The 7 most important numbers to know to increase your restaurant revenue
Running a successful restaurant business in 2018 requires leveraging all of the technology available to you. But with more data than ever before, how can you ensure you’re increasing efficiency and driving revenue?
“If you want to stay in business, you better care about the numbers,” says Jeff Williams, Vice President of Restaurant Analytics at Border Foods, a 183-unit Taco Bell franchise. “Your data can reflect the health of your business in different areas.”
In the restaurant industry, he notes, margins can be very small. “Finding and applying specific data trends can save an operator 2% or 3%, and that’s a big deal.”
Here are 7 metrics that can help you run your restaurants more efficiently and profitably.
7 restaurant metrics you should be monitoring
Cost of goods sold (COGS)/food cost percentage
It’s wise to be aware of your restaurant’s cost of goods sold (COGS). For restaurants, cost of goods sold includes the cost of food, beverage, and paper supplies. You can find this number using this equation: Beginning Inventory + Purchased Inventory – Final Inventory = COGS.
Identifying ways to reduce your COGS will directly impact your restaurant’s profit.
Food cost can account for as much as 94% of COGS, depending on the brand, so some operators focus on food cost percentage, which compares food cost to food sales. To calculate food cost, use the same equation as COGS, but remove any non-food inventory (your beverage and paper supplies): Beginning Food Inventory + Purchased Food Inventory – Final Food Inventory = Food Cost.
Then, take your Food cost / Food sales x 100.
A profitable restaurant should spend 20-23% of total sales on food cost. For a benchmark, factoring in 4.5% for beverage, 2.5% for paper, and 20% food adds up to 27% total COGS on the low end, and 30% on the high end. Even if you’re already in this range, analyzing your current percentage can help you optimize your system and increase profits.
In addition to food cost percentage, it’s wise to be aware of your ideal food cost. This is the amount of food your restaurants are using compared to the ideal amount for your restaurant type: Total Cost per Item / Total Sales per Item.
Pro Tip: Make sure your portion sizes are accurate. Flavor profiles and price points are determined with the intended ingredient portions and cost in mind. It’s critically important that portion sizes are accurate with brand standards. The guests receive the consistency they expect, and restaurants operators hold the line on costs.
Your prime cost is calculated by taking your COGS + Labor. Typically, a restaurant’s prime cost should be about 55-60% of the total sales. Why is this number important?
It represents a giant portion of expenses you can control. If you’re going to find room to reduce expenses, it will most likely be within the prime cost.
Keeping employees’ production high is essential to running a successful restaurant business. If employees are doing a good job, it will not only increase sales but will also increase customer satisfaction and repeat customers.
There are many metrics you can measure, including transactions per labor hour, sales per labor hour, and actual hours compared to allowed and forecasted hours. The important thing is that you choose what’s important to your company’s success, and focus your attention there.
When you properly track this metric, you can recognize employees who are doing great work and keep them working at a high level. It also helps you identify those who are underachieving, so you can provide additional training and coaching, or you may need to find replacements.
Pro Tip: With specific reporting software, like Delaget Coach, you can also rank employees, zero in on areas where you can have the biggest monetary impact, and uncover relationships like which employees are most productive when working together.
These metrics include things like cancels, promo sales, discounts, voids, refunds, and over-rings. POS metrics are important because they show you the loss of sales due to system and employee error, and perhaps theft.
While analyzing POS metrics, you may find that extra company training is required. Adding a tracking system, either manually or a software solution such as Delaget Guard to monitor cashier and manager performance could also improve profit margins.
Speed of service
The metric that matters to most of your customers is speed of service. They want their food served fast and so do you. Quick, quality service not only leads to happy customers, but it ultimately leads to increased sales with faster turnover of customers going in and out of your restaurant. Measure these numbers to monitor your speed of service:
- Order time
- Order speed
- Line time
- Service time
- In-store delivery times (when applicable)
- Speaker or greeting time
- Order time
- Line time
- Window time
- Total order to delivery
Looking to improve your speed of service? Try some of these restaurant management tips.
Voice of the customer/customer scores
Capturing metrics related to the voice of the customer can help you understand their expectations, preferences, and aversions. This makes it possible to segment the value of happy customers and the value of those who are least satisfied. The feedback can show you how to make your unhappy customers happy again.
Which metrics will help you learn what your customers are thinking?
- NPS – The net promoter score measures how willing someone is to promote your service.
- OSAT – The overall satisfaction score measures how satisfied people are with their experience with your service.
- CLI – The customer loyalty index measures customer loyalty over time. It incorporates the values of NPS, repurchasing, and upselling.
- CES – The customer effort score measures customer service satisfaction.
In many ways, you can measure your employee satisfaction by analyzing retention and turnover.
The retention rate is measured by dividing the current number of employees by the number at the start of the measurement period (whether that’s the quarter or the year) and multiplying by 100. If you’re looking for a benchmark, 90% of employees on your team with greater than 90 days tenure is a great place to be.
Turnover rate is basically the opposite of retention, dividing the number of employees who left during a given time by the average number of employees during that period.
Putting it all together
When you have a handle on sales, labor costs, food costs, loss, training, and VoC metrics, you have a good overview of how your business is really doing. Getting the big picture helps you identify weak points so you can focus on strengthening them. It also allows you to see strong areas and capitalize on them, and give great employees the recognition they deserve.
Want to learn how to collect the right data and gain more control over your restaurant’s future? Let’s talk today.