Running a restaurant leaves little margin for error. The industry is incredibly competitive, fast-paced, and shaped by ever-changing economic conditions that affect everything from food and labor costs to customer spending habits. To succeed in this environment and survive past the average restaurant lifespan of 4.5 years, restaurant owners must regularly assess their operations and optimize business strategies to meet market trends and customers’ needs.
In practice, this means analyzing and working toward a comprehensive set of metrics that highlights areas where a restaurant is performing well and where there’s room for improvement. In this article, we break down essential restaurant metrics into four categories: financial, operational, performance, and customer-related. By monitoring these key benchmarks, restaurant owners can gauge the health of their organization and make informed decisions that can help build an enduring and profitable business.
What Are Metrics?
Metrics are quantitative measures of a business’s condition that businesses use to track their progress toward specific strategic or operational goals. For instance, a restaurant group expanding its operations into a neighboring state might monitor such KPIs as customer acquisition costs and frequency of visits to gauge the effectiveness of its expansion efforts. By consistently monitoring relevant metrics, businesses can make well informed, data-driven decisions that direct them toward meeting or exceeding their objectives.
What Are Restaurant Financial Metrics?
Restaurants use financial metrics to track the financial health of their operation. Common financial metrics for restaurants include cash flow, debt-to-equity ratio and gross profit margin, among others. These metrics provide restaurant owners with valuable insights into their sales, revenue, profitability and expenses. In the restaurant industry, where conditions can change rapidly, it’s advisable to review these metrics regularly — often weekly, or even daily — to stay ahead of market shifts. That said, optimal frequency can vary, depending on the individual restaurant and the specific metric.
Armed with impartial, data-driven insights into their financial strengths and weaknesses, restaurants can regularly analyze their financial performance, establish benchmarks for themselves to compare against the competition, and prepare a path that leads to long-term financial success.
Key Takeaways
- Restaurant metrics help restaurant operators gauge the health of their organization relative to financial, operational, performance and customer experience objectives.
- Regular benchmarking promotes steady analysis and improvement of restaurant practices.
- Tracking metrics can reveal opportunities for maximizing revenue and driving down costs.
- Financial management software automatically tracks key metrics to optimize performance and support long-term success.
33 Restaurant Metrics to Know, Calculate and Analyze
The restaurant industry faces unique challenges, including low profit margins, high employee turnover and an unpredictable economic landscape. With 41% of consumers saying they plan to spend less on dining out in 2024 than in previous years, according to KPMG, these challenges could intensify.
To navigate these challenges and achieve sustainability, restaurants can study a comprehensive set of metrics across four categories: financial, operational, performance, and customer-related. By monitoring these KPIs, restaurants can identify areas of strength, as well as opportunities where they can improve financial performance and steer their businesses toward success.
Financial Restaurant Metrics
Financial restaurant metrics reveal crucial information about a restaurant’s financial performance. The value of these metrics will vary according to restaurant type, location and economic factors, such as food and labor costs. For instance, a fast-food chain with franchises in multiple states operates very differently from a farm-to-table restaurant sourcing seasonal ingredients from local farms. Consequently, restaurant operators should select and interpret financial KPIs in the context of their specific business model and goals.
1. Current Ratio
Using the current ratio formula, a restaurant can measure its ability to cover its short-term obligations with its short-term assets. Examples of short-term obligations include accounts payable (e.g., money owed to food and beverage suppliers for goods already delivered) and near-due expenses, like employee wages and rent, which are paid in arrears.
Current ratio = Current assets / Current liabilities
A current ratio greater than 1 indicates that a restaurant has the liquidity required to cover its short-term commitments, but too high a ratio could indicate inefficient use of assets. A ratio below 1 suggests the restaurant has liquidity problems or needs to rethink the way it manages its finances. The average industry current ratio for restaurants as of June 2024 was 0.78, according to MacroTrends. By comparison, restaurants maintained a higher current ratio, between 1.4 and 2.0, through most of 2020 to weather the challenges of the COVID-19 pandemic.
To improve its current ratio, a restaurant must find ways to generate short-term income or free up cash to increase their current assets. That might involve adopting strategies that drive additional revenue from food sales or that cut back on inventory spoilage to reduce costs. Failing that, restaurant operators can also extend their payment terms with suppliers or opt for short-term loans to address their liquidity troubles, though the latter approach is less sustainable in the long term.
2. Quick Ratio (Acid-Test Ratio)
Also known as the “acid-test ratio,” the quick ratio is an indicator of a company’s liquidity. More specifically, it tells restaurant owners how prepared they are to meet short-term financial obligations without selling off their inventory. The quick ratio is calculated by dividing a restaurant’s quick assets by its current liabilities. Quick assets are a subset of current assets and include cash on hand and accounts receivable. For restaurants, accounts receivable typically refers to outstanding customer payments made on credit.
