Restaurant KPI

The Most Important KPIs and Restaurant ratios

When it comes to running a successful restaurant business, tracking key performance indicators (KPIs) and restaurant ratios are essential. These measurements give you insight into how your business is performing and help you identify areas where you can improve. Here are some of the most important Restaurant KPIs and metrics that all restaurant businesses should track:

Cost of goods sold (CoGS) and food cost ratio

The food cost ratio is one of the most critical metrics for any restaurant business. This metric measures the percentage of total revenue that goes towards the cost of food. Ideally, you want to keep this ratio below 30% to ensure that you are making a healthy profit. 

Labor cost percentage

Labor costs are another significant expense for restaurant businesses. The labor cost percentage measures the percentage of revenue that goes towards paying your employees’ wages and benefits. A high labor cost percentage can eat into your profits quickly, so it’s essential to keep an eye on this metric. To calculate the labor cost percentage, divide the total labor costs by the total revenue generated during a specific period. 

Gross profit margin

The gross profit margin measures the amount of money you have left after deducting the cost of goods sold from your total revenue. This metric gives you a good idea of how efficiently you are running your business and how much profit you are making. To calculate the gross profit margin, subtract the cost of goods sold from your total revenue and divide by your total revenue. 

Customer satisfaction

Positive customer experiences are crucial to the success of any restaurant. Monitoring customer satisfaction rates through online reviews, surveys, and feedback forms can help managers and owners make necessary changes to their operations. A high customer satisfaction rate can lead to repeat business and positive word-of-mouth recommendations.

KPIs are essential tools that restaurant managers and owners can use to monitor and evaluate their business’s performance. By keeping an eye on food cost percentage, labor cost percentage, customer satisfaction rate, and table turnover rate, it’s easier to make informed decisions that can help increase profits and improve the overall success of the restaurant.

Understanding KPIs in restaurants

Restaurant KPI, or Key Performance Indicators, are measurable values that help businesses determine their success and progress towards achieving their goals. In the restaurant industry, KPIs can provide insights into various aspects of the business, such as food costs, labor expenses, and customer satisfaction.

Financial ratio analysis of restaurant

As a restaurant owner or manager, you know that food costs are one of the biggest expenses you have to deal with. Keeping track of these costs is crucial if you want to make sure your restaurant is profitable. This is where financial ratio analysis comes in handy.

Financial ratio analysis is a tool that helps you measure and evaluate your restaurant’s financial performance. It involves comparing different financial ratios to see how well your restaurant is doing in terms of profitability, liquidity, and efficiency. Here are some of the most important ratios to consider when analyzing your restaurant’s food costs.

Restaurant sales KPIs

Sales Per Server

Sales per server is a simple calculation that divides total sales by the number of servers employed during a given period of time. For example, if a restaurant had $10,000 in sales during a week where it employed 5 servers, its sales per server would be $2,000 ($10,000 ÷ 5).

Sales per server is important because it helps restaurants understand how much revenue each server generates. This information can be used to identify servers who are performing well and those who may need additional training or support. Additionally, by comparing sales per server across different periods of time, restaurants can identify trends and adjust staffing levels as needed.

The ideal guest-to-server ratio will vary depending on the type of restaurant, the menu offerings, and the level of service provided. However, as a general rule of thumb, it is recommended that each server should be able to effectively serve between 15-20 guests per hour.

To calculate your specific guest-to-server ratio, you will need to consider several factors, including:

• The size of your establishment
• The number of servers on staff
• The typical length of a meal at your restaurant
• The level of service provided (i.e. casual vs. fine dining)

Once you have determined the appropriate guest-to-server ratio, you can use this information to make informed staffing decisions and ensure that your restaurant is operating at maximum efficiency.

Sales Per Labour Hour (SPLH)

The Sales per Labour Hour (SPLH) ratio measures how much revenue a restaurant generates for each hour worked by its employees. 

To calculate the sales per labor hour ratio, you need to divide your total sales by the total number of labor hours worked. The formula is as follows:

Sales Per Labour Hour = Total Sales / Total Labour Hours Worked

For example, if your restaurant generated $10,000 in sales in a week, and your staff worked a total of 200 hours during the same period, then your sales per labour hour would be:

Sales Per Labour Hour = $10,000 / 200 = $50

By streamlining your menu, managing staff effectively, reducing waste and implementing technology, you can optimize SPLH in your restaurant and increase profits.

