We all know that tracking data is important for running a restaurant, but what metrics are the best business decisions? In the restaurant industry, you have to make sure you're keeping your customers happy, that the food is fresh and delicious, and that you're making enough money to stay afloat and pay your employees.
However, a common hurdle in restaurant management is tracking different metrics; from customer satisfaction rates, to inventory levels, as it can be difficult for a restaurant owner to know what's important in the long term.
This blog post will help you better understand how to measure and analyze your restaurant's performance so you can increase profitability, productivity, customer satisfaction, and product quality. We'll cover key performance indicators like point of sale data as well as success metrics like customer retention rate in order for you to get an accurate picture of your restaurant's performance.
Organizing your restaurant
A restaurant can get organized by first starting with the basics and then following up with a more in-depth analysis. The basics include having an idea of what needs to be improved or scrutinized, tracking sales data, analyzing prime cost data, and making sure that staff is trained to the necessary level.
A more thorough analysis would include reviewing the menu, layout of the restaurant space, décor, ambiance and atmosphere. Other important but less tangible areas of concern for restaurant operators are employee happiness and morale.
Restaurants need to work with their customers and staff in order to achieve the desired goal of profitability, productivity, customer satisfaction and product quality. It is important to note that restaurant success metrics are not just numbers on a page.
How do restaurants measure productivity?
Restaurant productivity is an important key performance indicator for restaurants. It measures the total volume of food sold by a restaurant, as well as the number of customers served. Restaurant operations metrics are often used to measure how profitable a restaurant has been each month or year. These KPIs include profit margin, gross margin percentage, and average customer spending
- Profit margin is the profit generated from sales. It's calculated by subtracting cost of goods sold and operating expenses from a restaurant's gross revenue.
- Gross margin percentage measures how much of every dollar in revenue goes towards paying for ingredients, labor, rent, utilities and other overhead costs - often expressed as a number between 0% to 100%.
- Average customer spend is the average amount that customers paid per visit before taxes or other adjustments. Restaurants can also use this metric to measure how much a restaurant's menu prices are affecting their bottom line earnings.
Track key performance indicators
You can track KPI's using the number of customers served or the amount of food sold each month. This data is used in conjunction with KPIs to identify strengths or weaknesses within a restaurant's operations, from staffing levels to menu items that aren't selling vs those selling out.
Monitor customer satisfaction
A restaurant can acquire this information through detailed reviews and feedback collected through surveys, Yelp scores, Google analytics, and social media comments. Consumers are increasingly turning to online review sites when making dining decisions - restaurants that take the time to monitor their ratings can often identify patterns in negative reviews, which may lead them down the path of fixing these issues with new and existing menu items, staffing hires, or any other hidden problems with their customer experience.
It's important to collect point of sale data to measure the average bill size, as well as mealtime frequency and duration - which are all important indicators for restaurant management when it comes time to set prices or menu items. Therefore, there's a better chance that customers will revisit.
Accumulate guest data through payment methods
Restaurants can monitor some information about their guests by collecting data from their point of sale system. The average preferred payment methods determine which terminal you should use in your restaurant because this will help you identify the guests that are likely to spend more money. You also shouldn't offer more expensive terminals if upgraded cards are hardly used by your customers; which evidently saves you money in the long run.
Types of payment methods:
- Cash: Guests who prefer cash generally don't dine out very often, but when they do, their bill tends to be higher than average.
- Credit Card: People who pay with credit cards typically have a lower tolerance for prices and may not visit your restaurant as often, but they're more likely to spend money on each visit.
- Cash and Credit: These guests are known for being a little bit of everything - some prefer cash while others use credit cards or both. They may have different preferences depending on the type of restaurant, so it's important to be flexible in order to accommodate this guest.
- Phone: People who pay with their phone at a restaurant typically spend less money than those who don't pay with their phone.
- Online Ordering: Guests who order their food online typically want to save time and may not be as concerned with the prices or quality of your restaurant, but they're still likely to come back for another meal.