Quick ratio = Quick assets / Current liabilities
A quick ratio above 1 tells owners they are liquid enough to cover short-term obligations during extenuating circumstances, while a ratio below 1 indicates that they must improve their liquidity or cash management practices.
Like all businesses, restaurants can experience unforeseen cash flow issues that require them to quickly sell off assets to cover short-term expenses to keep their business afloat. The COVID-19 pandemic was a major test in this regard, forcing many restaurants to absorb short-term expenses, like rent, while their doors were closed to the public.
3. Debt-to-Equity Ratio
The debt-to-equity ratio reveals how much of a restaurant’s financing comes from debt as opposed to equity. It helps restaurant owners assess the balance between their financial obligations to external entities and the value of the owner’s stake, which, in turn, helps them assess their level of financial leverage in the face of risk.
Debt-to-equity = Total liabilities / Shareholders’ equity
Where:
Total liabilities = Current liabilities + Long-term liabilities
Current liabilities are debts due within the year, such as taxes, employee wages, and short-term loans. Long-term liabilities are due after a year, such as mortgages and long-term loans. Shareholder’s equity includes contributed capital — the investments made by owners, partners, and shareholders — and retained earnings, which is the undistributed cash left over after subtracting liabilities from assets.
So, if a restaurant group has $6,000 in current liabilities, $8,000 in long-term liabilities, and $7,000 in shareholder’s equity, its debt-to-equity ratio would equal 2, as ($6,000 + $8,000) / $7,000 = 2.
A ratio below 1 is generally favorable, indicating more equity than debt. While it’s common for a restaurant to take on loans and debt to finance operations in its early years, this becomes less sustainable over time and can lead to financial stress during economic difficulties.
To improve debt-to-equity ratio, restaurants can improve the efficiency of their operations to generate more income. They can also prioritize paying off loans and liabilities when in a position to do so.
4. Gross Profit Margin
Gross profit tells restaurant owners how much money their business is making after they subtract their cost of goods sold (COGS), such as food and beverages, from net sales. (More on COGS in the next section.) Going one step further, gross profit margin reveals how profitable these goods are for a restaurant. To calculate gross profit margin, restaurants must divide their gross profit by their net sales revenue, using the following formula:
Gross profit margin = (Gross profit / Net sales revenue) x
100
Where:
Gross profit = Net sales – COGS
Consider a popular fine-dining establishment with net sales of $600,000 for the year and a COGS of $400,000. Its gross profit is therefore $200,000 ($600,000 – $400,000), making its gross profit margin 33%, or [($200,000 / $600,000)] x 100).
5. Net Profit Margin
Net profit margin reveals how much money a restaurant makes after subtracting all of its operating costs from total revenue. Net profit margin expresses bottom-line net income or loss as a percentage of total revenue (similar to gross profit and gross profit margin). It’s important to include all of a restaurant’s operating costs, such as COGS and labor costs, as well as nonoperating costs, such as interest expense or losses on investments.
Net profit margin = (Net income / Total revenue) x 100
Where:
Net income = Total revenue – Total expenses
If a restaurant makes $50,000 in total revenue over the winter holidays and incurs $38,000 in total expenses over that period, its net profit margin would be 24%, or [($50,000 – $38,000) / $50,000] x 100.
6. Operating Income
Operating income is a measure of whether a restaurant is profiting from its operations. In practice, it tells restaurant owners how profitable their core operations are after subtracting their operating expenses from their gross profit (which is revenue minus COGS).
Operating income = Gross profit – Operating expenses
A restaurant’s operating expenses generally fall into two categories: direct and indirect. Direct expenses refer to a restaurant’s COGS, which includes food and labor costs, while indirect expenses refer to costs not directly incurred in the production of food and beverages. Indirect costs include wages for administrative employees who do not directly serve customers, as well as the cost of rent, utilities and marketing.
If a restaurant’s gross profit during autumn is $30,000 and its operating expenses total $24,000 for the same period, its operating income would equal $6,000, or $30,000 – $24,000.
To boost operating income, restaurants need to drive revenue, lower costs, or both. Common strategies include reducing raw material costs, improving inventory management, or finding ways to generate additional revenue at their restaurant locations.
7. Cash Flow
A restaurant’s cash flow measures its net cash inflows and outflows. A positive cash flow reveals that a restaurant has the liquidity and flexibility to pay its expenses. This can inspire confidence among investors and interest from potential lenders, as it indicates that a restaurant will likely deliver a return on investment and is in control of its finances.
Total cash flow is equal to the sum of a restaurant’s cash inflows and outflows. Inflows include cash from operating activities, like customer sales; investing activities, like interest income from investments; and financing activities, like loan proceeds. Outflows include cash paid for operating costs, such as employees’ salaries; investing activities, such as buying assets like kitchen equipment with cash; and financing outflows, such as dividends paid to restaurant investors. Total cash flow is calculated by combining all of these inflows and outflows.
