Restaurant managers and owners need to track sales figures and profits using a restaurant POS system. If “average check sizes” and “food costs versus sales” are all you track, then you have an incomplete picture of the reasons behind your restaurant’s performance. The performance of your restaurant business is affected by other factors including menu items, cash flow, and cost of goods sold. You need to understand the cost percentage of every item and its impact on the overall sales.
Key performance indicators (KPIs) are not a behemoth task to avoid. On the contrary, they are your best resources for making great decisions. The most successful businesses in the restaurant industry are tracking dozens of KPIs at a time. Usually, restaurant KPIs cover all grounds, from sales and marketing initiatives to human resources. In this article, you will learn about the top four sales-oriented KPIs that can dramatically boost your restaurant’s profitability.
The best restaurant KPIs to track and boost sales are:
- Sales per labor hour
- Sales per head
- Revenue per available seat hour
- Table turnover rate
Sales Per Labor Hour
The sales-per-labor-hour (SPLH) KPI assesses the earnings generated by your restaurant business each hour. An efficient labor hour is achieved when the resources available generate the most revenue.
When tracking this sales KPI, focus on two influential factors: labor hours and sales revenue. Since labor hours are not affected by many things in the restaurant, there are no significant changes. In contrast, sales revenue change drastically due to the influence of peak hours, holidays, weather patterns, and other aspects of business
If you track your sales levels for a longer period of time, you will be able to predict customer arrival patterns. This will help in creating efficient shift schedules that balance the number of workers needed to meet customer demand.
To predict the right staff schedule, calculate your target SPLH using the formula:
Sales Per Labor Hour = Total Sales/Hours Worked
The approach involves diving the total sales desired for the restaurant with the total number of hours scheduled. If your target sales for Sunday are $3,000 and your scheduled hours are 30, then target SPLH will be $100.
For you to meet your sales per labor hour targets, you need to effectively utilize every hour spent on the job. Make sure you hire a trained and sales-oriented FOH team to drive your sales. Some of the ways you may consider to increase the sales efficiency of your staff include:
- Pinpoint high-traffic cycles and prepare staff for consistent sales processes
- Motivate your staff in encouraging and enthusiastic ways to get the best results
- Use business intelligence technology like a restaurant point of sale system to achieve faster order placements and check processing
- Continue with ongoing training programs
Food and Drink Sales Per Guest
Sales per head gives you a full picture of what appeals most to guests and whether time of day affects your restaurant’s total sales. It reveals underperforming dishes that have a negative impact on the BOH’s productivity while doing little to boost profits. The sales per guest KPI shows popular or hot-selling items that increase prices and improve margins. It also shows the best time (slow periods) to run a promotion or happy hour to increase sales.
To calculate the sales per guest, divide the total sales of the time period by the number of customers. For a vivid picture, calculate the sales per head during breakfast, lunch, dinner, week, month, and year.
Revenue Per Available Seat Hour
This KPI is called RevPASH and is fairly new in the restaurant industry. However, it is popular among restaurant owners and managers because of its importance to profitability. Simply put, empty seats at the front of house are an indication that your restaurant’s profitability and bottom line are suffering. Therefore, you need to have a clear picture of the revenue per available seat hour.
The factors to consider when calculating RevPASH include hours open and the seats available. The formula is as follows:
Step 1: Seat hours = Number of Seats/ Hours open
Step 2: RevPASH = Total revenue/ Seat hours
If you have a 50-seat restaurant open for 10 hours, it means that you have 500 seat hours per day. If your revenue is $2,000 on a day, then the RevPASH would be $4 ($4 = $2,000/500).
RevPASH is incredibly a useful KPI that should be part of your daily financial review. By dividing your actual revenue per hour by the total number of seats you have, you get a clear picture of your profitability. You can use this information to make changes that improve your hour-by-hour profitability.
Table Turnover Rate
Tracking the table turnover rate KPI is essential for any sit-down restaurant. Your restaurant can benefit from this KPI, whether it is a fast-casual dining or white-tablecloth service. The process of calculating the table turnover rate is as follows:
Determine a specific time period, and count the number of seated tables in that specific time period. Then, divide this number with the total number of tables on the floor.
The calculations will determine the average time it takes to offer customer service. This is the average time it takes for a customer to sit at a table, eat, pay, and leave (also called the check time). With this information, you can then take deliberate steps to improve the rate.
Usually, the biggest problems that restaurants face lie in customer experience. The FOH may be too slow or the restaurant uses a slow legacy system to process payments. This makes it critical to find effective ways to improve your table turnover rate:
- Have servers approach the table in under one minute
- Save time with prep work and clear communication
- Rearrange the floor plan or redecorate
- Use new technology to quicken your service
There are many factors that influence your table turnover time. This means that the rate will not improve with a single change, but a combination of several. If profits are suffering from low turnover, patiently observe the restaurant’s operations. Check your other KPIs, and make step-by-step changes.
If you are a restaurant manager or owner, you need to start tracking the four restaurant KPIs mentioned above. This will not only keep your profits stable but also increase productivity and sales. Check them daily to get control of your restaurant’s profitability.