The Best Key Performance Indicators (KPIs) for Restaurants

The restaurant industry is one of the most competitive sectors, yet many businesses continue to thrive. To measure the success of a restaurant can be overwhelming as there are numerous factors to track simultaneously. This article outlines the most relevant KPIs to assess the performance of your restaurant and help you identify areas of improvement.

Understanding Key Performance Indicators in the Restaurant Industry

The best Key Performance Indicator (KPI) for a restaurant can vary based on specific goals and operational emphasis. Commonly used KPIs include:

Food Cost Percentage

This KPI measures the cost of food sold as a percentage of total sales. It aids in managing food inventory and pricing strategies. A typical target is around 28-35%. Regular monitoring of food costs is crucial for profitability.

Labor Cost Percentage

This KPI assesses total labor costs including wages, benefits, and taxes as a percentage of total sales. It is often ideal to keep labor costs around 20-30%, although this can vary by restaurant type. Effective labor cost management ensures efficiency and sustainability.

Sales Per Square Foot

This KPI evaluates the efficiency of the dining area by measuring revenue generated per square foot of restaurant space. Higher sales per square foot can signal a more efficient use of space and potentially higher profitability.

Customer Satisfaction Score

Customer satisfaction is gathered through surveys or online reviews and gauges the overall dining experience. It is critical to monitor as it can influence repeat business and customer loyalty. Surveys and reviews provide feedback to improve service and food quality.

Table Turnover Rate

This KPI measures how many times a table is occupied by different customers during a shift. High turnover rates can indicate better efficiency and profitability, but it is important to maintain a balance to ensure customer satisfaction.

Average Check Size

This KPI tracks the average amount spent per customer and can help in assessing menu pricing and upselling strategies. High average check sizes can indicate successful upselling and effective menu pricing.

Reservation No-Show Rate

This KPI measures the percentage of customers who don't show up for their reservations, impacting overall revenue. Reducing no-show rates through effective reservation management can significantly enhance profitability.

Net Promoter Score (NPS)

Net Promoter Score measures customer loyalty and the likelihood to recommend the restaurant to others. High NPS scores indicate customer satisfaction and can drive positive word-of-mouth marketing.

Selecting the Best KPIs for Your Restaurant

Ultimately, the best KPI depends on the restaurant's specific goals—whether you're increasing profitability, enhancing customer satisfaction, or optimizing operations. Regularly monitoring a combination of these KPIs provides a comprehensive view of the restaurant's performance.

Top 5 KPIs to Measure for Restaurants

However, here are the top 5 KPIs to measure for restaurants to identify areas of improvement and appreciate positive performance based on insights from NetSuite and Intouch Insight.

Sales

Sales are among the most basic metrics to measure performance. They impact many key metrics such as profits and losses. For beginner restaurants, sales are crucial to determine the break-even point, measuring the sales volume required to return an investment.

Labor Costs

Consistently monitoring and controlling labor costs is essential for the restaurant's success. Labor costs include salaries, taxes, and employee benefits. According to NetSuite, typical labor costs should be around 30-35% of a restaurant's total revenue. Effective labor cost management ensures sustainable operations.

Customer Satisfaction

Customer satisfaction is determined by whether your product or service meets or exceeds customer expectations. Surveys and online reviews are key in gauging customer satisfaction. This feedback helps identify areas for improvement, such as food quality, price points, and overall dining experience. High customer satisfaction can lead to repeat business and word-of-mouth marketing.

Historical Sales Data

Historical sales data helps monitor the performance of your restaurant over time. To track this KPI, it is best to monitor daily, weekly, monthly, and yearly sales data. This allows you to see if you meet your targets and adjust strategies accordingly. Monitoring sales trends enables better planning, cost reduction, and more accurate forecasting.

Turnover Rate

High staff turnover rates can affect labor costs negatively and impact your restaurant's performance. To address this, regularly collect employee feedback to improve staff retention. High staff turnover can result in a lack of consistency in service and food quality, and a constant need for training new staff, increasing costs.

Conclusion

The top 5 KPIs to measure for restaurants are sales, labor costs, customer satisfaction, historical sales data, and turnover rate. Regularly monitoring these KPIs can help you identify areas of improvement, improve operational efficiency, and enhance the overall performance of your restaurant. By focusing on these key performance indicators, you can make data-driven decisions that drive success in the highly competitive restaurant industry.