The restaurant industry is one of the most competitive businesses out there. According to the National Restaurant Association, the US alone has over 1 million restaurants. To succeed in an industry where competition is high, the margin is tight, and 60% of businesses don’t make it past the one-year mark, regular performance tracking is essential.
The continuous assessment of a restaurant’s Key Performance Indicators (KPIs) allows owners to have a comprehensive understanding of current operations - what’s going right and what needs improvement.
If you are not setting and tracking KPIs, there will be no way for you to measure and evaluate the effectiveness of your current strategy. When problems in performance start to arise, which they eventually will, you will have difficulty pinpointing the source of the issue as there are no benchmarks or historical data to measure your current performance against.
What are Restaurant KPIs?
Restaurant Key Performance Indicators (KPIs) are measurable data metrics that are used to evaluate whether a restaurant is on track towards achieving its key business objectives.
With restaurant KPIs, there is no ‘one-size-fits-all’ approach. Many different indicators can be used to measure performance, depending on the restaurant’s main objectives. What works for one restaurant may not work for another, which is why it’s important to tailor your restaurant’s KPIs accordingly.
Restaurant owners often make the mistake of wanting to track every possible performance metric. However, this is not an optimal strategy because a. Not every data point needs to be tracked for every restaurant b. With so many data points to track, it’s harder to maintain the consistency and effectiveness of performance tracking. Working smartly and selecting the KPIs that best suit your restaurant will be a lot more effective than tracking every data point possible.
If you’re unsure where to begin, here are a few KPIs that are commonly tracked in restaurants.
The Top Restaurant KPIs Every Manager Should Measure
Restaurant Sales & Cost KPIs
1. Total Sales
A restaurant’s total sales are a key indicator of success or failure. The higher the sales, the higher the revenue, which is why it’s critical to have measurable sales goals and keep track of them to evaluate restaurant performance.
2. Break-Even Point
The break-even point, which is the sales volume required to make back investment costs, should be used as a benchmark to set the total sales target to ensure that at the very least, the volume of sales is able to cover the costs and the restaurant is not suffering losses.
Total Fixed Costs / (Total Sales - Total Variable Costs/Total Sales) = Break-Even Point
3. Prime Costs
Prime costs include the cost of goods sold and labor costs. They represent the largest spending undertaken at a restaurant and therefore have a huge impact on restaurant performance. If costs are not tracked over time, restaurants can very easily go over budget and completely throw off the total revenue, and may even lead the restaurant to losses.
Start of the Month Inventory + Additional Purchases - End of the month Inventory = CoGS
Employee Wages + Employee Benefits + Taxes = Total Labor Cost
CoGS + Labor Cost = Prime Cost
4. Overhead Expenses
Any costs not included in the prime cost, like promotional and marketing expenses, rent/mortgage payment, repairs, licensing fee, etc. are included in overhead expenses. Just like prime costs, if not tracked correctly, overhead expenses can negatively impact revenue. It’s also important to know exactly where the money is being spent to identify areas that can be better optimized to improve profitability.
Rent + Marketing costs + Taxes + Licensing fee + Repairs + Utilities + Other Expenses = Overhead Costs
5. Gross Profit
Gross Profit refers to the total revenue earned by a restaurant after deducting COGS. It’s a key indicator of performance as it represents the amount of money a restaurant has available to pay labor and overhead costs.
The goal gross profit must be set high enough to be able to cover costs at the minimum and ideally, lead to some amount of net profit. If the gross profit is not able to cover the labor and overhead costs, the restaurant will remain in a state of loss.
Total Revenue - Cost of Goods Sold (CoGS) = Gross Profit
6. Average Check Size
The amount of money spent by customers per visit i.e. the average check size is a good measure to indicate the number of customers required to meet your break-even point and daily revenue goals. Tracking it over time can help restaurant owners identify any discrepancies and take corrective action immediately.
Total Sales/Number of Customers = Average Check Size
Restaurant Employee KPIs
1. Employee Turnover Rate
The frequency at which employees leave a restaurant over a period of time i.e. the employee turnover is a crucial performance tracker. While some turnover cannot be avoided, the benchmark rate should be as low as possible. Hiring and training staff is an expensive undertaking, therefore a high turnover rate will have a negative impact on your revenue.
