It’s been more than three years since the end of the lockdown, but the restaurant industry is still feeling the effects. Prior to the pandemic, estimates put the number of restaurants in the US at over 1 million; today’s numbers are about three-quarters of that figure. That means that there are fewer businesses competing for the same diners. Food prices are going up and margins continue to hover between 3 and 5 percent. Food service is a highly competitive industry in which every decision cascades, affecting performance and revenue. The key to effective decision-making is data. We’re here to help you drive restaurant success by the numbers with 10 KPIs to measure. These KPIs offer valuable insights into every area of your business’s health, efficiency, and profitability. Quantifying the results of your efforts will help you boost your bottom line by letting you know what’s working and what needs to change.
Restaurant Success by the Numbers: KPIs to Measure Financial Health
Financial KPIs are crucial for understanding your brand’s overall profitability and financial health. They help owners and managers assess everything from cost management to sales efficiency, guiding decisions that have a direct impact on long-term success. By regularly tracking these KPIs, restaurants can optimize expenses, set realistic revenue targets, and make data-driven adjustments to enhance profitability and operational efficiency.
Here are four of the most important:
Net Profit Margin
Formula to Measure: (Net Profit ÷ Total Revenue) x 100
- What is it? Net profit margin is the percentage of revenue that remains after all operating expenses, including food costs, labor, and overhead, have been deducted.
- Why does it matter? It provides insight into how efficiently a restaurant is managing its costs relative to its total sales, with a higher net profit margin indicating better profitability.
Revenue per Available Seat Hour (RevPASH)
Formula to Measure: Total Revenue ÷ (Available Seats x Hours of Operation)
- What is it? RevPASH measures the revenue generated per seat during a given time period, reflecting how efficiently a restaurant is utilizing its seating capacity to drive revenue.
- Why does it matter? This KPI helps restaurants optimize their seating arrangements and service speed, especially during peak hours. A higher RevPASH means a restaurant is maximizing its earning potential by balancing table turnover and customer service quality.
Average Order Value (AOV)
Formula to Measure: Total Sales ÷ Total Orders
- What Is It? Average Order Value (AOV) tracks the average amount spent by customers per transaction. It helps assess customer spending habits and evaluates the effectiveness of your pricing strategies and upselling techniques.
- Why Does It Matter? A higher AOV indicates that customers are purchasing more or higher-priced items, which directly boosts revenue without necessarily increasing customer volume. Monitoring AOV allows restaurants to fine-tune their menu, pricing, and promotions to encourage higher spending per customer visit.
Break-Even Point
Formula to Measure: Fixed Costs ÷ (Sales Price per Unit – Variable Cost per Unit)
- What Is It? The break-even point is the sales level at which total revenue equals total expenses, resulting in no profit or loss. It helps restaurants determine how much they need to sell to cover all their operating costs.
- Why does it matter? Knowing your break-even point is essential for financial planning and setting realistic sales targets. It allows restaurant owners to understand when their business will start becoming profitable and how changes in cost structures or pricing strategies will impact profitability.
Restaurant Success by the Numbers: KPIs to Measure Operational Efficiency
For anyone seeking to quantify restaurant success by the numbers, KPIs that measure operational efficiency are key indicators that help restaurants measure how effectively they are using resources to maximize output without compromising quality. These metrics provide insights into areas like staff performance, table turnover, and inventory management, all of which directly impact profitability. By tracking these KPIs, restaurants can streamline operations, reduce waste, and improve customer service, ultimately increasing revenue while minimizing costs.
Pay particular attention to these four:
Food Cost Percentage
Formula to Measure: (Cost of Goods Sold ÷ Total Sales) x 100
- What Is It? Food cost percentage is the ratio of the total cost of ingredients used to prepare dishes to the total sales generated by those dishes. It reflects how efficiently a restaurant manages its food expenses relative to revenue.
- Why Does It Matter? This KPI is critical because food costs represent one of the largest expenses in a restaurant’s budget. Knowing how to control food costs in your restaurant is integral to creating maximum margins. Maintaining a balanced food cost percentage ensures profitability by minimizing waste and optimizing pricing strategies to cover costs while meeting customer expectations. Streamline inventory management and minimize food waste by tracking ingredient use. Tools like MeazureUp’s DailyChex can be used to ensure consistent monitoring of food costs and make timely adjustments to purchasing or portion control to maintain a balanced food cost percentage.
