The restaurant business is rough, no doubt. The National Restaurant Association estimates that around 30% of restaurant owners are unable to stay afloat and fail within their first year of operating. In other words, one out of every three new restaurants won’t make it past their initial year of operation.
In this article, we’re going to explore one of the best ways to ensure you can keep coming back strong year after year: tracking your restaurant’s key performance indicators.
Why Tracking KPIs is Crucial for Your Restaurant
Tracking your restaurant’s KPIs gives you a clearer picture of performance and makes it easier for you to make proper calls. There’s no need to reinvent the wheel in most cases. All you need to do is get yourself restaurant analytics software, learn from the industry leaders, and apply the strategies that have worked for them. They aren’t the most successful in the world for no reason.
- Operational efficiency: Tracking operational efficiency KPIs can streamline processes and cut costs. For instance, McDonald’s uses KPIs to monitor drive-thru times and reduce wait times, which improves customer satisfaction and increases sales.
- Customer satisfaction: Customer satisfaction is key to your restaurant’s success. Starbucks tracks customer satisfaction through surveys and social media feedback. They use this data to make menu changes and improve service.
- Employee performance: Monitoring employee performance KPIs can help in staff training and development. Chipotle, for instance, tracks employee efficiency and customer service skills. They use these metrics to offer targeted training programs, which improves overall performance and customer experience.
- Financial performance: Financial KPIs like food cost percentage and revenue per seat can make or break your restaurant. Olive Garden tracks its food costs meticulously to ensure profitability. Keeping a close eye on your finances can prevent losses and boost profitability.
- Inventory management: Proper inventory management prevents waste and reduces costs. Shake Shack tracks inventory KPIs to maintain optimal stock levels and reduce waste.
21 Restaurant KPIs to Stay on Track
Tacking restaurant KPIs allows you to stay on top and ensure you’re doing everything in your power to stay on top of your business.
Let’s explore 21 restaurant KPIs that will help you and your restaurant managers stay on top of your business.
1. Key Financial KPIs for Restaurants
Tracking financial KPIs is crucial for managing your restaurant’s costs, boosting profitability, and making informed decisions. By keeping an eye on key metrics like labor cost percentage, food cost percentage, and revenue per seat hour, you can identify areas of overspending and opportunities for improvement.
1.1 Cash Flow
The first and probably the most important restaurant KPI we’re going to discuss is cash flow. In short, cash flow measures the amount of money going in and out of your restaurant. Positive cash flow ensures you can cover expenses and invest in growth. Monitoring cash flow helps you avoid liquidity issues, enabling you to manage day-to-day operations smoothly.
On the flip side, negative cash flow indicates that your expenses exceed your revenues, which could signal trouble.
- How to calculate: Cash Input – Cash Output
- Example: If your restaurant receives $50,000 in sales and pays $30,000 in expenses in a month, your cash flow is $20,000 ($50,000 – $30,000).
Use accounting software like QuickBooks or Xero to track cash flow. These tools provide real-time updates on cash inputs and outputs, helping you manage your finances efficiently.
1.2 COGS (Cost of Goods Sold)
COGS includes the cost required to create your food and beverage items. It helps you understand how much you’re spending to make what you sell. Keeping COGS in check ensures you maintain profitability, as high COGS can eat into your margins.
- How to calculate: Beginning Inventory + Purchased Inventory – Final Inventory
- Example: If your beginning inventory is $5,000, you purchase $20,000 worth of inventory, and your final inventory is $6,000, your COGS is $19,000 ($5,000 + $20,000 – $6,000).
1.3 Prime Cost
Prime cost is the total of your COGS plus total labor costs. This KPI is essential because it represents the largest expenses in your restaurant. Keeping prime costs low while maintaining quality and service can significantly boost profitability.
- How to calculate: Total COGS + Total Labor
- Example: If your COGS is $19,000 and your total labor costs are $15,000, your prime cost is $34,000 ($19,000 + $15,000).
Use labor management software like 7shifts combined with inventory management systems like MarketMan to monitor and control prime costs.