- Loyalty Points: A restaurant's loyalty program will help you retain customers and increase revenue by rewarding them for their patronage so this is an important metric to track, especially if it's a younger demographic that loves accumulating points or the next free meal.
It's important for restaurants to have a variety of payment options in order to satisfy the needs of these different customers - who doesn't want seamless and accommodating transactions?
Using analytics in the restaurant industry
Data analytics is used for tracking and optimizing the performance/success of a restaurant. Data from success metrics can be analyzed to improve productivity, customer satisfaction, product quality through management interventions like reallocating resources, increasing training effectiveness, or managing waste. It is a powerful tool, as it also gives information about overall food quality, percent of sales, and average customer wait times. Tracking these metrics allows businesses to identify changes to improve dining experience and take corrective action as needed, which often translates to maximum profit.
Restaurants can adopt analytics by using key performance indicators (KPIs) and success metrics to keep track of their restaurant's performance.
Key performance indicators (KPIs) are metrics that track the progress of some key aspects of a business, such as menu success and employee performance. In restaurant management, KPIs typically measure sales volume and margins on food sales. For example, most restaurants use point-of-sale data (POS) as a KPI because it tracks how much and what kinds of products are being sold in their establishment.
Another way that POS is tracked is customer average purchase amount (CAPA) that tracks the total sales per customer. This is good to know in order to set prices for similar items, or simply track how much a business should be making from each individual sale.
A success metric is a type of KPI that identifies the success or failure of an intervention or strategy for a business. For example, customer retention rate measures how well an organization is able to retain customers by measuring the percentage of customers staying with the service provider beyond the first purchase. Customer retention rates can be measured in different ways like months or years.
It's important to know your customer retention rate so you can understand how well your restaurant is retaining customers. If this number drops, it could mean that the product quality or service has dropped, and a change needs to be made in order for consumers to come back.
How key performance indicators benefit restaurants
By focusing your efforts on the KPIs that are most important to your restaurant, you can find measurable success. Depending on the type of restaurant and its goals, different types of key performance indicators may be more or less useful. Below are some examples of KPI's and their benefits, pick and choose from the list to combine with your existing tried and true restaurant techniques.
Revenue per available seat hour (RevPASH)
Is a key metric restaurant owners should track to increase profits. RevPASH is calculated by dividing the total restaurant revenue for the period of time being analyzed by that same duration’s available seat hours (ASH) and then multiplying it times 100. This allows an owner to see how effectively they are utilizing their space, staffing, and menu offerings to make the most money.
The RevPASH metric should be tracked on a weekly basis for each restaurant to see how well they are performing during that time frame. This is important because it can help identify what menu items or other changes need to be made in order to increase profitability, customer satisfaction, and productivity.
For example, if a restaurant is using more available seat hours than the previous week but making less revenue per ASH, it may be due to customers ordering menu items that are lower in price. However, if they have had an increase of total revenue then there's no need for any changes because their RevPASH numbers improved as well.
When comparing RevPASH numbers from one restaurant to another, it is best practice for the same time period (week) and location of each restaurant. The metric should not be analyzed by different locations or over a long span of time as this could make results inaccurate due to fluctuating variables such as weather conditions, day-of-the week trends, special events, etc.
The “holy grail” of restaurant metrics used to measure success is the RevPAM, or revenue per available square meter. This metric takes into consideration not just sales but also seating capacity for a given restaurant location and ultimately provides an indication of how profitable a business might be in different locations.
Food cost percentage (costs/revenue)
This will show you the profitability of your restaurant. Paired with other data, your actual food cost percentage can help identify areas for improvement to increase profit margins. For example, if production is too slow or there's not enough staff available to prepare food, costs will increase.
This is the cash received from customers for their purchases and includes tax and service charges added to a bill by restaurant staff. Although it may not show what portion of your revenue comes from which customer groupings (e.g., breakfast vs lunch), if you're able to determine that there's an increase in spending after a price increase, you can test different prices to see if this trend continues.
