Restaurant KPI: Improving Performance With Various Strategies

Marketing 19 minute read 29th June 2023

A restaurant’s KPI measurement is an important factor that restaurant owners and managers must take into account. It is a vital aspect of restaurant management that demands attention. Many managers make operational decisions based on limited data in an attempt to reduce costs. There are plenty of ways to reduce restaurant expenses with the help of KPIs. Restaurant KPI monitoring allows managers and owners to track the performance of their businesses.

If you don’t know what KPI stands for, it may seem like a frightening word. Especially if you are in the restaurant business and recently discovered you should have been monitoring this from day one. Well, there is nothing to worry about if you have not been doing this. The reason is that it is not the exclusive business success tool. It is one of the successful methods in the pool of restaurant management strategies.

If you are unaware of what this is or don’t know how to implement it, don’t worry. This article has covered the fundamentals to help you begin your KPI journey.

What Is a Restaurant KPI?

KPI is a frequently used business term, but many people don’t know what it represents. KPI stands for key performance indicators. These indicators are measurable values that demonstrate the overall performance of a business over a given period of time.

KPIs vary from business to business, and in the context of a restaurant, KPIs can include the following quantifiable areas:

  • sales
  • customer satisfaction
  • employee productivity
  • inventory turnover
  • food costs
  • food quality
  • waste reduction

The restaurant KPI list may change over time, but the above are some areas many establishments choose to measure.

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Why Is Measuring KPIs in the Restaurant Business Important?

Measuring KPIs in the restaurant business is important because it helps businesses identify their overall performance. It also helps analyze whether they are succeeding or failing based on the strategies implemented after a restaurant KPI calculation. As well as discover underperforming areas that require management attention. It helps them improve their operations, which in turn leads to increased profitability.

In addition to finding problem points, measuring KPIs can help restaurants stay competitive in the industry. This would assist in differentiating themselves from their competitors. For example, if the KPIs show that they have longer waiting times than their competitors, they can focus on speed. If they need to improve their food quality, the management should focus on purchasing superior ingredients and presenting mouthwatering dishes.

Another benefit of restaurant KPI measurement is the ability to analyze the restaurant’s past and current performance. The previous indicators collected serve as a comparison with the current outcomes. Restaurants can use this to evaluate if their efforts are paying off or if they should consider applying new strategies.

How To Use Restaurant KPI Correctly?

Unfortunately, many managers are not using restaurant KPIs the right way. If done correctly, it can help solve issues you were unaware of and improve the restaurant’s performance. It is necessary to understand what KPIs fit your restaurant’s requirements.

Instead of randomly picking key performance indicators found online, it is good management practice to identify the problem areas beforehand. Based on these issues, you can create a restaurant mission statement and highlight the priorities you want to address.

Restaurant owners and managers are responsible for creating strategies addressing these issues. So that they can measure their overall success using key performance indicators. There can be multiple KPIs for one problem, but that does not mean the restaurant should implment all of them. Using all of these indicators would lead to confusion, incorrect data analyses, and the implementation of ineffective strategies.

If appropriately used, management can cut costs without reducing quality.

Restaurant KPI Examples

Here are some restaurant KPI examples to help you better understand how to use restaurant KPI correctly. Increase customer loyalty and improving service time are the two KPI examples in this case.

The first example explains how to identify and improve customer satisfaction, which would increase customer loyalty and retention rate. It explains not only one by using multiple KPIs to track the score.

The second example focuses on improving the restaurant’s service by using the average service time as the KPI.

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Restaurant KPI Examples to Increase Customer Loyalty

A restaurant with zero customer retention rate or negative reviews needs to increase customer loyalty. Therefore, the restaurant should focus on improving customer satisfaction.

To do this, the restaurant needs to identify the KPIs with which it can calculate customer satisfaction scores. There are plenty of key performance indicators a restaurant can use. A few of those KPIs are:

  • Comment cards and online surveys.
  • Quality of customer engagement in the restaurant and on social media platforms.
  • food quality and presentation
  • restaurant management and staff behavior
  • Customer feedback

All of these are important performance areas that a restaurant should measure. However, this does not mean that the restaurant should consider all of these as key performance indicators. It should only select those indicators relevant to solving the customer loyalty issue.

Feedback is the best KPI to use in this situation to identify why the restaurants are losing customers. Using that information, restaurants can identify problem areas, address those issues, and measure their effectiveness based on customer feedback.

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Restaurant KPI Examples to Improve Service

By closely monitoring staff performance, restaurant owners can analyze how their behavior and work ethics affect the restaurant’s performance. Since the aim is to provide efficient and timely service, the best restaurant KPI is the average service time.

With the average service time, restaurant owners can analyze multiple cases. For example:

  • How long does a customer take to receive their order after placing it?
  • Delays in the kitchen or slow service from waitstaff.

Using this, the management can track and record the service time for each order and calculate the average service time. They may also be able to identify which server is tardy when it comes to customer service.

The management can take steps to reorganize the workflow, introduce new equipment, implement new strategies, and train the staff accordingly. Restaurants can ensure they are properly staffed during peak hours while avoiding overstaffing during slower periods. This can result in significant cost savings and increased profitability for the restaurant. All of this is possible thanks to the output of the restaurant KPI.