1.4 Break-Even Point
The break-even point is the sales level at which total costs equal total revenue. Knowing this helps you understand how much you need to sell to cover your costs. Achieving your break-even point as soon as possible ensures that your restaurant can sustain itself and start generating profits.
- How to calculate: Total Fixed Costs / (Average Price per Unit – Variable Cost per Unit
- Example: If your total fixed costs are $10,000, the average price per unit is $20, and the variable cost per unit is $5, your break-even point is 667 units ($10,000 / ($20 – $5)).
Financial planning tools like LivePlan can help you calculate and monitor your break-even point, allowing you to set realistic sales targets.
1.5 Gross Profit Margin
The Gross Profit Margin shows the revenue remaining after deducting COGS. It indicates how efficiently you are producing your menu items. Monitoring gross profit margin helps you set appropriate pricing and manage food costs.
- How to calculate: (Revenue – COGS) / Revenue
- Example: If your revenue is $50,000 and your COGS is $19,000, your gross profit margin is 62% (($50,000 – $19,000) / $50,000).
In essence, a higher gross profit margin indicates that you are doing well. You should aim at a gross profit margin of about 60-70% or higher.
1.6 Net Profit Margin
Net Profit Margin reveals the percentage of revenue that remains as profit after all operating expenses, interest, and taxes have been deducted. It provides a comprehensive view of your restaurant’s overall profitability, indicating how well you are managing all aspects of your business.
- How to calculate: How to calculate: (Net Profit / Revenue)
- Example: If your revenue is $50,000, your operating expenses are $25,000, and your interest and taxes are $5,000, your net profit margin is 40% ((($50,000 – $25,000 – $5,000) / $50,000)).
Utilize accounting software like QuickBooks or FreshBooks in combination with restaurant analytics to monitor both gross and net profit margins. These tools help you track income and expenses, providing insights into your profitability.
1.7 Food Cost Percentage
Food cost percentage is the cost of food ingredients as a percentage of food sales revenue. Keeping this percentage low is crucial for profitability. A high food cost percentage can indicate wastage, theft, or poor pricing strategies.
- How to calculate: (Cost of Food Sold / Food Sales Revenue) x 100
- Example: If your cost of food sold is $15,000 and your food sales revenue is $45,000, your food cost percentage is 33% (($15,000 / $45,000) x 100).
Inventory management systems like SimpleOrder or BlueCart help track food costs and calculate food cost percentages, ensuring you maintain profitability.
2. Key Employee Management KPIs
Tracking employee management KPIs in your restaurant helps you monitor staff performance, identify training needs, and boost overall productivity. By measuring metrics like employee turnover, satisfaction, and productivity, you can address issues early and improve team morale.
Effective KPI tracking ensures a well-managed, motivated workforce that works to improve customer experience.
2.1 Employee Turnover Rate
Employee turnover rate measures the percentage of employees leaving your restaurant. High turnover can be costly and disruptive, leading to higher recruitment and training expenses. Monitoring this KPI helps you understand employee satisfaction and retention.
By identifying high turnover rates, you can take action to improve working conditions, offer better incentives, or provide more training opportunities.
- How to calculate: (Number of Employees Leaving / Average Number of Employees) x 100
- Example: If 5 employees leave in a month and you have an average of 50 employees, your turnover rate is 10% ((5 / 50) x 100).
HR management tools like BambooHR or Gusto can track employee turnover rates and help you implement strategies to improve employee retention.
2.2 Labor Cost Percentage
Labor cost percentage shows your labor costs as a percentage of total sales. This KPI helps you manage staffing levels and control labor expenses. A high labor cost percentage can indicate inefficiencies or overstaffing, while a low ratio might mean you’re understaffed and potentially compromising service quality.
- How to calculate: (Total Labor Cost / Total Sales) x 100
- Example: If your total labor cost is $20,000 and your total sales are $80,000, your labor cost percentage is 25% (($20,000 / $80,000) x 100).
Use labor scheduling software like 7shifts or HotSchedules to monitor and manage labor costs effectively. These tools help you optimize staffing levels based on sales forecasts.