If you notice a spike in your employee turnover rate, reevaluate your hiring and training process, as well as your work culture.
Number of Employees Departed/ Average Number of Employees x 100 = Employee Turnover Rate
8. Total Sales by Server
Total sales by server refer to the volume of dollar amount a server is responsible for in a given period of time. It helps restaurant owners get an insight into the performance of individual servers. Comparing the total sales of each server can help identify the ones that require some more training or need to be replaced to improve overall restaurant operations.
Restaurant Reservation KPIs
9. Walk-in vs. Reservations
For restaurants that accept reservations, being aware of the walk-in vs. reservation rate can indicate where most of their guests are coming from. If the reservation rate is higher, it means that people prefer booking a table, and therefore, the restaurant should focus more on getting reservations rather than depending on walk-in customers.
An easy way to find out your walk-in vs reservation rate is through a reservation system like Eat App that provides in-depth reports about a restaurant’s guests.
Related: How restaurants are using data to improve revenue
10. No-show rate
No-shows are one of the biggest hurdles that restaurants have to overcome to succeed. Given its significant impact on revenue, it’s critical to keep track of the no-show rate at your restaurant. A good no-show rate differs from restaurant to restaurant. Set a benchmark for your restaurant based on factors such as type of restaurant, size of tables, target audience, etc.
Read more about reducing your restaurant’s no-show rate.
11. Cancellation rate
A high cancellation rate can lead to empty tables and lost revenue, and can hinder your restaurant’s goals. While some cancellations are inevitable, it’s important to set a benchmark and regularly measure them to identify any spikes in cancellations and take action accordingly.
Other Restaurant KPIs
12. Customer Retention Rate
Customer retention rate refers to the percentage of return customers in your total customer volume. Regular customers are a restaurant’s bread and butter, so it’s important to ensure that you’re able to retain as many as possible. A drop in retention rate can indicate problems in your restaurant operations, and keeping track of it can help identify these issues as soon as possible.
(Total Customers-Total New Customers) /Total Customers x 100 = Customer Retention Rate
13. Table Turnover Rate
The average number of times a restaurant’s tables are occupied in a period of time, i.e. the table turnover rate is an important factor for optimizing restaurant capacity. You want to make sure that your floor space is being used to its maximum potential at all times, which is why keeping track of your table turnover rate is crucial.
Low turnover rates can significantly impact revenue, but very high turnover rates can impact customer service. The optimal turnover rate depends on the type of your restaurant. Fine dining restaurants tend to have a lower turnover rate than casual restaurants where service is not an important factor. Assess your restaurant and set a benchmark turnover rate accordingly.
No. of parties served in a given time period/No. of tables = Table Turnover Rate
Revenue Per Available Seat Per Hour or RevPASH is a metric that calculates your dining room’s performance by taking into account revenue, seats, and time altogether.
Keeping track of RevPASH helps restaurants optimize seating, increase guest spend, and improve their overall dining room occupancy and revenue
Revenue in a Given Time Period/ (Number of Hours/ Number of Seats) = RevPASH
Related: Grow Your Restaurant Revenue with the RevPASH formula
Restaurant Marketing KPIs
15. Social Media Metrics
If social media is a big part of your restaurant’s marketing strategy, it’s important to be consistently aware of your performance on different platforms. Keep track of your followers, engagement, and reach on Instagram, Facebook, and any other channel that you are present on to see how well your current strategy is working to attract your target market.
16. Email Marketing Metrics
Email marketing is a great way to attract and retain more customers. However, it’s important to ensure that your current email strategy is effective. Evaluating email metrics like open rate and click-through rate on a regular basis can help you evolve your current strategy with more data-backed insights.
Read More: 5 Simple Email Marketing Ideas For Restaurants
17. Online Review Metrics
Reviews help restaurants better understand customers and their needs. Stay up-to-date with your online review ratings on platforms like Tripadvisor to know what your customers are happy with and identify any issues in operations that may be leading to unhappy reviews.
An easy way to track guest reviews is by setting up an automated survey through Eat App, which not only helps you collect more feedback but also provides regular reports about your restaurant’s current survey metrics.
Find out more about Eat App’s automated survey system here.