Ultimate Guide to Restaurant Metrics

15 min.
Aug 28, 2023 2:38:36 PM

A restaurant's success rests on more than just offering delicious food and excellent service. It also hinges on utilizing the various metrics you gather throughout your operations.

This article serves as a comprehensive guide to restaurant metrics, aiming to assist you in identifying, quantifying, and analyzing the ones that truly make a difference. 

After going through the information we present, you will be on your way to understanding the key metrics crucial for your restaurant’s success. 

Ready to get started? Our first stop is exploring the compelling reasons for tracking restaurant metrics.

Why You Should Be Tracking Restaurant Metrics

On the surface, running a restaurant is a straightforward process.

Create dishes that cost less to make than what you can sell them for, and sell enough of them to pay the bills and net a healthy profit. 

Simple, right? Well, as award-winning restaurateur Ross Boardman puts it in this Quora answer, the devil is in the details.

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Source: Quora

As Boardman states, you've got to comprehend various facets of your restaurant business to fine-tune them for maximum efficiency. 

This process involves gathering detailed metrics encompassing everything from your menu pricing to your brand image. 

The various data points you should be concerned about are called restaurant metrics, and they're the focus of this article.

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Source: Tablein

Monitoring these metrics offers invaluable insights. They provide an overview of your restaurant's performance and pinpoint areas needing improvement. 

Once these areas are identified, the metrics can also guide your strategic decisions, and with ongoing tracking, you can assess the effectiveness of any changes you decide to make to your operations.

So, to put it simply, tracking restaurant metrics equips you with the data you need to operate with precision and adaptability in a challenging industry.

How to Track Restaurant Metrics

Now that you're convinced about the “why”, let's delve into the “how” of tracking restaurant metrics.

First things first, let's address manual tracking. Sure, you could jot down numbers and calculate some of these metrics by hand, but let's be honest—that would be neither efficient nor foolproof.

Instead, you might want to use some of the software solutions and tools available.

Depending on what you need to measure, multiple tools can help you capture the data accurately and conveniently.

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Source: Tablein

For instance, you likely already use a point of sales (POS) system in your daily operations. 

This system, along with inventory management software and accounting tools, can serve as a rich data source, providing insights into sales, stock levels, profits, and costs.

One more ace up your sleeve could be Tablein, our restaurant reservation system that does way more than just manage bookings.

Tablein comes packed with features that allow you to keep tabs on crucial metrics like your most booked hours, percentage of no-shows, and average customer ratings, among others.

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Source: Tablein

The best part? All these data points are compiled in easily readable, intuitive reports, one of which you can see in the image above. 

These reports give you a visual representation of critical metrics and a basis for calculating others. 

Feel free to explore Tablein—it may be an indispensable tool for tracking the metrics discussed further in this article.

As you can see, multiple tools are at your disposal to help you track restaurant metrics effectively and efficiently.

What Types of Restaurant Metrics Should You Track

Now that you know how to approach tracking restaurant metrics, let's focus on precisely what you should be monitoring.

Each separate restaurant metric serves its unique purpose, and it's time for us to give you a detailed breakdown of them in the following sections. 

We will briefly cover what each metric is, why you should measure it, and how to do so.

To keep things digestible, we've categorized the metrics. 

This way, you can concentrate on one bucket at a time, such as operations, customer metrics, or your financials, without getting bogged down by the amount of information.

Operational Metrics

In the restaurant industry, operational metrics primarily focus on the internal workings and efficiency of the establishment. 

By analyzing these, restaurateurs can identify ways to optimize their operations and increase efficiency.

Let’s take a look at the essential operational metrics.

Cost of Goods Sold (CoGS)

This metric quantifies the total expenses in producing each menu item. It includes the cost of ingredients, consumable products, and other production-related expenditures.

How to calculate:

CoGS = Beginning Inventory + Additional Purchases – Ending Inventory

CoGS accurately captures real food costs, including waste and inventory shrinkage, allowing for more precise profitability analysis. 

By comparing CoGS to theoretical costs, you can identify inefficiencies that impact productivity, such as groceries that go unused. 

That allows you to find ways to address them in an effective way that benefits your entire business.

Food Cost Percentage

This ratio represents the proportion of food cost in relation to the overall sales for individual menu items and the entire restaurant.

How to calculate:

Food Cost Percentage Per Menu Item = Food Cost / Selling Price

This metric reveals how your menu items' pricing aligns with the production costs you have while making them. 

An awareness of this metric makes it possible to conduct proactive adjustments in response to fluctuating supplier costs, spoilage rates, or portioning errors. 

In short, it's crucial for optimizing profit margins while maintaining quality.

Labor Cost Percentage

This figure calculates what portion of your restaurant's total revenue is being allocated to employee wages, benefits, and other labor-related expenses.

