8 restaurant KPIs restaurant owners should be tracking Plow-horses: These dishes may not be as profitable as the Stars, but they're probably driving foot traffic to your restaurant, so keep them. Revenue is the income you generate from your restaurant. What Are the Main Benefits of a JIT (Just in Time) Production Strategy? Here are five ways to do that: Firstly, arrange your menu items into the various categories (starters, mains, and dessert). Starbucks, for instance, generated $24.1 billion in the US in 2020. This overarching section includes several topics already discussed. Your gross profit will tell you if the cost of your inventory is covered by your menu prices. A rule of thumb is that the prime costs of a full-service restaurant should equal 65% or less of the restaurant's total sales figures. Sales, returns, goods receipts even damage and theft affect your stock levels every day. Food waste. Invest in things that will bring savings in the long run. The food cost that is tracked can be for a specific menu item or for a group of items. If calculating your restaurant revenue shows you that youre earning less than you should be, youll need to find out whats dragging down your earnings. For instance, a bar known for its amazing patio will likely bring in more revenue during summer months vs. winter. But, don't be afraid to make changes to these dishes, so they become more profitable, e.g., source ingredients from different suppliers, reduce portion sizes and so on. There are at least seven key ratios that can be used to measure the ongoing costs and revenues of a restaurant business. Did you know that doing weekly stock counts can add up to 10% to your bottom line every year? These include white papers, government data, original reporting, and interviews with industry experts. Many point-of-sale restaurant systems include revenue-tracking tools that do the math for you. A detailed restaurant business plan will help you ensure that your business is able to make it over that one-year hump that catches almost one-in-five new businesses. From there, assign them to one of the following four categorieseach representing different levels of popularity and profit: You can use your POS sales data to help you classify all your dishes according to these quadrants. Also known as average gross profit, this figure includes all sales earned from food, drinks, merchandise, and other revenue streams whether those items are purchased tableside or online. To calculate revenue per seat, the total dollar amount of revenue earned on a given night is divided by the total number of available seats in the restaurant. Put simply, when you take off the various costs that go towards running your business stock, salary, maintenance, and upkeep is your bottom line in danger of bottoming out? Gross profit (earnings after expenses) is the true indicator of how much your business actuallywhen all expenses are paidtakes home. There's plenty of research which suggests that giving customers too much choice causes overwhelm and makes it harder to choose. Keeping a roof over your head in Georgia can be expensive, but it can also be pretty darn affordable. Its not logical to compare the twos revenue. But do not worry, you will find both topics, with sales added, below. For a full-service restaurant, average table times can range between 45-90 minutes or longer. The style of service or the concept, ie: fast casual vs. full-service. When planning your restaurant expansion, it is important to have all your costs in full view. Profit margins are probably your most reliable indicator of success in any industry. Reinventing the way restaurant teams work. "When we look at a menu, our eyes typically move to the middle first, before traveling to the top right corner, and then, finally, to the top left," explains restaurant consultant Aaron Allen. Weve had experience helping restaurants like yours unleash their true potential. ( Sage, 2021) The recurring and ongoing costs for restaurants are between $48,000 and $75,000 per month. If your business varies by season, factor that into your calculation, especially if there is an off-season when traffic slows to a crawl. Improving restaurant profitability is all about widening the gap between how much youre selling, and how much youre paying for it. Inventory Turnover Ratio: What It Is, How It Works, and Formula, Working Capital Management Explained: How It Works, Profitability Ratios: What They Are, Common Types, and How Businesses Use Them, Average Ticket: Definition and How to Calculate Ticket Size, Fixed Asset Turnover Ratio Explained With Examples. Leading QSR chains by sales per unit in the US 2020 | Statista However, make sure that you have enough space in your location to serve all of your customers. This metric is most useful to management when it plans to reduce or expand the number of available seats. Kitchen staff should be skilled in buying the appropriate ingredients, in the correct amounts, at the right time, and at the best price. Chart the number of seats, times turned over and average check per shift on a simple daily spreadsheet. Point Solution vs Platform: What Is The Best F&B Tech Strategy For Your Multi-Site Restaurant? 2022 Groupon, Inc. All Rights Reserved. If you have high margins, for instance, then you can afford to make fewer sales. The food/beverage-expense-to-sales ratio gauges how well the company is profiting on each item served. While many restaurateurs would love a definitive answer, the average restaurant revenue varies widely across the different restaurant types, sizes, service models, and locations. There are various factors that can influence your restaurant revenue, from the state of the economy to the weather and peoples willingness to come outdoors. This metric is especially useful if changes to the menu are planned. Being under capacity has its own set of problems. The average restaurant revenue per day is $1,350. But this is but one approach to better increasing sales. Dont hesitate to contact us. If you're over capacity, you don't have enough seating to meet the demand, which means you have to turn customers away. Refer to the instruction manual or contact your service provider to learn more about activating built-in or add-on features. That said, a rough estimate puts 12 months yearly revenue for a restauranton averageof about $486,000 annually. To calculate RevPASH for your restaurant, use the following formula: RevPASH = Sales per Hour / Number of Seats by the Hours. Even the location of your business can make a significant difference. And btw, revenue is the money your restaurant generates. Think about how you can make the experience more impressive for your target audience. Maintaining quality service is especially important in fine dining establishments. By monitoring the best and worst performers, you can balance your inventory more effectively too. Certain business loan products are made available through Retail Capital LLC, a licensed California Finance Lender. On the other hand, they also show that the future is looking bright for companies that are flexible enough to absorb the changes. As a result of these differences, restaurant revenue management can be challenging. Create your Groupon campaign today to see your business grow. 5. These are the key financial indicators for your businesss performance. Are Bars Profitable? 