Average food and beverage costs
The restaurant's total food costs divided by its annual sales volume (expressed as a percentage) can show the restaurant's efficiency in purchasing, receiving and inventorying food. Paired with other data, it can help identify areas for improvement to increase profit margins. For example, if production is too slow or there's not enough staff available to prepare food, costs will increase.
This will show you the profitability of your restaurant. If your costs are higher than the average, then you may want to sell more with that type of food item. Inversely, if your costs are lower than the average, you may need to work on your inventory management.
Customers per table
One measure that is worth tracking is customers per table (CPT). This metric reveals how many people are seated at a given time, which tells you what your occupancy rate is throughout an entire day.
If CPT is less than the seating capacity of your restaurant, this means you will need to add additional tables or seats. The goal is to set an average number of customers per day; depending on the size of your restaurant. If you exceed this number, it's a good indication that your restaurant needs more staff members or additional tables and chairs.
If there are no reservations made for the following hour during peak hours (such as lunchtime) and if CPT drops below your set number of people, then something might be wrong.
This metric can help you figure out if your restaurant is understaffed, overbooked, or attracting the right number of customers altogether to maintain a profitable business model.
Average Check per Customer
Average check per customer is a key performance indicator to measure restaurant profitability and revenue. The more data points available to make this calculation, the more accurate it will be!
Calculate how much each customer spends on average by dividing a total check amount (including tax and tips) by an estimated number of customers.
If you can't calculate an estimate, then divide the total check amount by a number of customers.
In addition to measuring your average check size per customer, also measure what percentage of your customers are spending at least 20% more than the average check size.
If more than 50% of your customers are below the average check size, this could be an indication that you need to increase menu prices or offer discounts for smaller orders. If your restaurant is slow, then try increasing prices or offering discounts for smaller orders in order to increase revenue.
80% of restaurant reservations are made less than a week in advance. Restaurants should make it easy for guests to either call the restaurant or book via third-party booking tools with flexible reservation policies and procedures such as availability on short notice.
A flexible reservation policy is key as it makes it possible for customers to book on short notice. For example, if you’re running out of space but still want people to be able to come in that same day, you can offer walk-in availability with a free appetizer or drink.
It should also be easy for larger groups to book reservations. If you’re running out of space, consider using a staggered reservation time table so that tables are available for groups. While a small deposit is useful too, as it ensures you won’t lose money if the group were to cancel.
Lastly, restaurants can use their loyalty program to incentivize people to visit more often as well. Most people will have a favorite restaurant they’d like to visit more often, but there are many things that might get in the way of doing so. If you make it easy for them with discounted or complimentary future visits and loyalty points, you can do better at retaining your customers who would otherwise be infrequent visitors.
It's important to keep cancellations in mind when developing a restaurant analytics strategy because they can either hurt or help your profits depending on how many occur and what percentage of sales come from those customers.
- If you have a small percentage of cancellations, then the lost revenue from those customers will not be significant and cancelling orders may actually protect your profits because it means less food is being wasted.
- However, if there are high levels of cancellations that represent a large portion of sales (for example more than 15% of total sales), then those customers may be costing you more than what they're spending.
In these cases, getting feedback from your employees about why the customer cancelled can help you make changes to your restaurant that might lead to increased customer satisfaction. Additionally, positive customer feedback reflects well on a percentage of employees, which is key for a successful restaurant.
The most effective action is that which both increases revenue and reduces overhead costs at the same time.
As business evolves, so should the restaurant's menu to meet customer needs and preferences. A KPI that can be utilized to measure the success of a menu change is the percentage of sales increase for new items. This can be done by tracking the new items added to a menu and comparing their sales numbers against total monthly food sales.
- Consider adding new items or substituting existing ones with more popular dishes in order to increase sales, and eat into competitor market shares by satisfying customers who might be shopping around for a place that offers what they're looking for.
- Dig deep into data for your average customer, looking at location, gender, age range, and frequency of visits. This information can be used to determine which dishes are most likely to attract new customers or offer a good deal on old favorites that will still bring in revenue.
- To measure success rates for existing dishes on menus that have been changed, track the traffic and profitability after the change and compare to the time period before.
