The 21 Must-Know Restaurant Metrics & How To Improve Them
- August 24, 2023
-
Nouhad Es-Said
Nouhad Es-Said
Being aware of your restaurant metrics and leading with data is crucial for business success. A study by Deloitte revealed that restaurants employing data-driven strategies achieve a 10% increase in overall revenue compared to those that don’t.
To add to that, the current F&B landscape is more challenging than ever due to the intensification of competition and the increased dependability on delivery aggregators – both of which lead to ultra-slim margins. This makes every sale or savings percentage pivotal for business owners.
Leading with data, especially those derived from your Inventory Management Software, is far from straightforward. In reality, overseeing a collection of bustling restaurants and maintaining stock control is exceptionally challenging as data needs to be kept accurate, up to date, and easy to understand at all times.
And to make things more complex, what you’ll soon realize is that all metrics are related. A high variance may come from an inconsistency in portioning. An inconsistency in portioning may mean reviewing your recipe, which then leads to a review of your menu item’s price, and therefore your whole menu engineering strategy.
In this article, we’ll cover the key restaurant metrics you should know about, how to calculate them, what affects, and how to improve them – all with the intent of shedding a light on restaurant operations and helping you run an efficient, profit-making business !
1. Why Restaurant Metrics Are Crucial
According to Harvard Business School, F&B operators that are data-driven are 5% more productive and 6% more profitable. Years ago, restaurants would grow their profitability by investing in their sales : launching a marketing campaign, joining a delivery aggregator (when the competition was low)… were part of the popular tactics, and with high margins coming in, improving a restaurant’s operations by a few percentage points wasn’t really the priority. But safe to say, today’s F&B landscape is quite different.
In a world that is more competitive than ever and where profit margins are slimmer than before, adopting a data-driven approach to cost reduction has emerged as the way to go to increasing profitability. By looking within your business and understanding its overall health, strengths, and weaknesses, you can now set a clear course towards higher profits.
Several common scenarios are frequently observed among restaurateurs who do not leverage data for their decision-making. One of these scenarios is neglecting the monitoring of supplier price fluctuations, and the subsequent impact it has on menu performance and, ultimately, profitability.
A restaurant owner might have initially priced a menu item based on the initial costs of the ingredients needed to make it. This price could have been calculated by considering the food cost percentage of that menu item, let’s say around 20%. However, several months later, due to continuous updates in supplier prices, the cost of these ingredients may have risen significantly, even reaching a food cost equivalent of 30%. Considering the other expenses this restaurant operator needs to cover, this situation could now mean that the dish is being sold at a loss
By monitoring supplier price fluctuations and setting alerts when a recipe’s food cost goes beyond a certain limit, restaurant operators can stay on top of the profitability of their recipes and adjust portioning, suppliers, or prices in real time.
2. The Categories Of Restaurant Metrics
Having a systematic approach to data and performance evaluation is essential, which is where the categorization of metrics comes into play.
Operational metrics
These are tailored to assess the day-to-day functioning of the restaurant, diving deep into aspects like table turnover rates and kitchen efficiency, thereby ensuring streamlined operations.
Financial metrics
Financial metrics provide restaurateurs with insights into the fiscal health, from revenue streams to profit margins, guiding budgetary and investment decisions.
Customer-related metrics
They act as a mirror to customer preferences and feedback, helping establishments curate unparalleled dining experiences.
Marketing & Outreach Metrics
These evaluate the pulse and effectiveness of various promotional endeavors in this increasingly digital age.
Inventory & Supply Chain Metrics
These delve into the nitty-gritty of backend operations, encompassing stock management, procurement processes, and supplier evaluations to ensure quality and consistency.
Employee & Staffing Metrics
These can’t be understated as they provide a lens into staff performance, training needs, and morale.
Through this methodical categorization, restaurants can compartmentalize their vast data streams, offering each department or role a clear set of metrics to monitor, thereby driving efficiency and excellence across the board.
Now let’s deep dive into some of these metrics, understand what they are, how to calculate them, what affects them, and how to improve them.
