Whether you disliked assessments during your school life or not, as a businessman you would know that the corporate world doesn’t really provide an option.
Continuous evaluation and assessment of organizational operations is a MUST if you want your business to survive and prosper. A successful business requires its owner to be data-driven. And the restaurant industry is no exception to this rule.
Determining whether your restaurant is doing well goes much farther than your customers leaving with a satisfied appetite and giving positive reviews. Also, a busy kitchen and fully occupied tables are not sufficient in predicting that you will make higher profits and continue to excel.
The food industry is highly dynamic and vast by its very nature. Therefore, most of the top restaurateurs analyze their business performance by using several different metrics. These Key Performance Indicators (KPIs) are essential in finding out which areas in your restaurant need improvement and which areas hold promising returns.
However, did you know that there are several different KPIs in the restaurant industry besides the traditional cash flows and the cost of raw materials? In fact, there are special KPIs for different categories in a restaurant business that can help you manage the operations smoothly and make informed decisions within the right time frame.
Read on to find out what they are.
Sorted category-wise for easier tracking, following are the 25 most important KPIs for all restaurant businesses.
Category: Revenue (measured in $)
1. Revenue Per Available Seat Hour (RevPASH)
As the name suggests, this is a measure of the revenue earned by your restaurant per available seat hour.
Available seat hours mean the number of seats available during the regular hours of operation. Therefore, the higher the value of this KPI, the higher your restaurant is earning from its given seating capacity.
This helps you identify the top-selling time intervals and the effectiveness of the current seating arrangement.
RevPASH can be calculated as follows.
RevPASH = revenue earned / available seat hours
2. Revenue Per Available Square Meter (RevPAM)
Divide the total sales by the total dining area of your restaurant and you get the revenue per available square meter.
RevPAM = total sales / total dining area in square meter
A large figure of RevPAM signifies a good generation capability of the serving division in your restaurant.
3. Revenue Per Table
This KPI measures the average sales from each restaurant table on any given day.
Needless to say, that this figure should be as high as possible as it shows the capability of your restaurant to earn well.
Revenue per table = (revenue / number of tables) / number of days in the reporting period
4. Amount Of Dining
The KPI of the amount of dining speaks volumes about the customers of your restaurant and how much they generally spend. It denotes the effectiveness of deals, discounts and other combos offered by your restaurant.
Amount of dining = total revenue (including take away etc.) / number of checks or bills
Category: Service (usually expressed as a % or as a number)
5. Tables Served Per Waiter
This KPI signifies the average number of tables served by a waiter in a given period of time.
The appropriate value for this indicator will vary from restaurant to restaurant. Consider factors such as the total seating capacity in your restaurant, the total number of wait staff, the peak service hours, and so on in order to decide whether the workload on each waiter is justified or not.
Formula = tables served / number of waiters
6. Unavailability Of Menu Items
No one likes it when you order a dish but are denied service because the required food items are unavailable or out of stock.
Therefore, make sure that such a scenario never arises in your restaurant by using this KPI that shows the number of uncompleted orders.
Formula = number of unavailable menu items / total orders x 100
7.Time Per Table Turn
As the name suggests, time per table turn is the amount of time for which the guests normally occupy a table.
This should be usually lower because customers seated for a long time is likely to mean more talking and chatting among each other and idle occupancy for your restaurant seats.
This, in turn, also affects your RevPASH.
Use the following method to calculate this KPI.
A = number of times table I was occupied, where i ranges from 1 to n
n = number of tables occupied
B = number of turns (group of guests)
Formula = (A1 + A2 + … An) / B
8. New Menu Items
Change is constant-especially when it comes to food trends and customers’ preferences and eating habits.
Restaurateurs must adapt to the variations by continuously introducing new menu items in order to keep the customers hooked to the place. New dishes mean that people will be interested to keep coming back for more.
However, the number of new items in your menu should be within a decent range. Too little new items mean that you do not welcome innovation and are likely to fall behind in the business. On the other hand, too many new items tend to confuse the customers and will probably lead to increased costs as well.
Track this KPI by noting down the number of new food items that your restaurant introduces in a given time period.
9. Front Of House Labor
Front of house labor is a KPI that expresses the percentage of workers in your total workforce who were stationed for managing the front of house activities.
It should be within a considerable range depending on the needs of your restaurant. If too many workers are assigned the front of house operations, then other areas in your restaurant’s management might face a setback.
Formula = hours of front of house work / total work time in hours x 100
Category: Occupancy (expressed as a % or as a simple number)
10. Canceled Reservations
It goes without saying that this KPI should be as low as possible.
Regardless of the reason behind it, a canceled reservation means potential revenue that only disappeared into thin air.
Percentage of canceled reservations = (canceled reservation / total reservations) x 100
11. Reserved Tables
If your restaurant tables are frequently booked be it through a phone call or online booking, then needless to say that you occupy a prominent place in not just your local area but even beyond.
This is an indicator of such popularity that customers book a table in advance because they don’t want to face the disappointment of coming to their favorite diner only to find all the seats occupied already.
Formula = tables occupied with prior reservation / total tables occupied x 100
12. Guests per table
This is the number of guests seated per table or the number of guests who paid a certain bill.
This KPI can help you monitor the number of customers as well as the size of each group that you served. Depending on your restaurant and the type of food items that you serve, this value should fall within an acceptable range.
For instance, two people ordering a steak or paying a bill of say $100 might be a considerable sale. But ten people who only placed an order worth $50 in a five-star restaurant definitely means that a table was occupied for a long duration yet couldn’t earn a profitable amount.
Guests per table = individual guests served / bill paid
13. Foodservice Strike Rate
The food service strike rate KPI should show a higher percentage on your data records.