- If an item has more than 50% of its revenue coming from new customers, it is considered successful.
Percentage of tables served
A restaurant KPI is a key performance indicator that can be used to monitor and optimize your restaurant. Quite often, the best way to assess the efficiency of your staff is by looking at what they are doing on any given day.
When calculating table service efficiency, the percentage of tables served is a key metric. For example: if 30% of customers leave without being seated because tables are not available to serve more guests in your restaurant, that’s an opportunity for improvement!
If you notice that the percentage of tables served per waiter has been increasing steadily, but it is not translating into increased profits then there might be a problem. This might indicate that your service time is too long, for example, or maybe you have an outlier who needs more attention.
Alternatively, if the percentage of tables served per waiter has been decreasing over time and yet you are seeing increased profits then there might be a problem with how your staff is spending their time in ways other than serving tables.
Measurement is one of the keys to success. As a restaurant manager, you should be tracking key performance indicators that will help you identify trends in your business and optimize how time and resources are spent on improving the efficiency of your staff. Additionally, consider how to handle reservation-only dining or prime times with little staff availability, as limited resources often reveal the most significant areas of improvement.
Inventory turnover is calculated by multiplying cost of goods sold and inventory. This key performance indicator measures how much a company’s current inventory sells in one year, which helps managers know if they should increase or decrease their orders from suppliers. If the number is low, that could indicate higher costs associated with holding raw materials and food items for a longer period of time.
It is also important to monitor inventory time as it relates to key performance indicators and sales metrics. Restaurants that have too much inventory at the end of the day are also going to be more inefficient.
For example, restaurants will typically have a certain amount of food prepared at any given time; the more time that elapses between when it was prepared and when it is sold, the less fresh and tasty it will be.
Speed of service
Eating out can be a great experience, but much of the time it is not. Customers are often dissatisfied with speed of service times and how long they have to wait for their order. A restaurant's customer satisfaction rate will decline when customers feel neglected or ignored by staff.
- Invest in new technology that allows you to track your speed of service to minimize the wait time for your customers, however if you are constantly low on staff and have the additional funds, investing in additional servers will ensure fast customer satisfaction rates.
- Verify that there are enough servers on hand at all times, and make sure they’re communicating with each other about orders coming in.
- If you have more than one server at your establishment, make sure that they are delineated by sections. This will help the staff to find their section and work more efficiently. When taking orders, don't forget about any allergies or intolerances customers have before proceeding with an order.
- Train staff to be sensitive to customer needs and work hard so as not to disappoint them. It's important to let the customer know how long it will be before they get their food, so don't forget to ask them about any allergies or intolerances when taking orders.
- Include a section of the restaurant where people can order takeout or delivery without waiting in line, if possible.
Tracking key performance indicators like a customer's satisfaction with service can help improve profitability by providing valuable insights that may not have been recognized before.
One of the key indicators to track is tips received. The average tip for a restaurant in America is 18%, but some people may leave less or more depending on how they are treated, and if you have servers who perform better than others it could mean that your owners will make more money with higher tips.
If your restaurants see revenue coming from tips, then tracking them is crucial to understanding how much revenue you are generating.
The best way to track tips received is by assigning a tip percentage for each server and adding it up at the end of the day or week/month depending on your restaurant's frequency.
Tips should be counted as an income type because they are considered wages for the servers, and when they are accounted for it should be included in your restaurant's overhead costs.
The numbers on menus often have a psychological impact that can make diners feel satisfied with their purchase or disappointed at how much was spent without considering what else is offered throughout the menu. Knowing this, it is important to optimize prices for menu items and ensure that the dishes on the menu are logically priced.
- Menu pricing should be consistent with what is offered in terms of quality, portion size, taste level, etc.
- Keep customers satisfied by making sure each dish offers a good value as well as an appropriate price point so they don't feel cheated by the restaurant.
- The numbers on menus should be logical and easy to calculate in order for customers not to have any questions about what they are ordering or how much they are paying.
