Serving dishes that will impress your customers, charming them with the presentation of your plates, and giving them a quality welcome are all crucial to the success of your establishment.
However, this article will not call on your culinary talents or your sharp sense of service, but rather on your management skills. A large part of your restaurant's success also depends on the management of your business and more precisely on your ability to take a step back, measure the performance of your business and take action if necessary. And for this, you can rely on KPIs. These key performance indicators will allow you to analyze your structure with precision and to take the right decisions.
What is a KPI?
KPIs is an acronym for key performance indicators. They are used by any type of business, but differ depending on the nature of the business. An airline will not measure its success in the same way as a toy store or a restaurant.
To be effective, KPIs must:
- be calculated from reliable data;
- be well defined;
- have an impact on the company's results;
- be communicated to employees on a regular basis.
Here are three good reasons to use KPIs:
- Track and measure the overall performance and productivity of your facility and evaluate the effectiveness of your strategy in achieving your goals.
- Identify opportunities for improvement and implement appropriate corrective actions if necessary.
- Convince potential investors. They will inevitably try to find out about the health of your company before investing their money.
In short, these indicators will allow you to measure in order to better manage.
What key performance indicators should be taken into account in the restaurant industry?
There are several types of KPIs. We have classified them into 3 categories.
What do they have in common? Measuring the activity of your restaurant to continue to operate serenely and rectify the situation if the need arises.
1. KPIs related to personnel
Staff turnover rate
Employee turnover refers to the number of employees who need to be replaced due to resignation or dismissal in a given period of time. When you relate this number to the total number of employees, you get the employee turnover rate.
The lower the ratio, the better, because you won't need to train staff or interview them, which takes time and money. You also won't suffer the loss of productivity caused by this turnover.
Turnover rate = (Number of employees lost/Average number of employees) x 100
Hourly productivity
Thanks to this indicator, it is possible to define the turnover realized in one hour of effective work during a given time slot. The analysis of the hourly productivity allows an optimal management of the planning and to identify the time slots where you are in overstaffing.
Average service time
This KPI will be very useful to evaluate the production capacity of your establishment and all the parameters that can impact the performance of the department such as the skills of your staff.
Payroll ratio
The payroll ratio is calculated as follows:
Payroll ratio = wages and salaries + social security charges/sales excluding VAT, including services.
This is the perfect indicator if you are looking to evaluate the productivity of your employees.
This ratio is generally between 25 and 28%, but can go up to 50% in gourmet restaurants. If it is lower than this average, it can be a warning about the quality of the service offered. If it is above, it may mean that your payroll is too high, that salaries are too high or that staff are not sufficiently skilled or trained.
2. KPIs concerning the profitability of your restaurant
The break-even point
The first, and perhaps most obvious, is the break-even point. It is essential to know this before you even open your restaurant.
This indicator gives you an idea of the minimum amount of revenue you will need to make to reach a zero profit and break even. Beyond that, you will start to make a profit. Calculating the break-even point can also give you an idea of how long it will take your business to become profitable. This will allow you to make decisions about what investments to make and how much to invest.
Break-even = Total fixed costs/((Total sales - Total variable costs)/Total sales)
The turnover
The calculation of your turnover will allow you to evaluate the success of your establishment. This is obtained by multiplying the selling price by the quantities sold.
The average ticket
The average ticket is the amount a customer spends on average in your establishment. This information is useful to measure the commercial performance of your staff, but also the success of your menus with your customers.
To calculate your restaurant's average basket, simply divide your sales by the number of diners.
Inventory turnover rate
To get an idea of how often your entire inventory is used and replaced, you need to calculate the inventory turnover rate.
This indicator will be useful to prevent products from accumulating on your shelves or to avoid disappointing customers to whom you will have to announce a stock shortage. It will also help you to fight against food waste.
Inventory Turnover Rate = Start by calculating the average total inventory by adding the value of inventory at the beginning and end of your reporting period. Divide the resulting figure by 2. As a final step, take the total sales for that same period and divide the average total inventory.
The profitability of the dishes
Have you ever calculated the individual profitability of your restaurant's menu items in order to develop profitable and attractive menus? It is important to know which dishes your customers like the most by making a sales chart by product. It is also crucial to know which dishes bring in the most money. By calculating the profitability of the dishes, you will know which dish to favour, which prices to set, which offers to make, etc. It is calculated as follows: (Number of dishes sold x Price of the menu) - (Number of dishes sold - Cost of the dish portion)
Restaurant operating costs
Like turnover, this KPI will give you an overall picture. To calculate it, you need to add up the costs of rent, equipment, raw materials or personnel.
Net margin
This is the indicator that should be used to find out how much profit is generated for each euro of turnover after paying operating costs, taxes and interest.
Net margin = divide your net profit by your sales and multiply by 100.
This will give you information on how much profit is available to reinvest in the business, start a franchise, save money, increase employee salaries, hire, etc.
The gross margin
The gross margin is the turnover minus the cost of raw materials (food and beverages). For your accounts to be balanced, it must be at least equal to your fixed costs.
3. Customer-related KPIs
Attendance rate
This key performance indicator will allow you to evaluate your restaurant's level of attendance and thus determine the success of your restaurant with customers. Are you selling out every service or do you need to redirect some of your efforts to attract new customers? The attendance rate is expressed as a percentage and is obtained by dividing the number of seats served by the restaurant's capacity over a given period of time and multiplying the total by 100.
👉 To go further: declining attendance in your restaurant: how to deal with it?
The filling rate
Also known as the table turnover rate, this indicator tells you how often customers can be served at the same table during a shift. It is useful for evaluating the performance of your establishment as well as the efficiency of your employees. You get this figure by dividing the number of services in a given period by the number of tables and multiplying by 100.
Customer satisfaction rate and percentage of customer returns
Unlike the previously mentioned indicators, this indicator is not based on numerical data. You can collect opinions through various means : satisfaction surveys, mystery visits, listening carefully to your customers, analysis of comments posted online, employee feedback, etc.
To conclude, all the KPI's mentioned in this article are relevant to the restaurant business, but it is not necessary to use them all.
How to track your KPIs with IO Analytics?
With IO Analytics, managing your restaurant has never been easier:
- Access all your data in real time to get a better understanding of your points of sale.
- Create reports and graphs with your own KPIs to simplify your analysis.
- Follow the evolution of your performance day after day.
IO Analytics has been developed hand in hand with restaurant owners to help you make the best decisions for your business.
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Are you a restaurant owner who wants to improve the performance of your business? Contact an Innovorder expert now and receive personalized advice!