A. Operational Metrics
Table Turnover Rate
It gauges how often a table is occupied and then vacated during a particular time period. Efficient rates ensure maximum customer flow and potential revenue.
How to improve it : Implement efficient seating plans, enhance staff training, and optimize menu design for quicker decision-making by diners.
What affects it : Staff efficiency, restaurant layout, and menu complexity.
Kitchen Throughput
It represents the speed and efficiency of the kitchen in processing orders. A higher throughput indicates a well-coordinated kitchen that can handle high order volumes.
How to improve it : Regular equipment maintenance, staff training, and optimizing the kitchen layout.
What affects it : Ingredient availability, kitchen equipment efficiency, and chef expertise.
Order Accuracy
It measures the percentage of orders correctly fulfilled compared to errors made. Accurate orders lead to satisfied customers and reduced wastage.
How to improve it : Implement order verification processes, utilize technology to aid ordering, and conduct regular staff training.
What affects it : Staff training, clarity of customer orders, and efficiency of communication channels. it
B. Financial Metrics
Sales Revenue
Indicates the total earnings from goods sold or services provided. It’s a primary metric to measure the financial performance of any business.
How to improve it : Introduce promotional offers, optimize menu pricing, and enhance overall customer experience.
What affects it : Seasonality, local events, and market trends.
Cost of Goods Sold (COGS)
It represents the direct costs incurred in producing goods sold by a business, which includes ingredient and material costs. This is, without a doubt, one of the most critical metrics a restaurant owner should keep track of.
How to improve it : Negotiate better supplier deals, reduce wastage, and optimize inventory management.
What affects it : Ingredient prices, wastage, and inventory mismanagement.
(Pssst ! Want to see a real COGS calculation ? Read on!)
Gross Margin
It is calculated by deducting COGS from total sales revenue. It shows the proportion of money left over from sales after production costs.
How to improve it : Increase sales revenue, reduce COGS, and optimize pricing strategies.
What affects it : Sales volume, COGS, and discount strategies.
Labor Cost Percentage
It evaluates how much of your revenue is spent on labor. It helps in determining staffing needs and optimizing schedules for profitability.
How to improve it : Optimize staffing during peak and off-peak hours, enhance employee productivity through training, and implement efficient scheduling.
What affects it : Wage rates, staff efficiency, and operating hours.
Food Cost Percentage
The food cost percentage of a restaurant is the ratio of the cost of the ingredients bought to the revenue generated by the menu items sold, over a period of time.
How to improve it : Control portioning, stock the right amount of ingredients, increase control in the kitchen.
What affects it : Supplier prices,
We’ve written an in-depth article on How To Calculate A Food Cost Percentage. Check it out !
C. Customer-Related Metrics
Average Spend Per Customer
Indicates how much each customer spends on average. It provides insights into buying behavior and menu pricing strategy.
How to improve it : Upsell and cross-sell, offer bundled deals, and enhance dining experience.
What affects it : Menu pricing, promotions, and customer demographics.
Net Promoter Score (NPS)
A measurement of customer loyalty and satisfaction. A high NPS suggests customers are likely to recommend the establishment to others.
How to improve it : Enhance customer service, solicit feedback, and address concerns promptly.
What affects it : Overall customer experience, quality of food and service.
Customer Retention Rate
Measures the number of repeat customers over time. High retention indicates satisfaction and brand loyalty.
How to improve it : Loyalty programs, consistent quality, and responsive customer service.
What affects it : Customer satisfaction, competitive landscape, and overall value proposition.
D. Marketing and Outreach Metrics
Customer Acquisition Cost (CAC)
Represents the cost involved in acquiring a new customer, taking into account marketing and sales efforts.
How to improve it : Optimize marketing strategies, utilize cost-effective advertising channels, and enhance referral programs.
What affects it : Marketing spend, conversion rates, and competition.
Online Reviews and Ratings:
Indicates the public perception of an establishment. Good ratings enhance reputation and attract more customers.