Cash flow = Net cash flow from operating activities +/– Net cash flow from investing activities +/– Net cash flow from financing activities
Consider a restaurant that collects $8,000 in cash sales for the month, receives a $500 return on its investments, and takes out a $1,000 loan for new kitchen equipment. Over the same period, it paid $6,500 for operating costs and spent $800 to replace broken chairs and tables in its dining room. Its cash flow for the month would be $2,200, or ($8,000 + $500 + $1,000 – $6,500 – $800).
It’s possible for a restaurant to have a negative cash flow and still be financially profitable. This is a common situation for newly opened restaurants that must spend a lot of money up front to cover rent, equipment, wages, and marketing activities. However, every restaurant’s goal should be to become cash-flow positive as quickly as possible, because prolonged periods of negative cash flow can become unsustainable.
8. Break-Even Point
The break-even point measures the volume of sales a restaurant must achieve to exactly cover its costs. This metric is important for new restaurants, which need to set sales and revenue goals above the break-even point in order to generate profits. Restaurant owners also use the break-even point to help them make major financial decisions, like whether to open a new location or invest in expensive equipment.
Break-even point = Total fixed costs / Contribution margin
ratio
Where:
Contribution margin ratio = [(Total sales – Total variable costs) / Total sales]
Fixed costs are usually recurring and consistent expenses like rent and employee salaries, while variable costs fluctuate based on volume. Common variable costs for a restaurant include food ingredients, hourly labor and supplies like takeout containers.
Say a large restaurant has $80,000 in monthly fixed costs, $65,000 in variable costs, and $170,000 in sales. Its contribution margin ratio would be 0.62, or (170,000 – 65,000) / 170,000. (More on contribution margin in the next section.) This means its monthly break-even point would be $129,032, or $80,000 / 0.62.
9. Capital Expenditure (CapEx) Ratio
Capital expenditures, also referred to as CapEx, are funds used to purchase, maintain, or upgrade a restaurant’s capital assets that are carried on a business’s balance sheet and depreciate over time. For restaurants, these assets include real estate property, delivery vehicles, kitchen equipment, fixtures and furniture, hardware (such as computers), and point-of-sale (POS) systems.
To assess their capital expenditures, restaurants typically compare these outlays for capital assets to their operating cash flow. This helps owners gauge their ability to purchase needed capital equipment with the company’s own free cash flow. In the following formula, operating cash flow is equal to the total cash collected from sales minus cash paid for its operating expenses.
CapEx ratio = Capital expenditures / Operating cash flow
In the case of the large restaurant referenced above, let’s imagine that it spent $45,000 in March to buy a delivery van and new lighting for its dining room. Over the same period, it collected $135,000 in sales and spent $95,000 to cover its operating expenses. Its CapEx Ratio for the month would therefore be $45,000 / ($135,000 – $95,000) = 1.125, indicating that March’s capital expenditures could be completely covered (and then some) using internally generated cash.
Operational Restaurant Metrics
Operational metrics tell restaurant owners how efficiently their business is running. KPIs like prime cost, inventory turnover, and employee turnover help restaurants understand how well they are using and allocating their resources. By the same token, the operational benchmarks below help restaurant owners identify and address food and service quality issues that risk turning customers away and could be standing in the way of their business’s success.
10. Food Cost Percentage
Food cost percentage tells restaurant owners what proportion of a dish’s selling price is taken up by the cost of ingredients used to prepare the dish. The formula for food cost percentage is as follows:
Food cost percentage = (COGS / Total sales) x 100
The “ideal” food cost percentage will depend on the restaurant’s goals and operating model, but as a general guideline, profitable restaurants tend to maintain a food cost percentage of 28% to 35%. Whatever their overall objectives, to keep their food costs in check restaurant owners should regularly calculate and compare their food cost percentage over time and compare it to industry standards, a crucial step in running a profitable restaurant operation. Note that food cost percentage is impacted not only by food costs but also by amount of ingredients used. This metric can inspire restaurants to adhere to recipes and predetermined portion sizes.
Consider a neighborhood cafe that made $11,000 in sales last month and spent $7,500 on ingredients over the same period. Its food cost percentage for that period would be equal to 68.2%, or ($7,500 / $11,000) x 100. With such a high food cost percentage, the restaurant might want to think about sourcing its ingredients in bulk to reduce costs, getting a handle on whether there are issues with severe over-portioning, or raising the price of its dishes to beef up its profit margins.
11. Labor Cost Percentage
Labor cost percentage reveals how much a restaurant spends on labor relative to its total food sales. This metric is influenced by many factors, including employee wages and tips, operating hours, seasonality, special events, alcohol and beverage sales, and service quality. By analyzing labor cost percentage regularly, restaurant operators can monitor and address any operational issues that might be eating into their profits and service quality. Restaurant labor costs should average around 30%–35%.
