culinary-arts
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How to Track Your Performance When Starting a Food Business

EHL Insights
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Learn how to measure and track the success of your food business with these 12 KPIs

Managing a successful restaurant is no easy feat – tight margins, high employee turnover rates and a fiercely competitive market make for an uphill battle for newcomers and veterans alike.

The best way managers for to track just how well their restaurant is performing is through a carefully-selected set of Key Performance Indicators, or KPIs, that indicate their financial and staff performance, as well as customer satisfaction, over time.

There are a lot of different metrics you can consider (in fact, there are hundreds), but we’ve compiled our list of what we believe are the most important operational, kitchen & inventory and customer satisfaction KPIs for any restaurant business to track. Not only will these KPIs help you keep a closer eye on your overall performance, but they’ll also let you know what areas you need to tackle and nurture to further optimize your success.

RESTAURANT OPERATIONAL KPIs

The following KPIs look at your sales, turnover, profit and overall efficiency – giving you clear picture of how productive your staff is, how much money they’re bringing in and how your restaurant is doing overall.

  • Cost of goods sold (CoGS): CoGS measures how much it costs to make each item on your menu. This will help you determine how to price your menu items and how much profit you’re making on each dish. Make sure to do a regular review of your menu pricing, and look at which menu items sell the best, so that you can make pricing and promotion decisions based off of both your CoGS and sales volumes.

  • Net Profit Margin: Your Net Profit Margin is the profit your business makes after deducting all of your expenses like CoGS, rent, electricity etc. Just remember, it takes most restaurants a few years before they start to turn an actual profit, so don’t worry if these numbers look bleak in the beginning!

  • Break-Even Point: This is another one of your most essential KPIs, as it helps determine how much you should be selling in order to break even. This number will also help you forecast just how long it will take for you to earn back your investment.

  • Average Occupancy: This metric tells you how many customers visited your restaurant over a certain period of time. It will help you determine which times of day are most/least popular, and help you find out when you might want to pull the trigger on a new promotion or special offer.

  • Table Turnover Rate: This defines the number of tables turned over a given period of time. You'll want to try to increase your table turnover rate (by decreasing your service times) – as logically speaking, the more people you can serve, the more money you’ll make.

  • Sales Per Head: Sales Per Head is how much money, on average, each patron spends during their sitting. It will help you better understand which time of day is most profitable and what items on your menu (whether it be food or beverages) are most popular. Combined with your table turnover rate, this can also help you forecast sales.

  • Employee Turnover Rate: Unfortunately, employee turnover rates in the foodservice industry are unusually high – and it can cost restaurant managers a lot of money. Keeping a close eye on your employee turnover, and implementing measures to address underlying issues, will help you save on unnecessary hiring & training costs to replace disgruntled employees.

KITCHEN AND INVENTORY KPIs

The kitchen is really the heart and soul of your business. It’s where you can have the biggest impact on profit margins, efficiency, quality and food waste reduction. Here are the 3 key kitchen management KPIs you’ll want to keep in mind:

  • Production Time Per Dish: When it comes to the food preparation, time is your most precious asset. Make sure you know how long it takes to prepare each dish (especially your most and least popular dishes) so that you can consider ways to shorten production time and offer faster service.

  • Food Waste (per food purchased): Food waste is no longer just a financial burden, but is increasingly becoming a sustainability issue, too. Keep track of how much food waste each menu item is producing so that you can optimize your procurement, storage and preparation methods to cut down on waste and increase your profit margins.

  • Inventory Turnover Ratio: Your Inventory Turnover Ratio refers to the number of times your restaurant has sold out its inventory over a given time. This is another important metric for helping you manage your inventory – and making sure you don’t over or under-stock on produce.

CUSTOMER SATISFACTION KPIs

As we all know, the customer is king. And keeping your customers satisfied and coming back for more is what’s going to keep your business afloat in the long run. Here are 2 key things you’ll want to consider when it comes to tracking your customer satisfaction:

  • Customer Retention Rate: This metric will help you understand how loyal your customers are, and whether your patrons are coming back to – or not. Finding new customers is always more expensive than keeping your existing ones, so make sure to implement a loyalty program or incentives to keep them coming back.

  • Online Reviews: What customers say about your business can make or break your reputation. Keep an eye out for different platforms – like Google, Facebook, Tripadvisor and Yelp ­­– to see what your customers are saying about their experiences, and find out how to better improve your menu and service.

 

The data you’ll collect on your KPIs is incredibly valuable; not only for measuring and forecasting your success, but also for helping you understand what areas need improvement in both the short and long run. Use your findings to create an action plan – and then track the impact of your initiatives on your staff, sales performance and customer satisfaction.

Need more resources on food business? 

Food Entrepreneurs: How To Master Restaurant Management

 

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