3. Key Operational Efficiency KPIs
Monitoring your restaurant’s operational efficiency KPIs will make it easier for you to streamline processes, reduce waste, and improve overall service speed.
By tracking metrics like table turnover rate, inventory usage, and order accuracy, you can identify areas for improvement and implement changes that save time and resources. This leads to a smoother operation and a better customer experience.
3.1 RevPASH (Revenue Per Available Seat Hour)
RevPASH measures the revenue generated per available seat per hour. It helps you understand how efficiently you are using your seating capacity. Maximizing RevPASH can significantly increase your overall revenue without needing to expand your physical space.
- How to calculate: Total Revenue / (Available Seats x Opening Hours)
- Example: If your total revenue is $60,000, you have 40 seats, and you’re open for 200 hours a month, your RevPASH is $7.50 ($60,000 / (40 x 200)).
Restaurant management software can help you track and optimize RevPASH, providing insights into seating efficiency and revenue generation.
3.2 Table Turnover Rate
Table turnover rate indicates how often tables are occupied over a period. This KPI helps you measure how efficiently you are serving customers and managing table occupancy. Higher table turnover rates typically correlate with increased revenue and customer satisfaction.
- How to calculate: Total Number of Parties Served / Total Number of Tables x Average Meal Duration (in hours)
- Example: If you serve 1,500 parties in a month, have 30 tables, and the average meal duration is 1.5 hours, your table turnover rate is 33.33 (1,500 / (30 x 1.5)).
Consider testing the UpMenu restaurant reservation system. It helps you monitor and improve table turnover rates. 3.3 Average Table Occupancy
3.3 Average Table Occupancy
Average table occupancy measures the average number of seats occupied at any given time. This KPI helps you understand how well you are utilizing your seating capacity. Higher occupancy rates mean you are maximizing your space effectively, which can lead to higher revenue.
- How to calculate: Total Number of Parties Served / Total Number of Tables x Average Meal Duration (in hours)
- Example: If you serve 1,500 parties in a month, have 30 tables, and the average meal duration is 1.5 hours, your table turnover rate is 33.33 (1,500 / (30 x 1.5)).
Use tools like Upserve to track table occupancy and manage seating efficiently. These tools provide data on seating utilization and help maximize space.
4. Key Customer Experience KPIs
We all know that a satisfied customer is a good customer. We also know that a dissatisfied customer can be a real pain in the neck. Tracking customer experience KPIs in your restaurant helps you understand guest satisfaction and identify areas for improvement.
And so, by measuring metrics like customer satisfaction scores, online reviews, and repeat visit rates, you can enhance service quality, build loyalty, and minimize negative customer feedback.
4.1 Retention or Repeat Visitor Rate
The retention rate measures the percentage of repeat customers. A high retention rate indicates customer satisfaction and loyalty, which are critical for long-term success. Satisfied repeat customers are more likely to recommend your restaurant to others.
- How to calculate: ((Number of Customers at End of Period – New Customers) / Number of Customers at Start of Period) x 100
- Example: If you have 500 customers at the end of the month, 100 new customers, and 600 customers at the start, your retention rate is 66.67% ((500 – 100) / 600) x 100.
A restaurant CRM system will help track repeat customers and analyze retention rates. These tools offer insights into customer loyalty and preferences.
4.2 Spend per Head
Spend per head monitors how much an average customer spends. This KPI helps you understand customer spending habits and identify opportunities to increase sales through upselling and promotions.
- How to calculate: Total Revenue / Number of Customers
- Example: If your total revenue is $45,000 and you serve 1,500 customers, your spend per head is $30 ($45,000 / 1,500).
POS systems like Square or Toast provide detailed reports on average spend per head, helping you identify spending patterns and opportunities for upselling. Ideally, you should aim for a POS system with online ordering to keep all sales and data in one place.
4.3 Revenue per Available Seat Hour
Revenue per available seat hour measures the revenue generated per seat per hour. This KPI helps you maximize the profitability of your seating capacity, ensuring you get the most out of your available space.