Labor cost percentage = (Labor cost / Total sales) x 100
If the previously described neighborhood cafe had labor costs of $3,000 for the month and still made $11,000 in gross sales, its labor cost percentage for that period would be 27.3%, or ($3,000 / $11,000) x 100. This falls below the industry average, which means the cafe is on point with its labor costs relative to its total sales.
12. Prime Cost
A restaurant’s prime cost is the sum of its COGS and labor costs, and it accounts for the majority of the restaurant’s variable costs. This essential KPI tells restaurant owners how much they spend on food and labor.
There are two ways to calculate prime costs, but the classic approach — shown here — is to simply add up the restaurant’s COGS and labor costs, as per the formula below:
Prime cost = COGS + Labor costs
Prime cost can then be calculated as a percentage of total sales, by dividing prime cost by total sales and multiplying the resulting figure by 100. Given the seasonality of the restaurant industry, this approach helps restaurants bring consistency to their performance monitoring when measuring key metrics from month to month. According to TheRestaurantExpert.com founder David Peters, the sweet spot for a restaurant’s prime cost percentage is between 60% and 65%. Note that prime cost percentage can also be calculated by menu offering, which can be used to set menu prices and determine profitable dishes.
Going back to the neighborhood cafe yet again, its COGS for the month of March was $7,500 and its labor costs were $3,000. Its prime cost would therefore be the sum of these two figures, or $10,500. If that cafe made $35,000 in sales during the month of March, its prime cost as a percentage of total sales would be quite low at 30%, or ($10,500 / $35,000) x 100.
13. Inventory Turnover
By tracking inventory turnover, restaurant owners gain a better understanding of how quickly they need to purchase and refill their inventory over a given period. Calculating inventory turnover ratio reveals how well a restaurant manages its inventory, providing insight into inefficiencies such as overstocks and food waste, either of which can snowball into significant expenses.
To calculate inventory turnover, begin by calculating average inventory for a period:
Average inventory = (Beginning inventory + Ending inventory) / 2
From there you can calculate the inventory turnover ratio by dividing COGS by average inventory.
Inventory turnover ratio = COGS / Average inventory
Consider a wine and tapas bar that started the month of May with $8,000 in inventory, including alcohol. It spent $9,000 on new ingredients throughout the month and ended the month with $11,000 in inventory. With $6,000 in COGS for the month ($8,000 + $9,000 - $11,000), the bar’s inventory turnover ratio would be 63%, or $6,000 / [($8,000 + $11,000) / 2]. That means the restaurant turned over a little more than 60% of its inventory over the course of the month.
To improve inventory turnover ratio, restaurants must optimize their inventory levels. They can do this through effective demand forecasting, implementing a first-in, first-out (FIFO) approach to moving inventory to minimize waste, and using software to improve their inventory tracking capabilities. Restaurants should also review their menu regularly and adjust their dishes to match customer demand, which reduces the chances of perishable ingredients expiring and contributing to lost profits.
14. Waste and Spoilage Percentage
A restaurant’s food costs are one of its biggest expenses, which means that any degree of waste can significantly and negatively impact profitability. While there’s no universal formula to calculate food waste and spoilage, restaurants can minimize their losses by conducting scheduled food waste audits. These audits provide owners with a real-time picture of how much food they’re wasting, where and why these losses occur, and their impact on profits in dollar amounts.
Food waste audits are primarily an analog process. To determine where food losses are occurring during a given shift, separate any waste into three bins, each representing the three major sources of food waste: spoilage, customer plates, and food preparation. After a shift, calculate total food waste in each of these categories by weighing each bin, adding up the total weights, and calculating the associated costs. From there, compare these totals with your broader inventory figures to assess food waste as a proportion of your overall inventory purchases. Food waste audits can be conducted regularly over weeks, or even months, to identify long-term trends.
15. Cost of Goods Sold (COGS)
A restaurant’s cost of goods sold, or COGS, refers to the food costs directly required to prepare menu items. These include the cost of core dish ingredients, such as the meats and produce used to create restaurant dishes, as well as the kitchen goods, like spices, oil and flour, that are used to prepare a range of dishes. Restaurants that offer takeout might also include the cost of containers as part of their COGS.
COGS = (Beginning inventory + Purchases) – Ending inventory
Consider a fast-casual restaurant that needs to calculate its COGS at the end of May. It had $4,000 of inventory left over from April, representing its beginning inventory. Throughout May, the restaurant had to restock its food and beverage inventory to the tune of $2,500. At the end of May, the restaurant’s inventory was down to $1,500. Its COGS for the month would, therefore, be $5,000, or ($4,000 + $2,500) – $1,500.
The more a restaurant spends on ingredients, the lower its profit margin. The goal for restaurant owners is to reduce COGS without sacrificing food quality. Adopting leaner inventory strategies can drive down ingredient costs, and developing dishes that promote maximum ingredient usage can keep COGS down.
