Your business can specialize in anything, but the most important part is being able to measure your productivity and cost in numbers. This applies to the restaurant industry as well. Key performance indicators allow you to evaluate the productivity of your business in numerical values. Metrics such as income per hour of an available seat, sales per head, cooking time, cost of goods sold and much more are helpful in measuring productivity. It is advisable to start the tracking process by setting goals. Based on those, it will be possible to choose specific indicators for the company’s successful operation.
However, there is a set of universal indicators that will be useful to any restaurant manager, regardless of your goals. In this article, we will discuss 7 basic KPIs for the HoReCa industry and restaurants in particular.
Revenue per available seat hour or RevPASH is quite easy to calculate. All you need to do is to divide your restaurant’s revenue for a given time period by the number of available seats at the restaurant for the same period. The higher the score, the more profitable your restaurant is. In addition, using RevPASH, you can determine the most profitable time intervals for visits - breakfast, lunch, late dinner. After that, you can choose a strategy for each part of the day. For example, you can include special offers, bonus cocktails, etc.
This indicator has a significant impact on the results of RevPASH. Table turn time will help you find out how much time the guests spent at your restaurant. Obviously, the faster the flow at one table, the more revenue your restaurant will generate. Low customer turnover will slow down the process not only in the main hall but also affect the workflow of the kitchen and possibly regular customers. If the place is always busy, they can find other options. After identifying the problem with the metric, you can take appropriate actions. Train the staff to work quicker, prepare in advance for the most visited hours, optimize the waiting time by allowing table reservations.
For this metric, the average sales are no longer considered per table but by sales per visitor. To have a more accurate understanding of this indicator, restaurant managers should measure it at different times throughout the day. This will make it easier to see how much are the sales for the main meals, such as lunch, dinner, etc. It is also good to have similar metrics for longer periods to see how much revenue there is from sales per week or even per month. Tracking longer periods is necessary to analyze positive or negative trends in your restaurant’s operations. For example, the coefficient for this KPI may decrease when discounts are applied.
The indicator is measured as follows: the total revenue divided by the number of visitors, and all this for the period you need.
Knowing how long it will take to prepare a dish, you can determine if each of the items on the menu pays off. After you analyze this indicator, you should pay special attention to the dishes with low sales. It is advised to use this KPI in order to consider the popularity of a dish while taking action and making strategic decisions. For dishes that are not popular, you may have to reduce production, change or adjust the staff’s operation process. If the dish, on the contrary, causes an active interest among visitors, it is worth determining whether it is too much time spent on its preparation.
Spoiled food concerns every manager. Tracking it will allow you to forecast the demand for certain products. In addition, you will have to review and make adjustments in the procurement process. The third important conclusion that can be made based on the results of this metric is to make changes in food storage arrangements. This KPI can also help determine if there are more efficient cooking methods and whether you need to revise the serving sizes and habits.
Using KPI dashboards to track different metrics doesn’t take a lot of time. Therefore, restaurant managers who care about efficiency should also measure the cost of goods sold. This KPI is the most important indicator for any business. The results will demonstrate profitability. After that, you can optimize and customize business processes of the restaurant. As a result, you may need to cut costs. It is recommended to calculate the cost of goods sold once a month.
The cost of an item on the menu clearly affects the income of the restaurant. This key indicator will answer to important questions such as: “which items on the menu are the most profitable?”, “How well do these dishes sell?”. High income from an item doesn’t necessarily mean effective sales. It has good financial performance only if it constitutes a significant percentage of sales in general. Thus, items on the menu with a higher sales rate, but with a lower profit margin can become the main source of income for the restaurant. Determining the costs will make it possible to optimize the existing menu.
The number of indicators that can be measured by the managers is quite large. However, the 7 indicators we’ve just discussed focus on the basic, universal metrics that will help you understand how effective your restaurant business is. Measuring KPIs will allow you to see the big picture and set up various processes. Optimizing the menu, staffing, procurement, and other important operations will be easier if you keep an eye on these indicators. This will affect the company's profits as well as its public image.
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