How to improve it : Encourage satisfied customers to leave reviews, promptly address negative feedback, and maintain consistent quality.
What affects it : Customer experiences, responsiveness to feedback, and competition.
Return on Marketing Investment (ROMI)
Assesses the effectiveness of marketing campaigns by measuring the returns relative to the marketing spend.
How to improve it : Track marketing campaigns closely, A/B test strategies, and target high ROI channels.
What affects it : Marketing strategy effectiveness, market trends, and brand recognition.
E. Inventory and Supply Chain Metrics
Inventory Turnover
Shows how often inventory is sold and replaced over a specific period. High turnover indicates good sales or efficient inventory management.
How to improve it : Implement just-in-time inventory, optimize menu based on inventory, and improve forecasting.
What affects it : Inventory turnover rate is influenced by sales volume, inventory management efficiency, product seasonality, pricing strategies, and external economic factors. Effective management of these aspects ensures optimized stock flow and replenishment.
Wastage Rate
Measures the amount of inventory wasted due to various reasons. Low wastage indicates efficient operations.
How to improve it : Efficient inventory management, employee training on portion control, and timely promotions for items nearing expiry.
What affects it : Ingredient shelf life, sales forecasting accuracy, and storage conditions.
Supplier Lead Time
The time taken for a supplier to fulfill an order. Shorter lead times enhance operational efficiency.
How to improve it : Maintain strong supplier relationships, have backup suppliers, and optimize order frequency.
What affects it: Supplier efficiency, external disruptions, and order volume.
Variance Percentage
It’s the difference between your actual and theoretical cost.
How to improve it : see which item has high variance when counted. For example, if you experience a high variance in chicken, you should look into which recipes use chicken. Look into the analytics of your recipes and see if the portioning is correct. Perhaps that recipe is said to be needing 200g of chicken, when in fact 300g are required. This is maybe why chefs have been putting more than initially intended.
This might mean that you need to review the portions in your recipe, or the price of your menu item.
What affects it : Portioning, kitchen control, recipe prices.
F. Employee and Staffing Metrics
Employee Turnover Rate
Measures how often staff members leave and need to be replaced. Low turnover indicates job satisfaction and a stable workforce.
How to improve it : Enhance workplace culture, offer competitive compensation, and provide growth opportunities.
What affects it : Workplace environment, market wage rates, and job satisfaction.
Staff Training and Development
Indicates the frequency and quality of training programs. Regular training enhances staff performance and service quality.
How to improve it : Regular training sessions, create a feedback loop for continuous improvement, and provide growth opportunities.
What affects it : Budget allocation for training, employee feedback, and industry advancements.
Employee Satisfaction
Gauges the happiness and contentment of staff. Satisfied employees contribute positively to the business environment and customer service.
How to improve it : Foster open communication, offer rewards and recognition, and ensure work-life balance.
What affects it : Management practices, team dynamics, and workplace conditions.
3. Conclusion
In the rapidly evolving landscape of the F&B industry, where margins are incredibly thin and competition grows fiercer by the day, the importance of data-driven decision-making stands paramount
Numerous metrics can be used to assess a restaurant’s health, from operational metrics to customer satisfaction, and although they seem to be divided into separate categories, they are intrinsically linked. It is a restaurateur’s responsibility to understand the relationship between each of these metrics and find the right operational balance to keep their food business growing.
Although sheets and pen-and-paper methods may help you gain a regular overview on the health of your restaurant, having a real time access to each of these metrics can empower operations directors and general managers in taking real time decisions that rectify the operational balance at an earlier stage (vs leaving it for the end of the month). This is why restaurateurs should consider inventory software management that includes data & analytics.
4. About Supy
In the Food & Beverage industry, Supy emerges as a paramount tool for operational precision. With its advanced inventory software management tools and built-in dashboards, Supy delivers complex metrics such as the inventory turnover and inventory turnover ratio with the intent of delivering real-time, accurate, easy to understand data to operational managers and restaurant owners. Simply put, Supy is the compass guiding F&B establishments towards informed and sustainable decisions.