For instance, a restaurant that highlights local produce might design a menu item featuring a few seasonal ingredients. This approach not only aligns with its ethos and customer values but also helps minimize costs. By limiting the variety of ingredients, the restaurant can keep its COGS low and also maintain higher profit margins.
16. Contribution Margin
Contribution margin allows restaurants to measure how much profit particular menu items generate for their business. Restaurant owners can use this metric to optimize the pricing of every item on their menu, making it a valuable tool for strategic menu engineering. Specifically, it can help restaurants determine which dishes on their menus are worth keeping, which might need to be removed, and which should be reformulated to improve their profit-generating potential.
Contribution margin = Total sales – Total variable costs
Let’s say a steakhouse sells its tomahawk steaks for $45, and the variable costs (meat and other ingredients) required to prepare each steak are $25. Its contribution margin for the dish would therefore be $20, or $45 – $25. This means that the sale of each steak contributes $20 toward covering fixed costs and potentially generating profit.
17. EBITDA Margin
Businesses use their earnings before interest, taxes, depreciation and amortization, aka EBITDA, as an alternative measure of their “operating” profitability. Depreciation and amortization are accounting strategies that spread the cost of restaurant assets across recurring expenses over the useful life of the assets, rather than all at once at the time of purchase. These recurring expenses reduce net income in each period. Depreciation is applied to tangible assets, like kitchen appliances and machinery, while amortization is applied to intangible assets, like the cost to register and maintain a liquor license or trademarks.
In practice, EBITDA measures a restaurant’s net income while excluding specific nonoperating expenses. Noncash expenses, such as depreciation and amortization for past capital expenditures, interest on loans, and tax payments are added back to net income.
EBITDA = Net income + Interest expense + taxes + depreciation + amortization
To calculate its EBITDA margin, a restaurant simply needs to divide its EBITDA by its total revenue.
EBITDA = EBITDA / Total revenue
If the steakhouse mentioned above had an EBITDA of $12,000 for the month of June and total revenue of $36,000 for the same period, its EBITDA margin would be 33%, or ($12,000 / $36,000) x 100. This is well above the industry average of about 18%, suggesting that the steakhouse is operating at a high level of financial efficiency.
18. Menu Item Profitability
Menu item profitability tells restaurants which menu items generate high profits, which generate minimal profits — and everything in between. As with contribution margin, menu item profitability helps restaurant owners compare the profit-generating potential of individual dishes to decide whether to highlight them on the menu, encourage staff to upsell them to drive additional sales, or to remove them altogether.
Menu item profitability = (Number of items sold x Menu price) – (Number of items sold x Item portion cost)
If the steakhouse mentioned earlier sells 50 tomahawk steaks in one night at a selling price of $45 and each steak costs $25 to make,the menu item profitability for those steaks would be $1,000, or(50 x $45) – (50 x $25).
19. Overhead Rate
A restaurant’s overhead costs refer to its indirect business costs, such as rent, insurance, maintenance and utilities. The overhead rate expresses these costs as a percentage of the chosen allocation base, whether that’s total sales, hours open, or price of a menu item. By calculating overhead rate, restaurant owners can estimate these costs and apply the results to various circumstances, including how much it costs to keep their doors open over a given time frame, be it a day, a month, or a year.
Overhead rate = Total overhead costs / Allocation base
Consider a fast-food restaurant that’s open from 8 a.m. to midnight, seven days a week. Its overhead costs for the month of December totaled $14,000. The daily overhead rate would, therefore, be $451.61 per day ($14,000 / 31 days). To calculate its overhead rate per operating hour, the restaurant would simply divide that value by 16 hours, since the restaurant’s operating hours are 8 a.m. to midnight (i.e., $451.61 / 16 = $28.23).
Performance Restaurant Metrics
Like a Formula 1 car, a restaurant can reach peak performance only when all moving parts perform at the highest caliber. Performance metrics tell restaurants just how well each component is functioning. For example, metrics such as revenue per seat per hour and per square foot, table turnover, employee turnover, and return on investment all tell restaurant managers and owners how efficiently they are using their time and resources. This data makes it possible to continually optimize and streamline processes for maximum output — and maximum quality.
20. Revenue per Available Seat Hour (RevPASH)
Revenue per available seat hour (RevPASH) reveals how each seat in a restaurant is performing. A high RevPASH indicates that the restaurant is maximizing the revenue-generating potential of each seat, while a lower value suggests it must do more to attract customers throughout the day. For instance, a restaurant that wants to improve its per-seat revenue during the afternoon lull between lunch and dinner might introduce happy hour drink and meal specials to attract customers during these periods.
RevPASH = Total revenue per period / (Number of seats x operating hours in period)
Seat hours represent the total potential seating capacity over a given period.