- When menu items seem too high, consider splitting a dish with someone else at your table instead of choosing an additional side item which would be cheaper.
- Customers also need to know the amount of time a dish might take if it is not prepared quickly or if there are other considerations when ordering such as heating, etc.
Feedback and Complaints
Feedback and complaints are a key source of information for evaluating the quality of service provided to customers, which is critical in delivering an excellent experience that keeps them coming back. The type of feedback or complaint received by your business will also help you analyze how well employees are fulfilling their roles with the company.
The best way to improve customer service is by surveying customers about how well they were attended to and what improvements could be made in order for them to return.
If you are unable - or unwilling - to fix a problem that has been brought up, then it's time for your business as a whole to re-evaluate your employee's training, policies and procedures.
5 key performance indicators:
1. How well the restaurant is treating customers: Did they feel welcome? Were their needs met in a timely manner? Will they return as a result of this experience? The system will help guide employees to provide the best service possible while also helping identify any problems with policies or procedures.
2. The restaurant's cleanliness and upkeep: Did they notice unclean utensils? Was the food fresh due to an employee forgetting about it in a pot of boiling water on the stove for 45 minutes? Feedback and complaints will help track these metrics as well.
3. How much customers are eating: Did they order a salad but only pick at it? Were they too busy to stop and eat their meal? Feedback can help identify these cases of lost revenue, in addition to helping the business better understand consumers' needs.
4. The quality of food served: Was the customer expecting more from the dish they ordered? Feedback and complaints will help identify where the restaurant is falling short in terms of quality.
5. Quantity: Did the customer find that their meal was too small to fill them up or did they feel like there wasn't enough food on the plate for what they paid for? These are all issues your business can address with feedback, either by improving the food or re-examining policies on what's offered for a particular price.
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A customer complaints metric to track is based on:
- The number of Complaints Received Recently (last 30 days)
- Average Customers Affected by Each Complaint in the Last 30 days, or last year for trend analysis
The key to success in restaurant analytics boils down to listening, understanding and acting upon customer feedback and complaints. This type of data is crucial when it comes to the quality of service you deliver your customers as well as identifying trends that can help improve your business.
Workplace safety is an important part of restaurant management because it helps with the improvement of workplace safety, restaurant reputation and the reduction of hazards.
This is done by checking the fire extinguishers as one example or inspecting for any possible hazards in the kitchen. It also includes making sure your employees are compliant with your company's safety and cleanliness policies and treat equipment with care and safety.
It's important to remember that your employees are the key to success. A restaurant manager needs to make sure he or she is doing all they can for their staff in order achieve a higher level of performance and satisfaction, which will lead them back to your business and your success.
This includes things like being supportive when there are problems on the floor, creating a comfortable work environment, and giving the employees a voice in suggestions they may want to improve.
Consistency and quality
Restaurants fail because of issues with consistency and quality in their service and their menu, or lack thereof. For restaurants that employ analytics, this data can steer management decisions towards improving both areas for better performance overall.
Point of sale data could show the number of complaints about inconsistency or lack of quality, and the menu might have key indicators that demonstrate how well it has been curated.
The management team will then be able to analyze this data and make changes that are more likely to have a positive impact on the restaurant's bottom line.
Restaurants can be more consistent with their quality by creating a plan that the cooks are following. The management team should have a set of standards for how the dishes should taste, and they should also know what ingredients are needed to make the dish. This will help train the cooks so that they know what to do when they're making the dish.
Staff should be training for consistency in service. Training can happen in many ways, including a demonstration of how to provide quality service and a practice session for feedback.
Training also means allowing staff to provide and critique each other's services as a form of quality control. The management team should also have a set of standards for how the service should be provided, such as what etiquette to use in different situations and how to handle complaints from customers.
Because consistency and quality in their service and menu are so important to the success of restaurants, it is logical that these events should be monitored closely.
Key restaurant success metrics to jot down
- Customer retention rate - is how many customers return within one year; it measures repeat business and customer loyalty by dividing the number of returning customers by the total in that same year.