How to calculate:

Labor Cost Percentage = Labor Cost / Sales

By tracking labor cost as a percentage of sales, you can effectively manage your staffing needs to optimize profit while maintaining high service levels. 

Keeping within industry standards (20-35%) ensures competitiveness.

Prime Costs

The prime costs metric aggregates the cost of goods sold and labor costs, providing a comprehensive measure of your restaurant's operational efficiency.

How to calculate:

Prime Costs Percentage = (CoGS + Labour Costs) / Sales

This metric encapsulates both labor and material expenses. As such, it offers a holistic view of your restaurant's operational efficiency, and it should ideally be around 60% of your overall sales.

Break-Even Point

This point identifies when your total revenues exactly match your total costs, highlighting the baseline your restaurant must meet to avoid running at a loss.

How to calculate:

Break-Even Point = Total Fixed Costs / ((Total Sales – Total Variable Costs) / Total Sales)

Knowing your break-even point is essential for financial viability, as it identifies the minimum revenue needed to cover all fixed and variable costs. 

In other words, it’s only once you’re earning enough to cover all your expenses that you can say you’re breaking even. 

We’ve illustrated that in the graph below.

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Source: Tablein

As you can see, it's a key indicator for your long-term financial planning and risk assessment.

Inventory Turnover Ratio (ITR)

This metric reveals the frequency at which your restaurant exhausts its inventory. 

In other words, it shows how quickly you run out of, for instance, the groceries you’ve bought in your last procurement.

How to calculate:

Inventory Turnover Ratio = CoGS / ((Beginning Inventory + Ending Inventory) / 2)

This metric is important because a healthy inventory turnover ratio is a guarantee that you neither overstock nor understock items. 

Keeping an eye on it helps minimize waste and storage costs.

Vendor Performance

Vendor performance is specific in that it doesn’t directly address you and your establishment’s performance, but rather the people you work with. 

It assesses the efficiency and reliability of your suppliers, mainly focusing on the timeliness of deliveries.

How to calculate:

Vendor Performance = (Number of Deliveries Received on Time / Total Number of Deliveries) x 100

As you can see, this metric can help you identify and resolve issues in your supply chain. 

If you notice that a substantial percentage of a particular supplier’s deliveries fail to arrive on time, perhaps it’s time to part ways with them.

While severing that relationshipespecially if you’ve cultivated it over a period of timemight seem daunting, being proactive will prevent delays and diminish costs that would otherwise accumulate over time.

Purchasing Cycle Time

Similarly to the previous metric we’ve described, purchasing cycle time is also directly related to your suppliers. 

It measures the average duration required to complete one cycle of purchasing from suppliers.

How to calculate:

Purchasing Cycle Time = Total Time Spent on Purchasing / Number of Purchasing Cycles

This metric is important because it aids you in making better procurement decisions. It also contributes to optimizing the ordering schedule, and improving stock management.

Waste and Spoilage

Waste and spoilage is another metric that serves to identify areas of inefficiency and waste. 

The metric computes the loss incurred due to food waste, spoilage, or other factors as a percentage of the total food cost.

How to calculate:

Waste and Spoilage = (Cost of Waste and Spoilage / Total Food Cost) x 100

Staying on top of this metric allows you to take steps to improve sustainability and profitability.

Food Cost Variance

Food cost variance is a metric which measures the difference between actual and expected food costs.

How to calculate:

Food Cost Variance = Actual Food Cost – Expected Food Cost

If your actual food costs exceed what you expected to pay, that indicates inefficiencies in your procurement process. 

Therefore, tracking this metric can help you detect areas for cost savings, which is essential for managing inventory and pricing your menu items correctly.

Inventory Variance (Shrinkage)

In the same way that food cost variance measures the difference between what you pay for food vs. what you expected to pay for it, the inventory variance metric gauges the difference between expected inventory levels and the actual counts.

How to calculate:

Inventory Variance = Actual Inventory Value – Expected Inventory Value

Inventory variance is also referred to as shrinkage.

Monitoring this metric helps you catch inefficiencies or losses in your stock, like theft or spoilage, early enough to prevent larger financial setbacks.

Performance Metrics

Now that we’ve covered operational metrics, let’s move on to the next kind.

As the name suggests, performance metrics capture how well a restaurant is performing in multiple aspects.

They can reveal how effectively tables are being turned over, how busy or slow the restaurant tends to be on certain days, and how well you retain employees.

Table Turnover Rate

This metric indicates how often a dining table is occupied and vacated within a specific time frame.

How to calculate:

Table Turnover Rate = Number of Customers Served / Number of Tables

A high table turnover rate means more guests served and more revenue. However, it should be balanced with providing a quality dining experience.

If you want to learn more about striking that balance, check out our article with five tips on how to increase your table turnover in a way that doesn’t compromise on quality.

Average Customer Headcount

This metric measures the number of customers your restaurant serves within a given period. 

