Real-time financial data is the new secret ingredient in the rapidly evolving restaurant industry. There is a saying that goes, "What gets measured gets managed." However, it's equally important to note that if you measure the wrong things, you'll also end up managing the wrong things.
At Tablespoon, our mission is to help restaurant groups grow their business faster and more effectively. So, the answers were easy when Sage Intacct asked us what KPIs we thought restaurant groups needed to track!
Here are our top ten:
If you haven't already been tracking our favorite KPIs, here's a breakdown of each one and its value:
By understanding your average unit volume, operators can create a benchmark to gauge store performance relative to the rest of the company and understand which stores contribute most significantly (positively or negatively) to the total company's sales figures.
For example, a restaurant group with 8 locations and $17m in total sales has an average unit volume of $2.125m. Stores with revenue over $2.125 are contributing a more significant share of the company's revenue than stores below the AUV.
By isolating new stores, operators have a clearer picture of their year-over-year change in sales. Same-store sales growth focuses strictly on stores open during the same period in the prior year. This normalizes any increase in revenue or decrease in overall profitability due to new store openings in the same period of the current year versus the previous period. Investors and analysts will often keep a close eye on this financial metric as it is a strong indicator of the health of the store’s operations and a key indicator of the future success of the company.
Understanding your COGS% as a restaurant operator is critical to business decisions. Analyzing changes, particularly increases, in your COGS percentages allows you to identify supply chain cost increases and course correct to preserve overall profitability by increasing prices, renegotiating with suppliers, or finding alternative suppliers.
There are several ways to look at, and analyze, labor in your restaurants. While looking at labor as a percentage of overall sales is most common, you can also analyze labor by shift (or day part), labor by guest count, and/or labor per operations hour. Each metric gives different insights into how operators deploy labor within their restaurants.
For example, labor as a percentage of sales may not be the best driver of kitchen labor since the culinary team does not influence which dish(es) are most popular on a given day, whereas understanding labor as a product of overall guest count may better influence spending in this department.
Restaurant Operating Income is an excellent insight into the topline revenue your restaurants are producing. Understanding that certain costs are out of the control of the floor-level restaurant managers, focusing specifically on topline revenue is a great way to understand a restaurant's financial performance. It also allows for benchmark comparisons from one location to another by isolating expenses that are not the same for each location.
Guest count is a measure of foot traffic within your restaurants. By understanding guest count, you can better understand the "volume" of each location. Some of your locations are high volume from a revenue standpoint, while others are high volume from a guest count standpoint. This can lead to an analysis of your clientele from location to location to better engineer your menu to fit your clientele.
By analyzing your check average, you isolate any other potential "noise" in your financials to zero in on an accurate baseline comparison between your various locations. Understanding that each location may have different square footage, levels of foot traffic, or completely different concepts, you can compare the performance of different locations based on how much the average person/table spends in your restaurants.
After a restaurant’s payroll the next largest expense is the food and beverage costs. This metric is useful in determining if changes to menu items should be made as well as helping to ensure restaurants are ending their month or year profitably. The food cost tracked can be for one menu item or multiple items. Investors often look at this metric to see if the company is adhering to its strategic initiatives.
For example, a restaurant may find that it is spending 27% of its total food cost on buying the ingredients for gyros, when only 5% of the restaurant’s sales are for gyros. Or possibly find they are spending 30% of its food cost on seafood, when this is not something the restaurant is well known for.
Prime Cost represents the two largest expenses a restaurant has control over, COGS and total labor costs. If either of these expenses are too high, it is possible the restaurant will not be profitable. Maintaining a close eye on this metric allows operators to take the necessary steps to maintain control over the costs.
Restaurants can determine how efficiently their floor space is being used by using the financial metric, sales by square foot ratio. This KPI often can lead restaurants to find ways to improve the layout and optimize the use of available space within the restaurant. This number can be useful in helping restaurants look to expand seating or even replace equipment that is underutilized to help increase the sales by square foot.
Are you tracking all the above? If not, you might be managing the wrong things.
Find out which of our favorites are in Sage Intacct’s 5 Restaurant KPIs That Drive Better Decision Making. Click the button or link below to download their top five!
https://lp.tbsp.com/5-restaurant-kpis