- How to calculate: Total Revenue / (Available Seats x Hours Open)
- Example: If your total revenue is $50,000, you have 50 seats, and you’re open for 300 hours in a month, your revenue per available seat hour is $3.33 ($50,000 / (50 x 300)).
Use restaurant management software like TouchBistro or Upserve to track revenue per available seat hour and optimize seating arrangements for maximum profitability.
4.4 Canceled Reservations
Canceled reservations track the number of reservations that were not fulfilled. Monitoring this KPI helps you understand booking patterns and manage seating more effectively. High cancellation rates may indicate issues with your reservation process or customer satisfaction.
- How to calculate: Total Canceled Reservations during a period
- Example: If you had 100 reservations and 10 were canceled, your canceled reservation rate is 10%.
A restaurant reservation system will help you track and manage canceled reservations, helping you identify patterns and reduce no-shows.
4.5 Guests Served
Guests served measure the total number of guests served in a given period. This KPI helps you track foot traffic and understand peak times, enabling you to optimize staffing and inventory levels.
- How to calculate: Sum of all guests served during a period
- Example: If you serve 3,000 guests in a month, your guests served metric is 3,000.
Use POS systems like Square to track the number of guests served, providing insights into peak times and staffing needs. Aim for a POS system with online ordering to keep all sales and data in one place.
4.6 Positive Feedback
In the restaurant industry, a high customer satisfaction score can literally make or break your business. If your average Google Reviews score is 3.0/5.0, for example, you’ll get far less business than if it were in the 4.8 ballpark.
- How to calculate: Total positive reviews / Total reviews x 100
- Example: If you receive 80 positive reviews out of 100 total reviews, your positive feedback rate is 80% (80 / 100) x 100.
Frankly, calculating your positive review rate is not something you will ever need to do as long as you use review management tools like ReviewTrackers in combination with restaurant analytics to monitor and manage online reviews.
5. Key Marketing and Online Presence KPIs
Monitoring key marketing and online presence KPIs in your restaurant helps you gauge the effectiveness of your promotional efforts and digital footprint.
By tracking metrics like website traffic, social media engagement, and conversion rates, you can refine your marketing strategies to attract more customers.
5.1 Returning Customer Percentage
Returning customer percentage measures the percentage of customers who return. This KPI indicates customer loyalty and satisfaction. A high returning customer percentage shows that your restaurant is meeting or exceeding customer expectations.
- How to calculate: (Number of Returning Customers / Total Number of Customers) x 100
- Example: If 300 out of 1,000 customers return, your returning customer percentage is 30% (300 / 1,000) x 100.
CRM tools like Upserve or Salesforce can help you track returning customer percentage and develop strategies to improve customer loyalty.
5.2 Website Visits
Website visits measure the number of visits to your restaurant’s website. This KPI helps you understand your online presence and the effectiveness of your digital marketing efforts. Increased website visits can lead to higher online orders and reservations.
Tools like Google Analytics and Ahrefs provide detailed data on website visits, helping you understand the effectiveness of your online presence and digital marketing efforts.
5.3 Online Orders
Online orders measure the number of orders placed online. This KPI is crucial for restaurants offering delivery or takeout services. Monitoring online orders helps you manage inventory and staffing for peak times.
Online ordering systems like UpMenu can track online orders and integrate with your POS system for seamless order management.
5.4 Engagement and Conversions
Engagement measures interaction with your online content, while conversions measure how many users take a desired action, like placing an order or signing up for a newsletter. High engagement and conversion rates indicate successful marketing strategies.
- How to calculate: (Total Engagements / Total Views) x 100 for engagement rate, (Number of Conversions / Total Visitors) x 100 for conversion rate
- Example: If you have 1,000 engagements and 10,000 views, your engagement rate is 10% (1,000 / 10,000) x 100. If 500 visitors sign up for your newsletter out of 10,000, your conversion rate is 5% (500 / 10,000) x 100.
Social media management tools like Hootsuite or Buffer track engagement, while Google Analytics tracks conversions from your online marketing efforts.