Say a 150-seat restaurant is open from noon to midnight (12 hours) and makes $15,000 on a Thursday. Its RevPASH would be $8.33, or $15,000 / (150 seats x 12 hours).
21. Revenue per Square Foot
Revenue per square foot measures the relationship between a restaurant’s potential income and its physical footprint. Restaurant owners can use this metric to choose the ideal size for their restaurant properties, apply it as a benchmark against other locations or industry standards, or determine how much of its square footage should be dedicated to dining areas versus food preparation and storage areas.
To calculate revenue per square foot, restaurants must divide their total revenue over a given time frame — often a year — by their total physical footprint as measured in square feet.
Revenue per square foot = Total revenue per period / Total square footage
Consider an 1,800-square-foot family restaurant that made $500,000 in revenue last year. Its revenue per square foot would be $277.78, or $500,000 / 1,800.
22. Table Turnover Rate
By tracking table turnover rate, restaurants gain insight into how many parties they are able to serve over a given period, be it a specific shift, a day, a month, or a year. Using this information, they can determine how much staff they will need for different shifts and whether they need to turn more tables to meet daily revenue targets.
Table turnover rate = Number of parties served in period / Number of tables occupied in period
Different restaurants prefer different turnover rates depending on their business model and clientele’s expectations. For example, fast-food chains generally favor rapid turnovers while a fine-dining establishment is more likely to space out its service so customers can take their time and luxuriate during their visit. Turnover rate can also vary according to average party size, time of day, and complexity of the menu.
A local bistro that serves 32 parties across 10 tables between 7 p.m. and 11 p.m. (4 hours), for instance, has a table turnover rate of 3.2 per evening, or approximately 0.8 turns per hour.Meanwhile, a highly popular fast-casual eatery might serve 150 parties across 10 tables during the same period, resulting in a much higher turnover rate of 15, or about 3.75 turns per hour. Both are reasonable rates for each type of establishment.
23. Time per Table Turn
Time per table turn tells restaurants how long their average party is seated for. Similar to table turnover rate, this metric helps restaurants manage reservations and guests’ expectations with regard to wait times. Restaurant owners can also analyze their time per table turn to assess whether staff are turning tables over quickly enough to meet revenue targets.
Many restaurants use their POS system to track their time for table turn, as these systems register both the time at which a table’s orders are inputted and the time when it cashes out. By comparing and compiling these figures, restaurateurs obtain an average value for their time per table turn at different times of day, from brunch and lunch services to the evening rush.
For example, the local bistro referenced above might aim for an average time per table turn of one hour between noon and 2 p.m. to accommodate the business lunch-break crowd and a more leisurely pace of 90 minutes over dinner, when customers prefer not to rush through their meals.
24. Average Check
Average check refers to how much the average party spends in a restaurant. This metric helps restaurant owners gain a valuable data set that can be used to inform future revenue forecasts, assess how increased traffic could affect revenue, determine profits when compared with COGS, and decide whether to expand square footage to accommodate more customers. Restaurants also use average check values to assess the effectiveness of menu changes, as well as their marketing and upsell strategies.
Average check = Total sales revenue / Total number of parties served
Going back to our local bistro, if the business generated $6,000 in sales over dinner after serving 32 parties, its average check value for that night would be $187.50, or $6,000 / 32.
25. Return on Investment (ROI)
Return on investment (ROI) is a common financial metric that helps restaurant operators measure the profitability of an investment relative to its cost. A restaurant’s investments might include the purchase of real estate to house a new franchise location, the implementation of a POS system to improve staff efficiency, the execution of a targeted marketing campaign to attract new customers, and more.
ROI = (Net profit / Investment cost) x 100
The higher a restaurant’s return on its endeavors, the more profitable the investment. By contrast, a low ROI may indicate a poor investment decision. In the case of a project, low ROI may signify mismanagement. Note that ROI is typically evaluated in two ways: actual ROI compared to expected, and as a way to compare two potential investment activities before making a decision.
Consider a restaurant that’s deciding between two investment options: an email marketing campaign to promote its new seasonal menu or a social media campaign focusing on comfort foods and special winter promotions.
- Email campaign: With a cost of $5,000 and expected net profit of $1,500, expected ROI is 30%.
- Social media campaign: With a cost of $6,000 and expected net profit of $1,500, expected ROI is 25%.
Based on these projections, the email campaign appears to be the more profitable investment. The restaurant proceeds with the $5,000 email marketing campaign, launching it two weeks before the new winter menu goes live. After a month, the restaurant sees a net profit of $1,100 from this campaign, yielding an actual ROI of 22%, or [($1,100 / $5,000) x 100] — lower than the expected ROI for either campaign. The restaurant may need to refine its ROI projections for greater accuracy, or perhaps the email campaign could have been executed earlier to garner attention sooner.