Sales Per Square Foot

Sales per square foot is a measure of how much revenue your restaurant generates for each square foot of space. To calculate this metric, simply divide your total sales by the total square footage of your restaurant.

For example, if your restaurant has 1,500 square feet and generates $750,000 in sales per year, your sales per square foot would be $500 ($750,000/1,500 sq. ft.).

This metric can be used to compare the performance of your restaurant to industry benchmarks and to identify areas for improvement. Restaurants with higher sales per square foot are generally more profitable and efficient.

Food Cost Ratio (FRC)

The food ratio cost (FRC) is a financial ratio that measures the percentage of revenue spent on food costs. In other words, it tells you how much money you’re spending on ingredients and supplies compared to how much money you’re making from selling your menu items.

To calculate your food ratio cost, divide your total food costs by your total revenue and multiply the result by 100:

FRC = (Total Food Costs / Total Revenue) x 100

The food cost ratio is calculated by dividing the cost of the ingredients used to prepare a specific menu item by the menu price of that item. For example, if a menu item costs $2.50 to prepare and is sold for $10, the food cost ratio would be 0.25, or 25%.

By tracking the food cost ratio for each menu item, restaurant owners and operators can identify which menu items are most profitable and which may need to be re-evaluated or adjusted in terms of pricing or ingredient costs.

How to Improve Your FRC?

If you find that your FRC is too high, there are several strategies you can try to bring it down:

• Reduce waste by tracking inventory, optimizing portion sizes, and using leftovers creatively
• Negotiate better prices with suppliers or switch to more affordable ingredients without sacrificing quality
• Raise menu prices strategically or introduce new menu items with higher profit margins
• Improve kitchen efficiency by streamlining workflows and reducing labor costs

Keep in mind that improving your FRC shouldn’t come at the expense of customer satisfaction. Customers expect quality ingredients and tasty dishes, so make sure you’re not compromising on these factors.

Labor Costs

One of the biggest expenses for a restaurant is labor costs. Efficient staffing is crucial to maintaining profitability without sacrificing quality or customer experience. In this article, we will discuss how to calculate and optimize your restaurant’s labor costs.

To calculate your restaurant’s labor costs, you will need to determine your total payroll expenses. This includes all staff wages, benefits, and taxes. Divide this number by your restaurant’s total sales over the same period to get your labor cost percentage.

For example, if your restaurant has a total payroll expense of $30,000 for a month and total sales of $100,000, your labor cost percentage is 30%. You can compare this to industry standards to gauge how well you are managing your labor costs.

Once you have calculated your labor cost percentage, you can begin optimizing your staffing to reduce costs while maintaining efficiency and quality. Here are some tips:

• Track sales data: Look at sales trends during different times of day, days of the week, and seasons. Use this information to schedule staff only when needed, avoiding overstaffing and unnecessary labor costs.
• Cross-train staff: Train employees to perform multiple roles, so you can reduce the number of staff needed during slow periods without sacrificing service or quality.
• Consider part-time staff: Hire part-time employees or use temporary staffing agencies to supplement your full-time staff during busy periods. This helps reduce labor costs during slower times.
• Automate where possible: Implement technology to automate tasks such as ordering, payment processing, and inventory management. This frees up staff to focus on customer service and reduces labor costs.
• Calculate and track restaurant food ratio cost costs: To optimize your staffing even further, look at the profitability of each menu item. Calculate the cost of ingredients used for each dish and compare it to the price you charge customers. This allows you to identify low-margin dishes and eliminate them from your menu or adjust their pricing.

Labor costs are a significant expense for any restaurant, but by calculating and optimizing them, you can improve your bottom line without sacrificing quality or service. Use data and technology to make informed staffing decisions and track your progress over time to ensure you are managing your labor costs effectively.