Labor Cost Percentage
Formula to Measure: (Labor Costs ÷ Total Sales) x 100
- What Is It? Labor cost percentage is the ratio of total employee wages, benefits, and payroll taxes to a restaurant’s total sales. It indicates how efficiently a restaurant is managing its labor expenses in relation to its revenue.
- Why Does It Matter? Labor costs are often one of the highest operational expenses in a restaurant. Keeping labor cost percentages in check helps ensure that staffing levels are appropriate, preventing overspending on labor while maintaining service quality. Use digital site audit software to improve labor efficiency by automating routine operational audits and identifying areas where labor can be optimized. A digital solution like AuditApp by MeazureUp allows managers to track staff performance and identify overstaffing or understaffing during certain shifts, ultimately helping to maintain an efficient labor cost percentage.
Table Turnover Rate
Formula to Measure: (Total number of parties seated ÷ Total tables available) ÷ Operating Hours
- What Is It? Table turnover rate measures how quickly a restaurant can serve customers and clear tables for new guests. It reflects the efficiency of seating, serving, and overall restaurant operations.
- Why Does It Matter? A higher table turnover rate means more customers can be served within a set time period, increasing revenue. However, it’s crucial to balance speed with quality service to ensure guests are not rushed and leave satisfied.
Order Accuracy Rate
Formula to Measure: (Accurate Orders ÷ Total Orders) x 100
- What Is It? Order accuracy rate measures the percentage of orders that are fulfilled correctly, without errors in the items, quantities, or special requests. This KPI indicates how effectively a restaurant’s kitchen and service teams are working together to meet customer expectations.
- Why Does It Matter? A high order accuracy rate improves customer satisfaction and reduces the need for costly rework, refunds, or replacements. Ensuring accurate orders is especially important in delivery and takeout, where mistakes can lead to longer wait times and a negative customer experience.
Restaurant Success by the Numbers: KPIs to Measure Customer Satisfaction
Customer satisfaction KPIs let you know how well your restaurant is doing at meeting or exceeding guest expectations. These metrics gauge customer loyalty, experience, and overall satisfaction with service and food quality. By tracking your restaurant’s customer satisfaction KPIs, you can identify areas for improvement, retain loyal diners, and attract new patrons through positive word-of-mouth. Don’t miss these critical figures:
Customer Retention Rate
Formula to Measure: [(Customers at the end of a period – New Customers) ÷ Customers at the start of a period] x 100
- What Is It? Customer retention rate measures the percentage of customers who return to your restaurant over a given period. It reflects the success of your efforts to build customer loyalty and maintain consistent patronage.
- Why Does It Matter? Retaining existing customers is often more cost-effective than acquiring new ones, as it reduces marketing costs and increases the likelihood of repeat business. A higher retention rate indicates better restaurant customer experience, customer satisfaction and brand loyalty, which are essential for long-term growth and profitability.
Net Promoter Score (NPS)
Formula to Measure: % Promoters – % Detractors
- What Is It? Net Promoter Score (NPS) measures customer loyalty by determining how likely customers are to recommend your restaurant to others. To calculate NPS, a survey or poll must be conducted, typically asking customers to rate their likelihood of recommending your restaurant on a scale of 0-10. Based on their responses, customers are categorized as promoters (7-10) or detractors (0-6).
- Why Does It Matter? NPS is a valuable indicator of customer loyalty and satisfaction, and a higher score often correlates with stronger word-of-mouth marketing and repeat business. Tracking NPS helps restaurants identify areas for improvement and assess the overall customer experience.
Create Restaurant Success by the Numbers: Drive KPIs with Better Technology
Tracking essential KPIs will give you insights that can drive profits by improving your restaurant’s profitability, operational efficiency, and customer satisfaction. Leveraging these metrics will help you make informed decisions that directly affect both the bottom line and customer experience.
With digital tools like MeazureUp’s DailyChex and AuditApp, restaurant owners can now automate the tracking of the data needed to measure and improve KPIs, ensuring data accuracy and saving time that can be better spent on strategy and growth.
Gain actionable insights to drive your restaurant toward long-term success. Schedule a demo of MeazureUp today.
