10 Metrics Restaurant Owners Should Track to Boost Profits and Efficiency
Running a restaurant is no small feat. From managing substantial investments and fluctuating food prices to handling high employee turnover and ensuring regulatory compliance, the challenges are numerous. Not to mention the constant concerns about utility bills and food waste. A recent study indicates that while average restaurant revenues can range from 0% to 15%, profit margins typically hover between 3% and 5%. Daniel of POV Husband recently shared the monthly performance of three restaurants. He noted each restaurant is unique, with numbers varying monthly. During a snapshot month, his restaurants achieved the following: Restaurant Gross Sales Gross Profit Net Income Profit Margin A $119,861 $76,902 $20,463 15% B $70,927 $45,582 $9,001 13% C $256,108 $171,156 $59,783 23% Notice the trend: as restaurants scale, efficiency and profit margins tend to increase, highlighting the challenge for startups. Small restaurants, with minimal room for error, must leverage metrics for data-driven decisions. By using metrics, they can implement effective solutions—like optimizing ingredient costs or refining staffing schedules—instead of resorting to knee-jerk reactions like raising prices. In this article, we’ll explore 10 essential metrics that empower smaller restaurants to thrive. Table of Contents Why Metrics Matter Just as a great dish relies on the right ingredients, a successful restaurant depends on tracking the right metrics. Restaurant owners excel at crafting recipes and selecting high-quality ingredients, but many overlook the “ingredients of success”—the key performance indicators that fuel profitability and efficiency. A metric is any quantifiable, consistently defined measurement of performance. Two decades ago, data and metrics might not have been a focal point in the restaurant industry. However, in today’s competitive landscape, metrics offer invaluable insights into your restaurant’s effectiveness. They help identify strengths and pinpoint areas needing improvement, allowing for informed adjustments to operations and strategies aimed at optimizing profits. Often referred to as Key Performance Indicators (KPIs), these metrics provide a detailed picture of your overall business performance and indicate whether you’re on track to meet your goals. On top of that, understanding your customers through data enables targeted marketing efforts, enhancing sales strategically. For instance, if you know a customer dines out every Friday, you can send them a timely email on Friday afternoon. If you’re aware of an upcoming birthday, offering a complimentary champagne can enhance their experience. Recognizing big spenders allows for tailored loyalty rewards. Understanding spending habits, such as increased spending at month’s end, enables precise targeting. Knowing a customer’s preference for brownies allows for personalized suggestions during ordering. Restaurants that collect and effectively utilize data are poised for success. The pertinent question then becomes: which metrics should we track? 10 Metrics to Help Your Restaurant Thrive 1. Table Turnover Rate This metric tracks how efficiently you’re using your seating capacity. It measures how many times a table is “turned over” or reset for a new party during a specific meal service, like lunch or dinner. More turns generally mean more customers served and increased revenue, but it’s crucial to find a balance that doesn’t compromise the guest experience. You don’t want to rush diners out the door, but you also don’t want tables sitting empty for extended periods. To calculate the table turnover rate, you use the following formula: Table Turnover Rate = Parties Served ÷ Number of Tables For example, if a restaurant with 50 tables serves 200 customer parties during dinner service, the table turnover rate would be 4. This means each table was used an average of 4 times during that period. The industry benchmark for table turnover rate is around 3. This means that, on average, a table in a typical restaurant is used three times during a given meal service, like lunch or dinner. However, this is just a general guideline. Your ideal table turnover rate will depend on factors like: Target audience: A business lunch crowd might expect faster service than a leisurely dinner crowd. Table size and configuration: Smaller tables generally turn over faster than larger ones. To optimize your table turnover rate, focus on creating efficient systems and processes. This includes providing prompt and attentive service, from order taking to food delivery and table clearing. A well-designed restaurant layout can also contribute to smoother flow and faster turnover. 2. Average Check Size Average check size, also known as average customer spend, is a key metric that reveals the average amount each customer spends per visit. This valuable insight helps you understand customer behavior, assess the effectiveness of your menu pricing, and identify opportunities to increase revenue. By analyzing and optimizing the average check size, you can strategically implement upselling or cross-selling techniques to drive more revenue per customer. Here’s how to calculate the average check size: Average Customer Spend = Total Revenue ÷ Number of Customers For example, if your restaurant generated $5,000 in revenue from 200 customers in a day, your average check size would be $25 ($5000 ÷ 200 = $25). Industry benchmarks for average check size vary depending on the type of restaurant. Coffee shops typically have an average check of around $11, while quick-service restaurants range from $8 to $15. Casual dining establishments average between $12 and $15, while upscale full-service restaurants can range from $16 to $25. Fine dining establishments, of course, have significantly higher average checks, often ranging from $50 to $500 or more. There are several strategies you can implement to increase your average check size. These include providing excellent customer service, ensuring your staff has thorough menu knowledge, offering enticing specials, and using high-quality ingredients that justify higher prices. 3. Food Cost Percentage Food cost percentage is a critical metric that reveals how much of your revenue is spent on food and beverages. Given that 52% of restaurant professionals identify high food costs as a top challenge (according to Toast’s Restaurant Success Report), keeping this percentage in check is essential for profitability. By monitoring your food cost percentage, you can make informed decisions about menu pricing and cost control, ultimately protecting your restaurant’s financial health. Food cost percentage is calculated as follows: Food Cost Percentage = Total Food