26. Employee Turnover Rate
From chefs and line cooks to front-of-house staff, dependable employees spell the difference between a successful and unsuccessful restaurant operation. A restaurant’s employee turnover rate measures how often staff join and leave its team — a key metric to consider, because retention plays a valuable role in maintaining consistency, preserving institutional knowledge, and building a strong team.
Employee turnover rate = (Number of employees who left / Average number of employees)
Take a fast-food restaurant that generally maintains an average of 25 employees throughout the year. Over the course of the year, the restaurant saw 15 of its employees leave for better pay elsewhere. Its annual employee turnover rate would be 60%, or [(15 / 25) x 100].
Such a high turnover rate makes it difficult to maintain food and service quality standards. It also takes considerable time, energy, and money to train new employees, not to mention the potential friction created by frequent personnel changes, which can negatively affect staff morale and service quality. That said, high employee turnover rates in the restaurant industry are the norm. Competitive wages, ample development opportunities, a positive work environment, and benefits can encourage retention.
Customer Restaurant Metrics
A restaurant’s success ultimately comes down to whether customers appreciate its food, service quality, and the overall experience it delivers. Positive customer experiences lead to repeat visits and additional revenue, while poor experiences lead to negative reviews, damage control, and threats to the restaurant’s vitality. It’s only natural, given these stakes, that restaurants seek to establish a continuous feedback loop with their customers by collecting public feedback and tracking metrics such as customer satisfaction scores, customer retention rates, and the frequency of customer visits.
27. Customer Satisfaction Score (CSAT)
A customer satisfaction score (CSAT) measures how pleased a restaurant’s customers are with various aspects of its operation, from the quality of its food to the professionalism and friendliness of its servers. Restaurants can obtain their CSAT score using standardized surveys that solicit customers to rate various elements of their operation on a numerical scale.
While there are no strict guidelines for CSAT survey formats and grading scales, most restaurants ask their customers to rate them on a scale from 1 to 5. Customers who rate them 4 or 5 are considered satisfied, while customers who rate them 1 or 2 are dissatisfied. A rating of 3 is considered neutral.
To calculate CSAT, restaurants simply need to divide the number of satisfied survey respondents by the total number of people they polled.
CSAT = (Number of satisfied survey respondents / Number of people polled) x 100
If a popular Indian takeout restaurant polls 500 customers and receives 422 “satisfied” reviews, its CSAT score is 84%, or [(422/500) x 100].
28. Customer Acquisition Cost (CAC)
A restaurant’s customer acquisition cost (CAC) reveals how much it costs the organization to attract new customers. CAC is a powerful marketing metric, as it tells restaurants and restaurant groups how effective their campaigns are in driving new business. The metric also helps marketing leaders analyze and compare the effectiveness of different campaigns so they can retain the tactics that deliver the highest ROI.
CAC = Marketing expenses / Total new customers acquired
Let’s say the same Indian takeout shop spends $200 to run advertisements on a popular restaurant review site. The ad offers new customers $5 off their first order until the end of August. Once the end of the month arrives, they see that the promotional code was used 35 times. Its total marketing expenses would include both the $200 it paid to run the advertisement and the total expenses absorbed by offering customers its food at a discounted price, which in this case is equivalent to $5 x 35 orders, or $175. The restaurant’s CAC would therefore be $10.71 per customer ($375 in total marketing expenses / 35 new customers).
29. Net Promoter Score (NPS)
A net promoter score (NPS) is a customer success metric that tells restaurant operators what percentage of customers are likely to recommend their restaurant to their peers or to the wider world via public review platforms like Google Review and Yelp. In other words, NPS reveals whether or not customers like a restaurant and, therefore, whether the restaurant needs to work on its reputation.
As with CSAT scores, NPS scores are generally collected using surveys, though the scale restaurants use to collect this data goes from zero to 10. Customers who rate the restaurant at 9 or 10 are considered promoters; those who rate it at 7 or 8 are passive; and those who rate it at 6 or below are considered detractors. To calculate NPS, restaurants must subtract their percentage of detractors from their percentage of promoters using the following formula:
NPS = % of restaurant promoters – % of restaurant detractors
NPS values below 25 are considered average, while scores over 50 are considered excellent. According to CustomerGauge, the average NPS for restaurants is 42, though this benchmark varies based on the type of restaurant in question. For instance, fast-food restaurants often have lower NPS benchmarks due to their focus on speed and scale over ingredient quality and inventiveness.
30. Customer Retention Rate
Loyalty is the holy grail for restaurants. Not only do repeat customers bring in steady revenue, but they also make restaurants less reliant on expensive marketing campaigns and promotions to find new revenue, minimizing customer acquisition costs. Knowing they can rely on repeat customers also simplifies demand and revenue forecasting for restaurant operators, which allows them to plan and develop long-term business strategies with confidence. Enter customer retention rate, the metric that tells restaurant owners what percentage of their customers turn into repeat visitors.