It is a measure of the number of times customers visit your restaurant and actually place a genuine food order.
For instance, during the winter season, many passersby often visit a closed-door restaurant merely to get some warmth and comfort from the cold outside. They might order a tea or any other hot drink at most but are unlikely to have a proper, full-course meal.
Formula = number of people that serve a meal / number of patrons at location
This KPI denotes the total number of guests served. So, to measure it, simply note down the number of guests served in a certain time period.
By comparing the daily, weekly and monthly records, you can find out which days are the busiest and what measures should be taken to increase the inflow of guests on other days.
Category: Customer feedback (usually expressed as a %)
15. Customers Satisfied With The Time To Be Served
Preparing the food obviously takes time. But if your chef takes longer than usual, then obviously the customers will not be happy.
Use this KPI to decide whether the kitchen staff at your restaurant needs the training to fasten the food delivery or whether you need to take other measures such as expanding your kitchen to increase the speed of operations.
Formula = customers who said they were satisfied with the serving time / total customers x 100
16. Positive Feedback From Guests
Positive feedback from guests is a self-explanatory Key Performance Indicator.
This KPI helps you gauge the effectiveness of your restaurant in delivering the visitors a great overall dining experience.
The higher this percentage, the more your customers are pleased with the quality of food that you serve and the type of service that you provide.
Formula = guests giving positive feedback / total number of feedback x 100
17. Complaints Per Restaurant Order
Remember the time in your childhood when you would dread getting a ‘C’ on your report card?
Well, times haven’t changed so much after all.
Now this ‘C’ doesn’t just represent a failed math test. It represents something even worse: customer complaints.
No matter how good your food and service might be, one customer or the other is bound to lodge a complaint at some point. Though you should try to fix them at your earliest so that you don’t lose any guests, know that a few complaints are normal for every business.
Formula = complaints received / restaurant service orders recorded
18. Tips From Total Collected
The tip from total collected is a KPI that denotes good customer feedback. It is calculated by expressing the amount of tips collected as a percentage of the total value of the bills.
This indicator helps you evaluate your customers’ satisfaction as well the quality of service provided by your wait staff.
Formula = value of tips / total collected value of bills x 100
Category: Quality compliance (usually expressed as a %)
19. Application Of Principles Of Workplace Safety And Sanitation
If you want your restaurant to rank above the competitors, then you must follow all the principles of workplace safety and sanitation.
Luscious food presentation and delicious tastes pale in comparison if your tables are dirty and the napkins are stained. Unhealthy kitchen practices, as well as poor sanitation conditions, can do severe damage to your brand image.
Formula = number of restaurants that apply principles of safety / total number of restaurants x 100
20. Restaurants That Apply Principles Of Menu Planning
Following the principles of menu planning is considered highly important in the restaurant industry.
It shows your performance and how high you rank above others in the same business in terms of hospitality.
Formula = number of restaurants that apply principles of menu panning / total number of restaurants x 100
21. Application Of Principles Of Managing The Purchasing Process
Another way to ensure that you rank atop your competitors is to follow the principles in the purchasing process.
By following the standardized practices, you are more likely to benefit from reduced costs and enhanced performance.
Formula = number of restaurants that apply principles of managing processes / total number of restaurants x 100
22. Product quality uniformity
The product quality uniformity indicates the variance in food quality from an average rating.
If you own a franchise of some food brand or run a multi-location restaurant then the presentation as well the taste of every food item should be the same throughout the different restaurant facilities.
It is calculated via the following method.
Let Ai = quality of the product ‘i’ on a scale of 1 to 10 (where i = 1 to n)
n = number of products evaluated
Then, the formula is [(A1 + ….An) / n] - Ai
Category: Cost management (usually expressed as a %)
23. Food Loss
A small leak will sink a great ship. And food wastage is that small leak for your restaurant business.
Prepared dishes that are not served to the customers for reasons such as incorrect or misplaced orders or the food that took so long to be prepared that the customer walked out; all mean money and various other resources went down the drain.
Food wastage arising from large serving sizes that customers find hard to finish is another factor that increases your costs. Furthermore, new menu items that failed to please the customers’ taste buds or aren’t well received because they were introduced in the wrong season or at the wrong time are other aspects that incur you huge losses.
Thus, monitor the food loss KPI closely to prevent such damages to your business.
Food loss can be calculated as follows;
Volume of food that was not served / volume of total food production x 100
24. Food Costs From Food Sales
This KPI indicates the proportion of the costs of your food supplies that are being covered from the sales of food items prepared using those raw materials.
The food costs from food sales indicator should usually follow a decreasing trend. This is because a decreasing trend denotes a reduction in costs resulting from effective cost management. Moreover, it also signifies increased sales which ultimately mean that your profits are being maximized.
This KPI can be calculated by the formula,
Cost of food sales/ food sales x 100
25. Beverage Loss
This aspect in the restaurant business is similar to the food wastage factor.
However, beverage loss is often overlooked as most restaurateurs think that it does not contribute to significant losses.
But the reality is exactly the opposite. Little drops of water make the mighty ocean. Similarly, little amounts of beverages wasted frequently means huge losses for your business.
Monitoring the beverage loss KPI can help you keep track of your clients’ preferences. Therefore, you can stock your inventory, buy the supplies and serve the drinks accordingly in order to minimize wastage and the resulting losses.
Beverage loss can be calculated by the formula: actual quantity of beverages in the inventory / nominal quantity of beverages in the inventory x 100
These were the most important KPIs used in the restaurant industry.
As someone rightly said, ‘If you can’t measure it, then you can’t manage it.’
Hence, use these KPIs to manage your restaurant easily, make timely decisions and ensure that your business stays at the top of the line and ahead of your competitors.