Prime cost

Prime cost refers to the total cost of goods sold and labor expenses. It is an essential metric that can help you determine the profitability of your restaurant. Here are some steps to calculate and control your restaurant’s prime cost:

Step 1: Determine your Cost of Goods Sold (CoGS)

To calculate your CoGS, you need to add up the cost of all the ingredients used in your dishes, including any packaging or garnish items. Then divide by the total number of dishes sold in a specific period. This will give you your average cost per dish.

Step 2: Calculate your Labor Costs

Labor costs include wages, benefits, and taxes paid to your employees. To determine your labor costs, calculate the total amount paid to your staff in a specific period, including any overtime or bonuses. Divide this amount by the total revenue generated during the same period to get your labor percentage.

Step 3: Add CoGS and Labor Costs to Get Your Prime Cost

Once you have determined your CoGS and labor costs, add them together to obtain your prime cost. It is essential to track your prime cost regularly to identify any fluctuations in your expenses.

Step 4: Control Your Prime Cost

Controlling your prime cost requires careful management of your food and labor expenses. 

Here are some tips to help you manage your prime cost: 

• Use a inventory management system to track your food costs and prevent waste. 
• Optimize your menu by focusing on dishes with a high profit margin. 
• Train your staff to be efficient and productive to reduce labor costs. 
• Negotiate with vendors to get better pricing on ingredients. 
• Regularly review your prime cost and make adjustments as needed. 

Restaurant revenue indicators

Average Revenue per Customer

The average revenue per customer is calculated by dividing the total revenue generated by the number of customers served during a given time period. This metric is important because it helps restaurants understand how much revenue they are generating from each customer on average.

In order to calculate the average revenue per customer, restaurant owners and operators must first accurately track and record their sales data. This includes tracking the number of customers served, as well as the total revenue generated during a specific time period.

Average revenue per cover

The average revenue per cover is calculated by dividing your total revenue by the number of covers (or meals) served during a specific period. This metric tells you how much money, on average, is generated from each customer who dines at your establishment.

When analyzing your restaurant’s financial performance, it is essential to consider both average revenue per cover and food ratio cost in conjunction. By doing so, you can gain insight into the profitability of your restaurant and identify areas for improvement.

There are several factors that can affect the average revenue per cover, including the type of cuisine, the price point, and the location of your restaurant. The average revenue per cover can also be influenced by the time of day and day of the week. For instance, lunchtime may have a lower average revenue per cover compared to dinner since customers tend to order cheaper and smaller meals during the day.

Revenue Per Meal

Revenue per meal can help you determine how much money your restaurant is making per meal while also identifying areas where you can cut costs.

Revenue per meal is calculated by taking the total amount of revenue your restaurant earns in a given period and dividing it by the number of meals served during that same time frame. For example, if your restaurant earned $10,000 in one week and served 1,000 meals, your revenue per meal would be $10 ($10,000/1,000).

Knowing your revenue per meal can help you identify high-profit items on your menu and adjust your pricing accordingly. It can also help you pinpoint low-performing menu items that may need to be reevaluated or removed altogether.

Revenue Per Available Seat Hour (RevPASH)

For restaurant owners, understanding revenue per available seat hour (RevPASH) is crucial to measuring the success of their business. RevPASH is a metric used to determine how much revenue is generated per hour for each seat that is available for customers to use. This metric is important because it helps measure the overall efficiency of a restaurant’s operations and can provide insight into potential areas for improvement. Keeping track of RevPASH can help restaurants identify areas where they need to improve. For example, if a restaurant’s RevPASH is lower than industry benchmarks, they may need to consider raising menu prices, improving service speed, or increasing table turnover rates to increase revenue.

To calculate RevPASH, you’ll need to know your restaurant’s total revenue for a given hour, as well as the number of seats available during that time. You’ll also need to factor in any discounts or promotions offered during the hour.

Once you have this information, you can divide your total revenue by the number of available seats to get your RevPASH. For example, if your restaurant generated $1,000 in revenue during an hour when there were 50 seats available, your RevPASH would be $20 ($1,000 ÷ 50).