Customer retention rate = [(Total customers served in period – New customers served in period) / Total customers served in period] x 100
Let’s say a chain of coffee shops serves 455 customers across its 10 locations during a month and 35 of those customers are first-timers. Its customer retention rate for the month would be 92%, or [(455 – 35) / 455] x 100.
While the calculation for customer retention rate is simple in practice, many restaurants struggle to make the distinction between new customers and returning customers, especially if they don’t have a customer loyalty program in place or if they track their operations without the help of restaurant management software. To overcome this challenge, restaurant owners increasingly use POS systems in conjunction with loyalty programs to track their customer activity giving restaurant operators a clearer idea of who is spending money in their restaurants and how frequently they visit.
31. Average Customer Spend
Not to be confused with average check, which tells restaurant owners how much each party or table spends on average, average customer spend tells restaurant owners how much each individual customer spends on average, regardless of how many people are at a table. This metric is a helpful indicator of consumer behavior at an individual level, and denotes whether menu items are priced to drive revenue and repeat business.
By tracking and analyzing average customer spend over time, restaurants also gain valuable insights that help them forecast future revenues based on a variety of factors, from peaks and troughs in customer traffic to marketing spend to the distribution of table sizes in their restaurant locations.
Average customer spend = Total sales revenue / Total number of guests served
If a nationwide chain of barbecue restaurants makes $140,000 across its locations in the space of a week, after serving 2,200 customers in the same period, its average customer spend for that week would be $63.64 ($140,000 / 2,200 customers).
32. Average Customer Headcount
Average customer headcount measures how many customers a restaurant serves during a given time frame. In addition to providing insights into how popular a restaurant is at different times of day, this metric can be used to anticipate and plan for periods of high and low traffic. For example, by identifying periods with above-average customer traffic, the restaurant will know to schedule extra staff and to purchase additional ingredients.
Unlike most customer metrics, restaurant owners do not need to provide field surveys or conduct complex calculations to determine their average customer head count. They simply need to pull this information from the reporting or business intelligence dashboards integrated within their POS systems. Most POS systems allow users to adjust the time frame for this metric so they can analyze their average customer head count by day, week, month, season and year.
For restaurants that do not use POS systems, another option is to analyze the time and date on customer receipts. This approach is more labor-intensive, however, which is why restaurant owners increasingly opt for a software-based approach.
33. Frequency of Visits
Increasing the frequency at which customers visit their restaurants not only drives more revenue, it can also save restaurants money. It costs significantly more to acquire new customers than to build loyalty and maintain repeat business with existing ones, so the more frequently customers visit their locations, the better. as far as most restaurants are concerned.
Average frequency of visits = Total number of visits / Total number of unique customers
Restaurants can use their POS system to see how often each customer returns to their establishment over a given timeframe.
Consider a brunch restaurant that records 3,000 visits in February, serving 1,250 unique customers over that period. Its average frequency of visits would therefore be 2.4 visits per customer for the month of February (3,000 / 1,250).
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Running a restaurant or restaurant group is a labor of love and passion. Costs are high, margins are tight, and customer habits are unpredictable. But by monitoring and analyzing strategic metrics, restaurants of all types can set up their business for financial, operational, and customer success. A software-based approach to tracking performance benchmarks can compound that success, providing restaurant operators with the data they need to make informed decisions that promote long-term financial health, customer loyalty, and sales.
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Restaurant Financial Metrics FAQs
How do you measure profitability in a restaurant?
The metric many restaurants use to measure profitability is gross profit. A restaurant’s gross profit reveals how much revenue it generates after subtracting its cost of goods sold (COGS). Gross profit can be calculated using the following formula: Gross profit = Total net sales – Cost of goods sold
Restaurants can also account for their operating costs when calculating profits by tracking net profit, which reveals how much revenue they retain after subtracting all costs, including COGS, labor, rent, equipment, hardware, taxes, and utility costs.
How do you do a financial analysis for a restaurant?
While there are many ways to assess a restaurant’s financial health, a good starting point is to track and analyze its performance against key financial metrics. Often calculated as ratios, key financial metrics for restaurants include its current ratio, debt-to-equity ratio, operating income, cash flow, and break-even point, among others.
What is a good SPLH for a restaurant?
A restaurant’s sales per labor hour, or SPLH, is calculated by dividing its total revenue during a given time frame by its total labor hours over the same period. A good SPLH will depend on the type of restaurant, with fast-food joints tending to have lower average figures than high-end establishments. Time of day also affects SPLH, with peak hours pulling in more sales than off-peak times.
What are 5 key metrics that can be used to measure restaurant performance?
There are dozens of metrics that can help restaurants optimize their performance. Five key metrics include cash flow, gross profit, inventory turnover, revenue per available seat hour, and customer retention rate.