- Average customer lifetime value - is the average revenue a company generates from each of its customers over their duration as customers, which is calculated by taking the average of the total revenue generated from all customers in the same year, and dividing it by the number of "new" customers that were acquired in that same year.
- Repurchase rate - measures brand preference and customer satisfaction based on how many customers return to the restaurant within two years divided by the total number of entries.
- Lead time - the lead time report uses the restaurant’s labor and inventory data to calculate how long it takes to fulfill an order. The lead time is the time elapsed from when an order is classified as a work order until the item arrives at the customer’s table. It tracks items that are taking up the most time or resources, and helps a restaurant improve productivity, customer satisfaction and product quality.
- Average ticket size - one key metric is the average price per customer. This can be an indicator of whether your food quality or value is resonating with customers and it also helps you understand your overall product pricing strategy. You can calculate the average ticket size by dividing the total sales by the number of customers.
- Customer satisfaction rate - uses a survey where customers provide feedback about their experience on site and score your restaurant. This includes any comments left or ratings given for specific items. It can not only help you understand your customers’ thoughts, but also identify areas where more attention is needed.
- Profit margins - is the percentage by which revenues exceed expenses and can be calculated as net income divided by expense, or alternatively, sales revenues minus all costs. This is, more specifically, calculated by dividing your net income/revenue from last month (YTD) by food cost for that same period.
- Feedback score - is the likelihood that your customers recommend your restaurant to others, based on their experience. You can calculate the feedback score by dividing your number of reviews that are rated as a five, four or three and multiplying it by 100%.
- Product cost - is how much money was spent on ingredients to create each dish served, which includes not just food cost, but all costs that went into the preparation of that dish. The food costs can be calculated by dividing the cost of all ingredients, including any delivery fees and other miscellaneous costs to prepare it. The labor expense can be calculated using an employee’s wage rate times their estimated hours spent on preparing that specific menu item.
- Marketing and promotional expenses - a company wants their investment in advertising to be proportional to how many new customers they acquire for that same period. These are calculated by using the total amount of money spent on marketing divided by the number of customers acquired.
- Payroll percentage - is an expense that can be calculated by dividing the total wages and salaries to pay employees in a given period of time (for example, last week) with the restaurant’s net income for that same period.
How do restaurants store data?
Restaurant data is collected from one or more point of sale systems, customer satisfaction surveys and other software sources that generate the actionable insights that the majority of successful restaurants use to track performance. Restaurants can then use this information to improve operations and maintain profitability by tracking key metrics like sales volume, labor costs, product quality, menu prices and competitor benchmarks.
Some data storage examples are:
- Spreadsheets: they are a good way to track restaurant metrics and data, as they're simple to use. However, if you have a lot of information or want to graph your numbers for more detail - spreadsheets might not be best option. I.e. With Excel's graphing capabilities, business owners can easily create charts that illustrate how sales volume, for example, changes over time.
- Sale system: Point of sale systems are typically the most effective method for tracking restaurant metrics. The data they collect is then stored in a database, which can be used to create graphs and charts with various analytics tools.
- CRM: Customer relationship management software can also be advantageous at storing restaurant performance metrics. CRMs allow business owners to organize customer information by location or social
- Inventory software apps: Inventory software apps are another way to track restaurant metrics with customizable reports. Some examples include tracking restaurant POS, purchase orders, inventory, scanning invoices, calculating your consumption, overstock and under stock analytics, and more!
To conclude, restaurant analytics help track and optimize with key performance indicators, point of sale data, and success metrics to increase profitability customer satisfaction, and product quality. Restaurant analytics is also an important tool in the restaurant industry for tracking customer satisfaction which can lead a business to identify weaknesses or strengths within their operations that will ultimately make it more profitable.
In addition, restaurant management is an important part in restaurant optimization because it helps identify trends that can improve your business. While consistency and quality are both needed for the success of restaurants, this input focuses on how statistics like customer complaints or menu items could be used by managers at one end who may have not been paying attention to these factors before using them, as a guidepost towards improving their service or product offerings instead.