There are several strategies that restaurants can use to maximize their RevPASH:

• Menu engineering: Analyzing menu items for profitability and popularity and adjusting prices accordingly.
• Table turnover: Implementing systems or incentives to encourage faster turnover of tables.
• Upselling: Teaching servers to suggest high-profit menu items or add-ons to customers.
• Reducing waste: Identifying areas of food or supply waste and finding ways to reduce costs.

By focusing on these strategies, restaurants can increase their RevPASH and improve overall financial performance. However, it’s important to balance profit maximization with maintaining quality and customer satisfaction.

Restaurant Marketing KPIs and client relations

There are several marketing KPIs that restaurants should track to ensure their success. These include:

• Customer acquisition cost: This measures the cost of acquiring new customers through advertising, promotions, or other marketing efforts.
• Customer lifetime value: This measures the total revenue generated by a customer over their lifetime of patronizing the restaurant.
• Table turnover rate: This measures how quickly tables are turned over and how efficiently the restaurant is using its space to generate revenue.
• Online reviews and ratings: This measures the restaurant’s reputation and can impact its ability to attract new customers through word-of-mouth marketing.

Table Turnover Rate

The table turnover rate measures how long it takes for a customer to finish their meal and leave the restaurant. High table turnover rates mean more customers are being served, and therefore, more revenue is generated. This KPI can be improved by streamlining the ordering process, reducing wait times, and optimizing staff workflow.

Customer acquisition cost

Customer acquisition cost in restaurants directly affects the profitability of the business. If the cost of acquiring new customers is too high, it can negatively impact the bottom line. On the other hand, if the cost is relatively low, it can help increase revenue and profitability.

Customer lifetime value (CLTV)

Customer lifetime value (CLTV) is an important metric that helps businesses understand the total worth of a customer over their entire relationship with the business. In the food industry, restaurant owners can use CLTV to measure the value of a customer from the time they first visit the restaurant until they no longer come back.

One key factor that affects CLTV in restaurants is the quality of the food. Customers are more likely to return if they enjoy the food and have a positive experience. However, it’s important to note that CLTV is not just about customer satisfaction, but also about the cost of the meal and the overall cost of running the restaurant.

Customer Retention Rate

Customer retention rate indicates the percentage of customers that return to your restaurant after their initial visit. In the highly competitive food industry, businesses must focus on not only attracting new customers but also retaining existing ones. A higher customer retention rate directly translates to increased revenue and profitability.

Another significant factor that influences customer retention rate is the cost incurred. While pricing menus competitively and offering promotions can attract customers, the costs should not affect the quality of food or service. If customers feel they are not getting value for their money, they will not return to the restaurant.

Aside from food quality ratio and cost, customer experience also affects the retention rate. From the moment a customer enters the restaurant until they leave, their experience should be positive. Factors such as the ambiance of the restaurant, cleanliness, and prompt service all contribute to creating a great customer experience, which increases the likelihood of customers returning.

Restaurant Reservation KPIs

Reservations are crucial for a successful restaurant business. Here are some reservation KPIs that restaurants should consider:

• Reservation Conversion Rate: This KPI measures the percentage of online or phone reservations that turn into actual bookings. A high conversion rate indicates effective marketing, easy booking process, and satisfied customers.
• No-show Rate: This KPI measures the percentage of reserved tables that go unoccupied due to no-shows. A high no-show rate indicates poor communication with customers, overbooking, or inadequate cancellation policies.
• Turn Time: This KPI measures the time it takes to turn over a table after a guest has left. A shorter turn time means more customers served, higher revenue, and better customer experience.

Social Media Metrics

Social media has become an integral part of marketing for businesses across industries, and the restaurant industry is no exception. In fact, social media platforms like Facebook, Instagram, and Twitter can be particularly effective for restaurants looking to increase their visibility and attract new customers. However, simply having a presence on social media isn’t enough. It’s important for restaurateurs to track key performance indicators (KPIs) to measure the success of their social media efforts. Here are some essential social media KPIs every restaurateur should measure:

1. Engagement Rate

Engagement rate refers to the percentage of users who interact with your social media content. This includes likes, comments, shares, and clicks on links. A high engagement rate indicates that your content is resonating with your audience and can help increase brand awareness and customer loyalty.