KPIs are the backbone of measuring the success of the strategies implemented and comparing the current and previous performance.

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4 Key Performance Indicators in the Food Industry

There are several key performance indicators in the food industry, each of which is important in its way. It is up to the management to identify and create a plan for the KPIs they need to implement.

A few common metrics that every restaurant should consider tracking are:

  • food cost percentage
  • labor cost percentage
  • table turnover rate
  • customer satisfaction score

Restaurant KPI: Food Cost Percentage

Food costs are one of the most critical KPIs for any restaurant. It helps managers set the prices, calculate their profit, and estimate the monthly expenditure on ingredients.

Here is the formula for the food cost percentage:

Total Cost of Food: 300 Total Revenue: 400 Food cost percentage = (300 / 400) X 100 = 75%

The above formula example calculates that the overall cost of food is 75%. Restaurant managers can use this to set a target to reduce the overall food cost to 30%. This helps identify areas where cost reduction is possible without compromising on quality.

Along with figuring out the cost spent on food, managers can use an additional KPI named the food waste indicator. This KPI falls into this category because managers can calculate the amount of uneaten food. This wastefulness adds to the overall food cost.

Monitoring food costs regularly can help restaurants stay competitive and profitable in a highly competitive industry.

Restaurant KPI: Labor Cost Percentage

Another cost-calculating KPI is the labor cost percentage. This KPI measures the percentage of total revenue spent on labor costs, including salaries, wages, and benefits. The labor cost percentage KPI is a good choice if a restaurant believes they are overspending on staff.

The management can evaluate the restaurant’s performance and find ways to save labor costs using the data. Certain ways to reduce costs are:

  • better shift planning
  • staff training
  • implement labor management systems

These steps and a few others can help the business reduce labor costs. This can lead to increased profitability and a more efficient operation overall. Keeping labor costs in check is crucial for restaurants to maintain profitability. High labor costs can eat into profits and make it difficult to compete with other businesses in the industry.

Restaurant KPI: Table Turnover Rate

This may be a difficult KPI to track because the behavior dependent on calculating the outcome is unpredictable. The table turnover usually depends on the amount of time customers spend seated at a table.

This KPI is quantifiable, but the time spent by the customer is simply guesswork. However, taking that out of the equation, the table turnover rate is only partially calculated.Once the customers leave, management can analyze the time spent resetting the table and ushering in the next customers.

Based on this, several actions can streamline the process and minimize the table clearing and resetting time.

Restaurant KPI: Customer Satisfaction Score

The customer satisfaction score is a key performance indicator for restaurants. It reflects how well the restaurant is meeting the needs and expectations of its customers. If the overall customer satisfaction score is low, the management needs to identify the problem areas. Unfortunately, this could be a challenge as different customers may have uncommon complaints. However, a few strategies to analyze customer satisfaction.

  • surveys
  • feedback forms
  • online platforms

These three are the key measurement tools when it comes to gathering data on customer satisfaction. Based on this, restaurants can take the appropriate action, whether improving food quality, ambience, or staff behavior. With the changes implemented to deliver a positive dining experience, there will be an increase in revenue and customer loyalty.

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What Is a Restaurant KPI Dashboard?

Managers who must ensure that the business is running a profitable operation need to use a restaurant KPI dashboard. This dashboard will speed up the restaurant KPI calculation, introduce new indicators, and show a visual presentation of the operation. This visual appearance is in the form of:

  • charts
  • graphs
  • comparison tables
  • seasonal trends

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How To Create a KPI Dashboard?

Creating a restaurant KPI dashboard can be a challenging task. It requires identifying the restaurant’s goals, objectives, and KPIs. Here are a few steps that may help when developing a dashboard:

  1. Determine objectives Identify the problem areas and create an outline of the goals and objectives.

  2. Select KPIs Choose theKPIs that will help measure progress towards achieving the objectives. They should be specific, measurable, and relevant to the restaurant’s goals.

  3. Collect the data Decide on a restaurant KPI time frame and collect the data for each KPI individually.

  4. Choose a restaurant KPI dashboard tool Select the appropriate tools to create your dashboard. Microsoft Excel, Google Data Studio, and Google Sheets are popular KPI visualization tools. They include the necessary features to create a dashboard.

  5. Design the dashboard Develop a visual representation of the data that is easy to understand and navigate. It should provide a clear overview of the restaurant’s performance and highlight areas that require attention. The dashboard should include appropriate visual elements, and group together related KPIs.

  6. Create the visualizations With the tool selected and the dashboard designed, the next step is creating the visual elements. They show the progress and calculations of each individual restaurant KPI. These visualizations should be easy to understand.

By following the above steps, creating a restaurant KPI dashboard is very easy. Yes, in the beginning, it is tough to figure out how and where to begin. However, once you have finished one dashboard, it will be simpler to create subsequent visualizations for a variety of KPIs.

Do you want to identify what restaurant KPI best suits your operational needs? Beambox makes tracking key metrics and creating visual reports an effortless job. Learn more and start growing your business with the Beambox free trial.

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