Previously I have commented on the importance of tracking key
performance indicators of your restaurant. In this post, we are going to
identify what are the most important KPIs that will help you to make
decisions easily and be proactively improving your business.
For me, the consistency and quality of the food, drinks and the service is key at a restaurant, but when we talk about restaurant management we need parameters to measure the performance.
Why is it so important to track them weekly?:
- Weekly sales. Firstly, you must know what is your break-even point , which represents the sales you need to cover total costs, at that point profits are zero. You can control your costs but if you don’t get to this minimum level, you will never make a profit.
It is important to set a sales goal (realistic) for your team and design your rotas and expenses based on that forecast. Tracking the weekly sales and see if you are reaching target will enable your team to adapt on the rest of your expenses.
- Food and drinks Gross Profit Margins. It is necessary to know them weekly. Some businesses get this with their P&L on the following month, but this doesn’t allow you to react in time if something doesn’t go as planned.
In any other business, imagine a bookstore, you know perfectly the margin of each book and the margin that is obtained at the end of a sale. To think that in hospitality should not have this control is crazy. We work in a business in which every penny counts to get profits, if we don’t track weekly, so many pennies will be gone by the end of the year…
- Staff Costs. This is the percentage of salaries paid divided by sales. It is one of your most important costs and it should adapt to the sales of your restaurant at all times.
I have seen restaurants increase their sales and increase their staff cost in the same way. The restaurant manager panicked every time the restaurant got busier, so he would have always too many people on the floor ready for the “rush” to come, instead of training and rewarding the staff he had on dealing with the rush. Consequence: poor staff management can lead to an increase in losses even when sales increase. Keep an eye on that!
- PRIME COST. Staff Costs + Cost of Goods Sold will determine your prime costs.
Prime Cost is the most important cost of our restaurant. It is said that a healthy prime cost would be 60% but it really varies depending on the concept, location, etc.
- Reservations/ Walk-ins. Maximizing the number of customers who go to your restaurant week after week is essential and for this it is key to know if they come through your booking system or just walk-in. We recently blocked 5 tables of 2 on Friday and Saturday night at peak time, result: weekly increase of 24 people only in those tables thanks to a better turnover of those tables.
- Average spend. Crucial to know if we are selling the number of dishes for which we designed our menu, drinks, snacks, etc. Also important to reward those employees who know how to "up-sell" and sell what you want.
There are other indicators that depending on your type of business will be key for you, but in my opinion these are the most common and the most relevant. I suggest you give this a go for a couple of weeks, you will see the improvement areas that you will detect in your business and cash flow. The least I have seen in managers who have decided to do this is an increase of 3% in their profitability. Do you dare to check it out?