10 Average Bar Profit Margin Facts - BinWise However, there are three main factors that usually form the foundation of most sales problems: Occupancy: The number of people you serve Sales: The average amount that people spend Service: How frequently you fill seats with new and returning customersHere are some of the strategies you can use to address various revenue problems. There are several ways to calculate restaurant revenue. These same principles apply to your menu. It's now becoming more common in the restaurant industry because restaurants embody many of the same business characteristics of airlines and hotels that made revenue management so successful. If youre already attracting the right number of customers to your restaurant, but they dont seem to spend much while theyre there, focus on upselling and cross-selling. There's some open seating, but not too much, and staff have a decent amount of work to maintain the quality of service without feeling swamped. Your profitability is determined by the gap between cost and revenue soincreasing your restaurant profit margin comes down to either (or both) of these things: Its about finding money-saving measures while maintaining efficiency, and/or finding ways to attract new customers and increase repeat business, enhancing your revenue per seat. We have researched a ton of reports on the foodservice industry and put the most telling stats in an overview, sorted by topic. In the past, new restaurant owners were advised to assume 75% capacity for their establishments for the first 12 months. Dogs: Unless these dishes appeal to a crucial customer segment of yours, get rid of them. RESTAURANT BENCHMARKS FOR 2019 Here are some of the most current restaurant benchmark KPIs, per the 2018 Baker Tilly Restaurant Benchmarks report. Technology is unstoppable in todays society. New restaurants can estimate the average check amount based on mid-priced menu items; averages for lunch or breakfast will be lower because offerings are less expensive than dinner items. Just add the total proceeds from the sale of catering services to your monthly restaurant revenue to get your overall monthly sales figure. Number of persons employed. A simple reduction in price or a change in flavor profile can help achieve this. What is a break-even point and how do you calculate it? How is seat turnover calculated in a restaurant? - Quick-Advices A profit margin that goes down over time means your restaurant is becoming less profitable usually due to rising costs, a fall in revenue or both. The Groupon Merchant program can help you attract business while keeping an eye on your costs. We say suitable because your servers shouldn't rush service while compromising on the quality of customer service. Turnover. The purchasing process is an essential part of every foodservice operation. If you are just starting out, you may have to survey area restaurants of similar size, fare, and pricing to calculate your ballpark figure. Talk to a financing expert and find out which options are right for you. The same caveats apply here, as comparing a Fridays to a Tuesdays average revenues wont be that informative. Oops, we got carried away and made a top 12 instead of 10. What should you take away from all these figures? For example, you can adjust your table layout or give diners access to another section of your restaurant like your patio. If your prime cost percentage is greater than 60%, you may need to look at sourcing cheaper ingredients, or managing worker-hours more effectively. Lets work together to make you a destination. For comparison, the median sales price of an . Profitability ratios are financial metrics used to assess a business's ability to generate profit relative to items such as its revenue or assets. Ready to see what the challenges were for restaurants in 2021 and will be in 2022? Restaurant industry statistics indicate that the sector is undergoing major changes. The right financing at the right timethats how we help small businesses like yours grow, not owe. (For example, a fine dining restaurant in a trendy part of town with high rent, high wage expectations, expensive ingredients, etc.). But getting access to these loans can be difficultespecially for owners with bad credit. Control table turnover by ensuring both your kitchen and serving staff know how to do their job properly, and you have a strategy to deal with those annoying campers. Learn everything you need to know about rotating shifts and schedules, including how to create rotating schedules with in-depth examples. From there, you can begin to calculate averages. *Preliminary data. Sales per square foot is a measure of the efficiency of a brick-and-mortar retail store. For a dine-in restaurant, this simply demonstrates that some days, weeks, months and quarters may be quieter than others. From 19:00 to 20:00, 60. Because youll be restocking inventory regularly, youll be able to see where the ratio is changing and work out why. Recommended reading: Ultimate Guide to F&B Purchasing Control Orders, Deliveries & Food Cost in a Multi-Unit Restaurant Operation. Simply placing menu items in the various categories, including the golden triangle, and optimizing it for cross-selling isn't enough. He teaches accounting, helping promote financial education and awareness. Learn effective strategies to tackle food waste in your food and beverage business. 3) Now that you know your net profit, you can calculate your profit margin to determine how much pure profit youre making from each sale. Regardless of your reasons for being here, the solution to your problem remains the same: Better restaurant revenue management. Number of employees. Knowing how to calculate restaurant revenue is also important when setting prices, creating menus, and designing the floor space of your establishment. Conversely, about 17% of restaurants fail in their first year. It can be helpful to access fast, affordable financing to meet your capital requirements during these off times. Its interesting to see, though, that delivery isnt so much taking share of wallet from traditional dine-in but rather from retail. *How to Calculate How Much Money a New Restaurant Might Make, Rewards Network, 2023 Clover Network, Inc. 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