2. Follower Growth Rate

Follower growth rate measures how quickly your social media following is expanding. While it’s important to have a large following, it’s even more important to have an engaged following. Tracking follower growth rate over time can help you understand which content is resonating with your audience and adjust your strategy accordingly.

3. Reach

Reach measures how many people are seeing your social media content. This includes both your existing followers and non-followers who may come across your content through shares or hashtags. Increasing your reach can help you attract new customers and expand your brand’s visibility.

4. Click-Through Rate (CTR)

CTR measures the percentage of users who click on a link in your social media post. This is important because it indicates how effective your social media content is at driving traffic to your website or other online presence. A high CTR can help increase conversions and drive revenue.

5. Restaurant Food Ratio Cost Costs

In addition to social media KPIs, it’s important for restaurateurs to track financial metrics like food cost and labor cost. By monitoring these costs and comparing them to revenue, you can identify opportunities to improve profitability and make data-driven decisions that benefit your business.

By tracking these essential social media KPIs and financial metrics, restaurateurs can gain valuable insights into the success of their marketing efforts and overall business performance. With this information, they can make informed decisions that improve customer engagement, increase revenue, and drive long-term growth.

Business-process and performance efficiency of restaurant

Kitchen management KPIs

Managing a kitchen in a restaurant can be quite challenging. You need to ensure that the food quality is top-notch, while also keeping an eye on costs to ensure profitability. This is where kitchen management KPIs come into play. By tracking and measuring these KPIs, you can keep your food ratio cost under control and manage your kitchen more efficiently. Here are some essential KPIs to track:

Food Cost Percentage

This is the most critical KPI for any restaurant. It measures the percentage of each dollar spent on ingredients and supplies. To calculate it, divide the cost of goods sold by total sales and multiply by 100.

Menu Mix

Menu mix is the proportion of sales generated by each menu item. By analyzing this KPI, you can determine which items are popular and which ones are not. This will help you adjust your menu accordingly to maximize sales and reduce waste.

Waste Percentage

Waste percentage measures the amount of food that goes to waste during preparation or service. Tracking this KPI will help you identify areas where waste can be reduced, such as over-portioning or over-ordering ingredients.

Labor Cost Percentage

Labor is one of the biggest expenses in running a restaurant. This KPI measures the percentage of labor costs compared to total sales. Keeping this percentage low is crucial to maintaining profitability.

Inventory Turnover Ratio

Inventory turnover ratio measures how quickly inventory is sold and replaced. The higher the ratio, the faster you’re selling inventory, which means you’re not carrying excess stock that can go to waste.

Inventory Turnover Ratio (ITR)

The inventory turnover ratio measures how quickly you are selling your food inventory. It is calculated by dividing the cost of goods sold by the average inventory value. A high inventory turnover ratio indicates that you are selling your food inventory quickly, which is a good sign. It means that you are not wasting money on excess inventory or letting your food spoil. A low inventory turnover ratio may indicate that you need to adjust your menu or pricing strategy.

Here’s how to calculate ITR in a few simple steps:

Step 1: Determine Your Cost of Goods Sold (COGS)

COGS represents the total cost of all the food, beverages, and other items that your restaurant sells during a specific period of time (usually a month). To calculate COGS, add up the cost of all the ingredients, supplies, and other expenses that go into creating each menu item.

Step 2: Find Your Average Inventory

Next, you need to determine the average value of your restaurant’s inventory over the same period of time. To do this, add up the value of all the inventory you currently have on hand and divide by the number of months in the period you are measuring.

Step 3: Calculate Your ITR

Finally, divide your COGS by your average inventory to get your ITR. For example, if your COGS for the month is $10,000 and your average inventory value is $5,000, your ITR would be 2.

Knowing your restaurant’s ITR can help you make informed decisions about pricing, ordering, and overall inventory management. A high ITR means that your restaurant is turning over its inventory quickly, which can help you avoid spoilage and waste. On the other hand, a low ITR may indicate that you are ordering too much inventory or not selling enough, which can lead to increased costs and reduced profits. By monitoring your ITR regularly and making adjustments as needed, you can help ensure that your restaurant is running efficiently and profitably.

