Running a restaurant is incredibly hard. They have one of the highest failure rates in business, and it requires an incredible amount of blood, sweat, and tears to get it up and running. Then the real work starts. Once your doors open, the entire job is keeping them open - and that’s nearly impossible without the proper tools. So today, Cuboh felt it was time to put together a short crash course in crucial restaurant KPIs and statistics.
Let’s dive right in, shall we?
KPI & Statistics 101
Let’s start with the true basics - what is a KPI? Key Performance Indicators (KPIs) are sets of data used to measure the success of your business concerning its goals. They need to be well-defined, created with real data, monitored constantly, and clearly established with your staff.
In other words, KPIs are statistics on the performance of your business - and they inform more than you know.
It is important to note, you can't fix what you can't measure. As a restaurant owner, you can only do so much. We find that most restaurant employees are young, and want to learn, so explaining what a KPI is, and why they should care is very helpful. In terms of managing the KPIs, we recommend a framework called "Name, Number & Northstar". It essentially means that every single person in the restaurant should have a KPI (number) that they help own. The restaurant overall has a north-start (aka. a goal everyone is working towards). Many restauranteurs think this is silly, but employees care if you want them to care, and most people in the world are competitive. Tracking something else than just their job is fun, and will help you delegate management. If you give them freedom to think about only one of these KPIs, the results will compound.
Back of House (BOH)
Let’s start with the heart of all restaurants - the kitchen. Food waste, labor costs, and inventory management are the name of the game here, and you’ll want to pay keen attention to each.
In general, these are the most essential bits and bobs to track in your restaurant’s back-of-house:
KPI #1 - Food Waste:
Food waste is never fun. You pay good money for each bit of your inventory, so seeing bits of food go into the trash is painful. And it should be - restaurant food waste is a major issue in the food industry. In fact, according to Food Print, restaurants waste between 22-33 billion pounds of food per year, with roughly 4-10% of food wasted before it even reaches the customer.
To address this, it’s vital that you carefully track food waste and find patterns. Does it occur when particular people work, only with specific dishes, or on busy days? Once you recognize a pattern, you can adjust how things operate to solve the issue. If certain employees seem to waste more food, talk to them. If a particular dish results in more waste than others, speak to your chef and rework how it’s prepared. And if you see food waste skyrocket on busy Saturdays, work with the BOH to figure out why and solve the issue.
Nobody wants to see food wasted - so talk to your kitchen. They’re likely going to be on board with any solution you can find to cut down on needless waste and encourage sustainability.
KPI #2 - Production Time:
Production time is another critical metric to track. The longer customers wait for food, the less happy they’ll be. And (arguably) more importantly, it costs you more in labor the longer each dish takes to make. Streamlining your prep and serving process is crucial to cutting labor, and the absolute best way to track it is to record how long each dish takes to prepare on a standard night.
If a particularly popular dish takes twice as long as everything else, talk to your kitchen and find a solution to get it out faster. And inversely, if you have an unpopular dish that is near-instant to make, consider removing it for something that sells better and cooks quickly.
Tracking production time also helps control food waste, so don’t forget this, as it informs both labor and inventory costs.
KPI #3 - Cost of Goods Sold (COGS):
And now we’re breaking into inventory management. Cost of Goods Sold (COGS) is one of the oldest forms of KPI and statistics monitoring used in businesses. It essentially boils down to figuring out how much you make on a particular good in exchange for how much you lose on that item.
A positive COGS means you’re making money, whereas a negative COGS means losing money.
Use COGS to determine if particular bits of your inventory are taking up more than they’re worth in your monthly stock. If so, find cheaper alternatives or determine how to justify the cost in your business plan.
To calculate COGS (without a calculator or specialized software), use the following equation:
(Beginning inventory + purchases) - end inventory = COGS
KPI #4 - Menu Profitability & Popularity:
And finally, we make it to the pricing of your menu. Knowing how much you make on each part of your menu is vital. Things like pizza, garlic bread, pasta, and other low-cost, high-margin items are great if you sell them consistently, but it means nothing if they don’t sell.
Track what sells, how often, and if there’s a pattern to when it does (for example, it only sells on hot summer days or cold winter nights).
If you see that certain items only sell with specific criteria, consider removing them from your menu and turning it into a seasonal special. This lets you cut the recurring cost of that particular item from inventory and still get good returns when it actually sells.
Front of House (FOH)
And now we make it to the Front of House (FOH). These are the people that get you glowing reviews, interact with every customer, and represent the “face” of your business. Considering their job is crucial to the performance of your business, you must track a few statistics and trends on their end, too:
KPI #1 - Sales per Guest:
This is a pretty self-explanatory statistic to track. Measuring how each server sells items and, importantly, how poorly certain items sell will inform a number of things to address in both your Front and Back of House.
Watch who sells what, when particular items sell, and which promotions gain traction. And then act on it. Put best-selling servers on your busiest nights, run quality promotions when you know they’ll work, and adjust your menu to ensure every item sells consistently.
KPI #2 - Revenue per Seat, per Hour:
Similar to the above section, the sales per seat, per hour metric is directly tied to how well your restaurant performs. Also known as RevPASH (Revenue per available seat per hour), you’ll see this tracked in every well-run restaurant - and yours should be one of them.
Empty seats mean you’re losing money, and knowing when the shop is most likely to be dead can help adjust labor scheduling, your open hours, and even know when to run specials and promotions to boost revenue during traditionally slow hours.
(Pssst - RevPASH is why Happy Hour exists in just about every restaurant. Happy Hour occurs during the slowest period of business for this exact reason - to boost sales in an otherwise slow period of 3-4 hours.)
KPI #3 - Labor Cost Percentage:
Next up is your labor cost percentage. This is measured by dividing your labor costs by total operating costs.
For example, if you spend $1,000 per month on labor and have $10,000 in total operating costs, finding your labor cost percentage would look like this:
$1,000 / $10,000 = .1, or 10%
While those costs are fictional, you get the idea. Watch your labor costs and adjust scheduling and menu costs to ensure you stay in the black.
KPI #4 - Retention & Salary
Staff retention is something that matters to all of your staff. Staff retention and salary are absolutely crucial to ensuring your business stays afloat. Keeping well-trained, effective staff is always a better investment than hiring new ones - even if it comes with a pay bump.
In fact, according to SHRM, “Research suggests that direct replacement costs can reach as high as 50%-60% of an employee’s annual salary, with total costs associated with turnover ranging from 90% to 200% of annual salary.”
Let’s say you pay your head chef $60,000 per year. On average, it costs roughly $40,000 to retrain talented positions like this, meaning you just lost $100,000 between his replacement’s salary and the cost of retraining.
In short, if you find that your staff is leaving in droves, it’s time to look at the books. Find out where to cut costs (your inventory or menu, for example) and offer raises. That extra $1-2 an hour adds up, sure, but you know what adds up more? Retraining your whole staff with brand new employees - some of whom have never worked in a kitchen before.
In short, there is a load of KPIs and statistics to track in your restaurant. From inventory and average sales to COGS and RevPASH, you’ve got a lot to keep in that already busy head. So how can you track all of this and more with the click of a button?
Cuboh Software offers a one-stop-shop to track all of the aforementioned KPIs and statistics alongside more we didn’t even have time to mention. And if you’re getting into the delivery game, Cuboh Middleware makes taking orders online more accessible and streamlined than ever before.
If you’re tired of handwriting your KPI math, constantly struggling with multiple tablets and POS systems, and trying to manage your menu and website, Cuboh is tailor-made for you. So give it a try and watch as orders roll in more efficiently than ever you’ve ever seen.