As you can see, it shares some similarities with the table turnover rate, since both indicate the popularity of your restaurant among the diners.

How to calculate:

Usually available in mobile POS analytics dashboards. Just filter your data per the desired period. Or, use Tablein, which provides this information summarized in reports, as already discussed. 

The average customer headcount is also important inasmuch as it helps you identify your restaurant's busiest and slowest days for better staffing and inventory planning. 

Therefore, make sure to track this metric for peak performance.

Time per Table Turn

The time per table turn metric calculates the average time a table is occupied before being turned over for the next set of guests.

How to calculate

Typically available from your POS dashboard.

As such, this metric provides insights into operational efficiency and the quality of the dining experience. 

In other words, an exceptionally high turnover might indicate rushed service, while a low turnover might indicate inefficiency.

You want your guests to have a good time, yes. 

However, you also want to implement some tricks of the trade—such as a subtle invitation by the server to continue their evening at the bar—to make sure they don’t encroach on the time reserved by another group of guests.

Employee Turnover Rate

While the previous metrics tracked the number of guests you serve at your restaurant at a given time, the employee turnover rate captures the rate at which employees leave and are subsequently replaced within the organization.

How to calculate: 

Employee Turnover Rate = (Employees Departed / Number of Employees) x 100

Here’s why that metric is important.

High turnover can be expensive and disruptive to operations. It’s common knowledge in business that hiring and onboarding a new employee costs much more than keeping an existing one on board.

Therefore, monitoring your employee turnover rate can help detect problem areas (such as poor management) and enable you to improve retention strategies.

Repeat Purchase Rate

The last performance metric is all about consumption. Namely, the repeat purchase rate quantifies how frequently customers reorder specific items from the menu.

That way, you can gain valuable insights concerning the popularity of the particular dishes and customer loyalty.

How to calculate: 

Repeat Purchase Rate = Repeat Purchases / Total Purchases

With this information, you will be able to see which of the items need tweaking or further promotion, as well as find inspiration to further develop your menu.

Financial Metrics

Your restaurant’s financial metrics provide an overarching view of the restaurant's financial health. 

They include measurements that show not just revenue but how much of that revenue turns into profit after expenses.

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Source: Tablein

These metrics are essential for strategic planning, securing investment, and ensuring the restaurant’s long-term viability.

Let’s go over each of them next.

Contribution Margin

The contribution margin is the specific amount of revenue left after covering the cost of ingredients for a specific menu item.

How to calculate:

Contribution Margin = Selling Price – Cost of Ingredients

Put simply, this metric helps you determine how much you profit from selling a particular dish, compared to how much its ingredients cost you.

In short, this metric helps you identify profitable and non-profitable menu items. 

As such, it’s another one of the metrics that can inform decisions about promotions or menu changes.

Overhead Rate

The overhead rate is the measure of your restaurant's fixed costs, such as rent, utilities, and more.

How to calculate:

Overhead Rate = Total Fixed Costs / Cost Driver (which could be Total Meals Served, Hours of Operation, or Square Footage)

Here’s what makes this metric so essential. 

Understanding your fixed costs like rent and utilities allows you to set pricing that covers these expenses. Therefore, it can be said that this metric provides a clearer view of what it takes to be profitable.

Gross Profit and Gross Profit Margin

The gross profit margin is the amount of money you make after accounting for the cost of goods sold (CoGS).

To be able to calculate it, you first need to determine your gross profit.

How to calculate:

Gross Profit = Revenue – CoGS

Now that you know your gross profit, you can incorporate that number into the formula for the gross profit margin, shown below.

How to calculate:

Gross Profit Margin = ((Revenue – CoGS) / Revenue) * 100

The gross profit margin indicates the restaurant’s profitability after direct costs.

As such, it can inform decisions about operational adjustments, from purchasing goods at a different price, to finding ways to boost sales.

Net Profit Margin

Net profit margin is, briefly put, a measure that accounts for all expenses, fixed and variable.

Let’s look at how it’s calculated.

How to calculate:

Net Profit Margin = (Gross Profits / Total Revenue) x 100

Here’s why that’s important. 

Since it includes your gross profits and total revenue, it gives an overall sense of the profitability of your business and is key for assessing its health.

EBITDA

The abbreviation for our next metric stands for earnings before accounting for interest, taxes, depreciation, and amortization

The purpose of the metric is to analyze operational efficiency.

How to calculate: 

EBITDA = Net Income + Interest + Taxes + Depreciation + Amortization

Because EBITDA focuses on operational efficiency, it is commonly used for investment analysis.

Now that we’ve covered all financial metrics, let’s move on to our next category, metrics concerning sales.

Sales Metrics

These metrics offer a direct look at a restaurant's revenue generation capabilities. 