Food Wasted per Food Purchased

One of the biggest issues in the food industry is food waste. This not only has a negative impact on the environment but also adds up to the restaurant’s expenses. Here we will discuss how the ratio of wasted food to purchased food affects the cost of running a restaurant.

The ratio of wasted food to purchased food varies from one restaurant to another. Some restaurants have a higher ratio while others have a lower ratio. However, it is important to note that even a small ratio of waste can lead to significant costs over time.

For example, if a restaurant purchases 100 pounds of food and wastes 10%, which is equivalent to 10 pounds, this means that the restaurant has lost 10% of its investment. If this trend continues, the restaurant is likely to experience financial difficulties in the long run.

To reduce food waste, restaurant owners need to implement effective strategies. These include:

• Tracking inventory regularly to ensure that food is used before it spoils
• Reducing portion sizes to avoid over-serving customers
• Donating excess food to local charities or food banks
• Composting food scraps instead of throwing them away

By implementing these strategies, restaurant owners can significantly reduce their food waste and save money in the long run. Not only will this benefit the environment but also the restaurant’s bottom line.

HR development, education and innovations KPIs

If you are operating a restaurant, tracking your human resource (HR) and staffing key performance indicators (KPIs) can help you make informed decisions about your business. Here are some important KPIs for restaurants to track.

Food-to-Labor Ratio

One of the most important KPIs for restaurants is the food-to-labor ratio. This ratio compares how much money you are spending on food costs versus labor costs. To calculate this ratio, divide your total food cost by your total labor cost. Ideally, the ratio should be around 30% to 35%.

Staff Turnover Rate (Employee Turnover Rate)

The staff turnover rate measures how often employees leave your restaurant and need to be replaced. A high turnover rate can be costly, as it requires additional resources to hire and train new staff. To calculate this KPI, divide the number of employees who left during a certain time period by the total number of employees. In addition to the time and resources invested in recruiting, hiring, and training new staff members, high turnover rates can also lead to increased costs that can affect the profitability of your business.

Employee turnover can result in a number of costs for your restaurant, including:

• Recruiting and training costs: You may need to spend money on job postings, recruiting events, and other efforts to attract new employees. Once you have hired new staff members, you will also need to invest time and resources in training them.
• Lost productivity: When experienced employees leave, they take their skills and knowledge with them. This can lead to decreased productivity and lower quality of service until new hires are fully trained and integrated into your team.
• Lower morale: Frequent employee turnover can also impact the morale and motivation of your remaining staff members. They may feel overworked or undervalued if they see colleagues frequently leaving.
• Customer satisfaction: In the restaurant industry, customer service is key. High turnover rates can mean that customers are interacting with inexperienced staff members who may not be able to provide the level of service they expect.

By investing in employee retention strategies such as fair wages, benefits, and opportunities for growth and development, you can reduce these costs and help ensure the long-term success of your business.

Labor Cost Percentage

The labor cost percentage measures how much of your total expenses are going towards paying wages and salaries. This KPI can help you identify areas where you may be overspending on labor costs. To calculate this KPI, divide your total labor expenses by your total sales and multiply by 100. By tracking these important HR and staffing KPIs, you can make informed decisions about your restaurant and optimize your operations for success.

How can restaurant management software help?

Restaurant management software can help you track your food cost ratio by generating reports that show your food costs as a percentage of your total revenue. You can use these reports to identify areas where you may be overspending, such as on ingredients or labor costs.

You can also use restaurant management software to set KPIs that track specific metrics related to your food cost ratio. For example, you can set a KPI for the cost per plate or the cost per ingredient. By tracking these KPIs over time, you can identify trends and adjust your operations accordingly.

The benefits of using restaurant management software for food cost ratio

There are many benefits to using restaurant management software to track your food cost ratio. Here are just a few:

• You can monitor your costs in real-time and make adjustments as needed.
• You can identify areas where you may be overspending and take action to reduce costs.
• You can set goals and track progress over time.
• You can make data-driven decisions based on accurate and up-to-date information.

Overall, restaurant management software is an essential tool for any restaurant owner or manager who wants to run a successful business. By tracking your food cost ratio and other KPIs, you can stay ahead of the competition and provide your customers with high-quality, affordable meals.