How to Calculate the Restaurant Benchmarks You Need to be Measuring

How to Calculate the Restaurant Benchmarks You Need to be Measuring

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Picture this, you're the proud owner of a bustling restaurant that dishes out meals to happy customers day in and day out. But how do you measure the success of your restaurant? Enter restaurant benchmarks. In this blog, we'll dive into what restaurant benchmarks are, why they are so crucial and how to calculate the important benchmarks you need to be measuring. 

What are Restaurant Benchmarks?

So, what exactly are restaurant benchmarks? Well, think of them as your restaurant's measuring stick for success. These benchmarks consist of metrics and ratios that help restaurant owners keep tabs on how their business is doing and how efficiently it's running. They provide a practical way to assess restaurant performance and to see how satisfied your customers and staff are.

You can use these benchmarks to see where you're excelling and where there's room for improvement. It's all about getting a well-rounded picture of your restaurant's performance.

Why Restaurant Benchmarks are Important

In the competitive world of restaurants, benchmarks provide a valuable edge by comparing your performance against industry standards and your restaurant’s past performance, showcasing where you shine and where you need to elevate your game. Furthermore, they help maintain the financial health of your establishment ensuring your restaurant remains financially sound.

Restaurant Benchmarks You Should Measure 

Below we dive into some of the most important restaurant metrics to measure (and of course how to calculate them).

Cost of Goods Sold

The cost of goods sold otherwise known as COGS is the total cost of everything sold within a timeframe. This differs from total costs as it includes only the labor costs and costs of ingredients for items sold. The smaller your COGS the larger your profit margin will be.


Cost of goods sold (COGS) = [beginning inventory + purchased inventory] – ending inventory


Prime Cost

Your prime cost is your cost of goods sold (COGS) and total labor costs combined. The Prime cost represents the expenses needed to serve your customers and provide them with the items from your menu. To find your prime cost rate you can divide your prime costs by your gross sales. The general rule of thumb is to try and keep your prime cost rate under 60%. 


Prime cost = COGS + total labor cost


Profit Margin

Your profit margin is your profit as a percentage of sales and it’s crucial for determining restaurant success. From your profit margin you can evaluate whether your restaurant is a profitable business. Profit margins for restaurants range from 0 - 15 percent with the average being between 3 - 5%.


Profit margin = [revenue – all costs] / revenue


Revenue per Seat

Revenue per seat allows you to understand how much your restaurant can expect to make per seat in a given timeframe. This clearly varies between different restaurant concepts as your layout, location and prices all influence this metric. It’s important to focus on raising the revenue per seat value as doing so will directly impact your profits. 


Revenue per seat = revenue / [available seats x open hours]


Table Turnover Rate

The table turnover rate shows how long customers are staying at your restaurant. It’s important to remember that a slow table turnover rate isn’t necessarily a bad thing as it means your guests are choosing to stay at your restaurant longer. Table turnover rate will also vary greatly depending on your restaurant type and concept.


Table turnover rate = number of parties served / number of tables


Food Cost Percentage

Food cost percentage simply shows how much money your restaurant is spending on food and beverage supplies. The average food cost percentage is 20 - 40 percent. Getting your food cost percentage in check is a key part of ensuring your restaurant flourishes.


Food cost percentage = [total food costs / total food sales] x 100


Inventory Turnover Rate

Inventory turnover rate takes into account how quickly your restaurant sells and restocks inventory in a specific timeframe. Managing your inventory turnover rate ensures you reduce losses and waste as well as always ensure there is enough inventory in place for orders. 


Inventory turnover rate = COGS / average inventory


Employee Turnover Rate

Employee turnover rate can be a good indicator into the satisfaction of your staff at your restaurant. The higher your employee turnover rate the more you may want to invest in ensuring your staff are feeling satisfied and have a good working environment. Employee turnover rate also affects costs as the more your employees are changing over the more time you are having to invest in training.


Employee turnover rate = [number of employees who have departed / average number of employees on payroll]


Sales per Square Foot

Sales per square foot can give you an idea of how successful your restaurant could be. It opens your eyes to the efficiency of your restaurant given the size of the physical space you are in. This metric is best done on a yearly basis.


Sales per square foot = annual sales / square footage of your restaurant


Conclusion

In the world of restaurant management restaurant benchmarks emerge as invaluable tools. They serve as your guide to navigating the industry, providing an approach to measuring success and addressing shortcomings. So, equip yourself with these benchmarks, and let them guide you on the path to restaurant success.

Grow Orders, Save Time & Eliminate Tablet Chaos

Integrate your delivery apps and online orders with your POS and consolidate them into a single tablet. Helping you reduce order issues, grow your sales, and eliminate delivery headaches.


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