By tracking different aspects of sales, from the total sales to the revenue per seat hour, you can make informed decisions regarding marketing, menu adjustments, and staffing, ultimately boosting your bottom line.

Total Sales

This metric is the sum of all revenue generated from every part of your restaurant business, including food and drink sales and merchandise for a specific period of time.

How to calculate: 

Use your point-of-sale (POS) system to track total revenue from all sources. 

The total sales metric gives you an overall view of your restaurant's performance. It's the foundation for many other metrics and helps you gauge profitability and growth.

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Source: Toast

An example of how total sales data can be presented in your POS is shown above.

Average Check

As its name suggests, this metric refers to the average amount spent by each customer in your restaurant.

Here is how you calculate it.

How to calculate:

Average Check = Total Sales / Number of Customers

Knowing the value of the average check helps form your pricing strategy by giving you an understanding of how much a typical customer is willing to spend at your establishment. 

This can inform decisions about promotions and menu pricing.

Revenue per Seat Hour (RevPASH)

This metric defines the revenue generated for each hour a seat in the restaurant is occupied.

How to calculate:

RevPASH = Revenues / Seat Hours (where: Seat Hours = Number of Seats x Hours Open)

Revenue per seat hour is a metric that helps you identify underperforming time slots and optimize your restaurant operations. 

As such, it can inform staffing and promotional decisions.

Revenue per Square Foot

As the name suggests, this metric monitors the amount of money the restaurant makes per square foot of space.

It is calculated on an annual basis.

How to calculate: 

Sales Per Square Foot = Annual Sales / Square Foot

Being aware of your revenue per square foot is important because it allows you to optimize your restaurant's physical space. 

If you notice that a certain corner of your establishment isn’t popular with diners, you can repurpose it and move the tables elsewhere. 

Conversely, you may notice your business is thriving so much that you’re ready to open another location.

As such, it can be vital in decisions concerning expansion.

Sales per Labor Hour

Sales per labor hour is the revenue generated for each hour worked by each employee.

How to calculate:

Sales per Labour Hour = Total Revenue / Total Labour Hours

Having access to this metric helps in optimizing staffing levels and provides insight into workforce productivity. 

In other words, it can indicate when you need to hire more people, or which shifts can be covered by just basic staff, thus saving you money.

Customer Metrics

For our final set of metrics, we’ll discuss those pertaining to customers and customer experience. In the hospitality industry, understanding the customer is the key to long-term success. 

Customer metrics offer insights into the overall customer experience, from the effectiveness of marketing campaigns to the quality of service.

Customer Acquisition Cost (CAC)

The first of these metrics is CAC, or the cost to acquire each new customer. 

How to calculate: 

CAC = Marketing Costs / Total Number of New Customers

The metric isn’t specific to the restaurant industry, but used by all sorts of businesses that deal with selling to customers. 

It provides insight into the effectiveness of a company’s marketing strategies and their Return on Investment (ROI).

Customer Retention Rate

Conversely to the previous metric we’ve covered, the customer retention rate refers to the percentage of customers who continue to use a restaurant's services over a specified period.

Here’s how it’s calculated.

How to calculate: 

Customer Retention Rate = ((Total Customers – Total New Customers) / Total Customers) x 100

And why is it important?

Well, as most business owners know, it's usually cheaper to retain customers than to acquire new ones. 

Therefore, high retention can lead to more referrals and positive reviews, so tracking this metric is vital for decision-making.

Customer Satisfaction Score (CSAT)

The customer satisfaction score is a metric that, simply put, measures how happy customers are with your restaurant.

In order to use it, you first have to survey your customers and identify the ones that give your restaurant high ratings. 

High ratings are 4 and 5 on a 5-point scale or 9 and 10 on a 10-point scale. 

Then, use the following formula.

How to calculate:

CSAT (%) = (Number of Satisfied Customers / Total Survey Responses) x 100

The metric informs you about the quality of the customer experience you're offering, helping you make improvements where necessary.

Average Rating Score per Month

The final metric we’ll be covering is the average score of customer reviews per month.

It gives you a general sense of how customers perceive your business, which can be critical for improvement and reputation management.

How to calculate: 

Typically, you'd look at review scores on platforms like Yelp, Google Business, etc., or use your own automated system to generate this metric. 

Tablein can help by automatically sending feedback request emails to guests, asking them to rate their experience at your establishment.

Conclusion 

In this article, we've discussed the importance of tracking restaurant metrics, how to go about it, and which metrics you should focus on. 

Our goal has been to offer you a comprehensive view into the realm of restaurant metrics, arming you with the knowledge you need to enhance your business.

By taking the insights from this guide to heart, you can implement changes that will streamline operations, improve customer satisfaction, and ultimately increase your bottom line.

Remember, understanding and applying the insights you get from tracking restaurant metrics is an essential practice for anyone serious about the success of their restaurant.

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