Key performance indicators (KPIs) are powerful tools that can help restaurant owners and managers objectively assess and measure the health of their business.
You may think your Friday night dinner rushes are a clear sign that all is well, but there’s no way to know for sure if a full house one night a week is translating into a profit unless you look at the numbers.
Here’s a look at some commonly used restaurant KPIs, as well as a few suggestions for how you can make these metrics work for you.
KPIs are data points used to measure how your restaurant is doing. Different KPIs explore various areas of your business, quantifying everything from overall profitability to your marketing efforts. The more you capture and compare these metrics, the better equipped you’ll be to make decisions about day-to-day operations, advertising strategies, and much more.
So, how do you decide which restaurant key performance indicators are most important? That’s kind of a trick question. Some KPIs are almost universally useful, while others are chosen because they are necessary for goals specific to your restaurant.
To narrow your list and track only those KPIs that will be most beneficial to your business, consider the following:
Here are the restaurant KPI examples you’re most likely to come across and use as you open and grow your business.
Your sales numbers and profit margins aren’t just indicators of how much cash you’re bringing in, they’re also KPIs that can help paint a picture of your restaurant’s overall health and potential for long-term success.
There are quite a few KPIs under the umbrella of sales and profit, such as your total sales, fixed costs, variable costs, labor costs, etc. Use POS sales tracking software to keep an eye on these numbers, so you always have an idea of whether you’re breaking even, turning a profit, or running in the red.
Food cost percentage, also sometimes referred to as cost of goods sold, is used to measure the amount you’re paying for ingredients compared to what you’re making when you sell your finalized dishes. Those two metrics – cost of ingredients and the price of your menu items – have to move in tandem to help protect your bottom line.
Learning how to calculate your restaurant food cost percentage is crucial, because it’s how you’ll keep an eye on ingredient quality while still making money.
Labor cost is one KPI for your restaurant business that you can’t afford to overlook. You should aim to keep your labor costs between 28 to 33% of your total revenue. It makes sense – the people who work for you are the livelihood of your business. Without cooks, servers, bussers, bartenders, hosts, managers, etc., it would be nearly impossible to run a restaurant. Labor costs don’t exist in a vacuum, though. Always consider them in concert with other metrics to understand how your staffing affects revenue and vice versa.
Prime cost combines two previously mentioned KPIs, adding your total labor costs and your cost of goods sold. You’re basically tallying up your two biggest expenditures – people and ingredients. This number is often expressed as a percentage of overall sales, with many restaurants aiming for a prime cost of 60%. That means the amount you’re spending on labor and goods should equal about 60% of what you’re bringing in from selling drinks and food.
How often are your customers coming back to see you? Do they visit once a week? Once a month? Just once, coming in for lunch or dinner and then never setting foot inside your establishment again? This KPI measures loyalty, so you can see how repeat business plays into revenue. To help keep customers returning, read this article on restaurant loyalty and rewards program ideas.
Employee turnover is a part of the business, but it can also hurt your bottom line. Every time you lose an employee, you have to spend money to find and train a replacement. Additionally, until your new employee gets up to speed, you may not see a boost in revenue right away. If you lose too many employees in a short time or under less-than-ideal circumstances, this can decrease employee morale, which can result in lower quality services, and thus, less sales.
Tracking turnover can help you identify small problems before they become big ones, so you can help improve employee retention.
Many restaurant KPIs are tied to daily operations, but key performance indicators can be used to inform and measure your marketing efforts, too. There are many marketing KPIs you might want to explore, expanding across digital and traditional marketing. Here are some common marketing KPIs:
Understanding the numbers attached to your marketing strategy can help you fine tune future campaigns, turning your list of restaurant promotion ideas into potent opportunities for growth.
KPIs are like mile markers on a road trip. They tell you where you are and give you an idea of how far you have until you reach your destination. Choosing the right KPIs for your restaurant can help with everything from goal setting to performance reviews – all you have to do is use them.
Interested in more help achieving your goals? Clover offers a wide range of business management and restaurant POS solutions designed to help FSRs and QSRs run as smoothly as possible. For more information, contact a Clover Business Consultant today.CONTACT SALES