Making a profit in the restaurant industry (or any industry, for that matter) isn’t easy - you’ll know that already. Although an OpenTable survey found that people in the UK spend 25 percent of their annual income dining out and eat out an average of 1.5 times a week, maintaining a positive profit margin on a consistent basis can still be challenging. Here are some of the key performance indicators (KPIs) restaurant managers and owners should keep an eye on.
The essential restaurant KPIs we’re going to discuss are:
It's obvious that any business will be doomed to fail unless you have enough customers coming through your doors. Keep a track of your average customer headcount to measure how many people are dining at your establishment.
It’s more than a good indicator of your ability to attract customers. When you combine it with your average revenue per customer (next point) and the number of covers, you can use that data to predict future targets and factor it into your cash flow projections.
Once you’ve mastered the art of pulling customers in, you can begin looking at how successfully you’re converting that into revenue. It’s no use having a restaurant that attracts a lot of customers if you’re not actually making a profit.
Look at how many customers are dining at your restaurant and how much overall revenue you’re making from them. Aim for a high figure if your headcount is low or you’re targeting a niche audience. The average industry turnover split is around 66 percent for meals, 27 percent for alcoholic drinks and four percent for non-alcoholic drinks.
The way your customers see you is one of the most important factors in determining how well your restaurant is performing. Browse your reviews on Facebook or TripAdvisor, or consider leaving feedback cards on the table - perhaps with a small incentive such as a five percent discount or a free drink on their next visit - if you're not getting enough feedback.
Customer feedback is a great KPI because it allows you to go straight to the source. Your patrons will let you know what they like and what's not up-to-scratch so you can play to your strengths and look for ways to improve.
With food, compare your food costs against your food sales. By calculating the cost of your food purchases for the week and comparing them to your actual food sales, you'll be able to get an understanding of how much produce you actually need. This KPI allows you to see if you're pouring money down the drain on unnecessary produce each week.
With labour, break down your wages into shift patterns, so you know how much each shift is costing you. Then, compare it against revenue from each of those shifts. This will allow you to analyse the effectiveness of your distribution of labour and give you a great indicator of how much turnover you need to have before considering putting on more staff for that shift or even reducing members.
Perhaps your restaurant is always fully booked and you’ve got glowing reviews from your customers. But your profits are being eaten away. Not exactly a good sign of success, is it? That’s why overall profitability should be a KPI. Monitor your dry and wet sales gross profitability so you can see how much of a return you’re actually generating from your food and drink in relation to your costs.
There is no set figure on what the average restaurant profit should be, but globally, the range spans from 0 to 15 percent, with three to five being the most common average. If you want to boost your profits, consider refreshing your menu, increasing prices (where and when appropriate), or ensuring your staff are trained to the point of maximum productivity. Look where you can reduce costs too by having a lower number of more efficient staff.
How quickly you go through staff can be a big tell-tale sign for how well your restaurant is performing. If you have a high turnover of staff, you have to put in more time, money, and productivity for their training and onboarding. That's time and energy you could be putting into other tasks.
A great way to retain your staff is through good management and ensuring that your employees are happy and satisfied. Another thing is to consider their safety in the workplace.
Keeping Your Team Safe Will Help
Slips, trips and falls are some of the most common restaurant injuries. Ensure that your staff are protected from hazards by investing in slip-resistant shoes to keep them safe and comfortable all throughout their shift.
Help Ensure Restaurant Success with This Checklist
These are just a few of the restaurant KPIs you should be tracking and they’re not the only factor you need to think about. Download our FREE Restaurant Growth Guide eBook and learn everything you need to know to transform your establishment - from management style to customer service.
It's filled with more in-depth advice and ideas to grow your restaurant through these key areas:
- Documenting Processes
- Innovative Ideas
- Improving the Team
- Customer Happiness