Find out why tracking your restaurant's Key Performance Indicators (KPIs) is critical to your restaurant's success and will help you make the right decisions.
Running a restaurant isn’t like running any other business. Everything you do is “live”, service standards have to be balanced with food standards, customer complaints are a common occurrence, and you must regularly devise promotions, new menu items, and seasonal offers that keep people coming back for more.
Then there’s the constant change in food trends, adjusting your price model to adapt to inflation, implementing safety measures against a global pandemic – oh, and the ever-growing list of competitors in your area.
Staying on top of the business can be a minefield – and it’s one of many reasons why tracking Key Performance Indicators (KPIs) is essential.
In this article, we’ll explore the importance of tracking restaurant KPIs and look at practical ways they can help you manage your restaurant.
What are restaurant KPIs and why should you track them?
KPIs are metrics that are important for understanding how your restaurant is performing. They can include information about everything from sales and cost management to customer satisfaction and employee performance.
The important point is that these metrics are measurable. By monitoring clearly defined values like average ticket size, table turnover rates, or food costs, you can build an accurate picture of the state of your restaurant.
More importantly, you can track those changes over time, which means you can identify trends and make data-driven decisions about where to make changes. You can then see how any changes you implement affect your business.
Gathering data for KPIs
It can seem daunting to begin looking into your restaurant’s KPIs. The good news is that it doesn’t have to be. Point of Sale (POS) systems like Adyen, phone services like Vonage, and inventory management systems like Nory all collect business data, allowing you to find the information you need at the touch of a button.
Similarly, restaurant chains can now collect data from multiple locations, so you can compare all of your branches to gauge what works. If you want to make informed decisions about your restaurants, technology platforms such as Lightspeed Restaurant can collect data, while Apache Hive uses technology to help you collate data from multiple sources in one place for easy analysis.
Restaurant KPIs you should be tracking
While there are countless KPIs you can track to see how your business is performing, many allow you to make practical changes to the day-to-day running of your restaurant. These are potentially the most essential ones to track if you really want to see results.
Revenue and profitability metrics
These KPIs offer a glimpse into how your restaurant is performing, allowing you to track profitability and highlighting areas of concern. Examples of profitability metrics include:
- Gross profit margin
- Net profit margin
- Average covers
- Cost of goods sold (COGS)
- Food cost percentage
- Cash flow
- Prime costs
- Break-even point
Operational and performance metrics
These metrics provide insight into specific areas of your restaurant performance, allowing you to make informed decisions and make positive changes to your business. Examples of performance metrics include:
- Revenue per available seat hour (RevPASH)
- Turn time or table turnover
- Inventory turnover ratio
- Total sales by server
- Food waste
- Foot traffic or guest count
- Walk-ins vs. reservations
- No-show rates
- Cancellation rates
In an increasingly online world, even restaurants can’t ignore digital metrics. Understanding these can give you an idea of how users engage with your restaurant online, how your website functions, and the general online reputation of your brand.
- Online reservation rate
- Sales from online ordering
- Online ratings and reviews
How KPIs can benefit your restaurant
While it is useful to know about different KPIs you can track, it’s also essential to understand the practical ways that tracking these KPIs can help you manage specific areas of your business.
Getting your staffing levels right
Staffing has always been one of the most challenging aspects of running a restaurant. Too few staff and your standard of service will suffer. Too many and you risk denting your profits.
Payroll is one the most significant expenses for a restaurant, and over-staffing is a surefire way to ensure you’re losing money. Staff can polish cutlery until it shines, but that won’t help your bottom line!
However, by tracking KPIs such as average covers per day, you can build up an accurate picture of when you will likely be the most busy and plan your staff rota accordingly.
For restaurant groups, knowing how many covers you expect per day can give you even greater flexibility with your staffing levels. One way to do this is to have staff that can work at multiple branches in the same city, allowing you to cope with the day-to-day variations different locations inevitably have.
You can offer staff the hours they need by using online rota systems such as RotaCloud or centralized PBX virtual call systems.
Maximizing bookings is one way to ensure you have the correct number of staff at any given time. Looking at your booking KPIs is the best way to maximize your potential at busy times.
One way to do this is to calculate your table turn time. By figuring out how long it takes for your average table to arrive, dine and leave, you can ensure you are maximizing your booking slots – and do so without negatively affecting customer service by keeping customers waiting for tables or rushing customers out the door.
Another KPI that can impact your booking potential is your no-show and cancellation rates. Remember, technology can help you here, too, with business call tracking service allowing you to ensure that customers can easily contact you so you never miss a booking.
Monitoring staff performance
It’s a sad fact that not all serving staff are created equal. Every restaurant has its superstars. Those servers wow customers and leave them walking out the door smiling ear-to-ear. But are they always the most productive?
If you have a good POS system, it will leave you with a complete audit trail of your server’s transactions that is easy to analyze. Firstly, this KPI allows you to find the real stars of your restaurant and ensure they feel appreciated, which will help with boost staff retention.
But knowing who’s underperforming can be equally important, as it can allow you to target training for staff who require it.
Optimizing menu pricing
We live in turbulent times; interest rates are high worldwide, and food prices are more variable than ever. Couple this with the incredibly tight margins most restaurants run on, and you may find that a menu item that was profitable a few months ago is now only breaking even.
Tracking the Cost of Goods Sold (COGS) and food cost percentage are the best metrics to help you engineer your menu and ensure your dishes keep making you money.
It’s always a good idea to monitor how much food is wasted in your restaurant – and where. Ingredients are one of the most significant expenses for a food business, so a high level of wastage can be a big problem for your bottom line.
This can be a crucial indicator of whether your portions are accurate. Too much waste could be a sign chefs are being a bit too generous.
If you are ordering too much, your menu is overly complicated, or certain dishes aren’t particularly popular, it could result in increased spoilage. If you have high spoilage, consider reassessing the number of items you serve or adopting a smaller menu with seasonal specials.
Tracking this KPI can also help you decide when to use promotions to clear aging stock. These efforts can reduce kitchen spoilage, ensure ingredients are always fresh, and entice customers to dine with you more often.
Improving the customer experience
Marcel Duchamp once noted that not everyone is an artist, but everyone's a critic. The sentiment has never been more true than today. So while it may not seem as obvious as some profitability and operational KPIs, tracking customer reviews is essential.
Online reviews give you an insight into how a portion of your customers really feel. If you make a mistake or something isn’t perfect, many diners will be too polite to mention it – at least to you.
However, when they speak to friends or write online reviews, you can be sure that those mistakes will be recorded, whether it’s on Google, Tripadvisor, or even your own branded app.
Remember that people now turn to online reviews to decide where to go. For most restaurants, reviews are their primary ads.
To ensure this is a measurable metric, implement a rating system so customers can assign your team a “score” based on their experience – this might be a star-based system or a number scale. But don’t forget to leave room for additional feedback so you can gauge why customers have given you a low or high score and identify trends.
Regularly respond to negative feedback – it makes all the difference to your reputation and will make customers feel more valuable. And be sure to communicate both positive and negative feedback with relevant staff. This ensures they feel recognized for their hard work while giving them specific areas of improvement.
Finally, consider separating your websites into geo-specific domains for chains with outlets in multiple locations. For example, use an Only Domains .ae extension for your Middle East outlets and a .co.uk domain for your UK sites – this will allow you to know precisely how your restaurant performs in individual regions.
The Final Bill
While it might be challenging to find the time to monitor your KPIs, it is vital to the success of your business. Spending a little time delving into the figures now will help you make informed, data-driven decisions to help your restaurant thrive in an ever-changing industry.