Finding out where to focus on your restaurant business is essential. However, we believe that some key performance indicators (KPIs) are worth more attention.

You cannot identify the “silver bullet” of the ultimate restaurant success. So, what are the most important KPIs for restaurants? 

Let’s see what experts have to say about it.

Cash Flow

The restaurant’s cash flow may be thought of as the money coming in and going out of the business. It boils down to the amount of money you have on hand. To be considered positive, cash inflows must surpass cash outflows over an extended period.

Cash Flow = Cash Input – Cash Output

Straits Restaurant owner Chris Yeo believes that if he doesn’t keep an eye on his financial flow, he’ll realize afterward that he’s in a hole and can’t get out.

COGS

COGS, or “Cost of Goods Sold,” is used to describe the total cost of all food and beverage products sold to customers. It requires a precise The cost of goods sold (COGS) is an essential indicator of a restaurant’s profitability since it frequently represents the most significant outlay.

COGS = Starting Inventory + Purchased Inventory – Final Inventory 

Managing food expenditures is impossible until you know what they are, says John Nessel from Restaurant Resource Group. But, unfortunately, if you don’t keep track of your inventory discrepancies, you won’t know what they are.

Prime Cost

Some strategists advise you to initially focus on reducing costs to enhance profitability rather than finding new methods to generate more money overall. For example, the traditional way of calculating the cost of running a restaurant is to use “Prime Cost,” a specific line item on the P&L statement.

The Prime Cost is the sum of the total cost of goods sold plus the labor cost.

“Every week, all of the most lucrative restaurants I have dealt with monitor their prime expenses.” According to Jim Laube, founder of RestaurantOwner.com, “They don’t wait around until their monthly or four-week P & L is produced to find out what occurred.”

As a result of their efforts in creating a weekly report, their bottom lines are rewarded nicely. 

RevPASH

RevPASH is an acronym that stands for Revenue Per Available Seat Hour. RevPASH, developed by Cornell University’s Sheryl E. Kimes, is used to optimize labor scheduling, organize food procurement, and enhance table turn times.

RevPASH = Total revenue ÷ available seats x opening hours 

Ryan Croson at Vanee believes RevPASH is a valuable statistic because it utilizes time and restaurant capacity. 

Returning Visitors or Recurring Customers

The strength of a restaurant is directly proportional to the number of repeat customers it has. All the other indicators, according to some, are meaningless if the client experience is subpar. 

It may be helpful to compare the cost of obtaining new customers to retaining current ones to determine a company’s performance.

Yearly Retention Rate = Total Customers at the End of the Year – New Customers acquired during that Year ÷ Number of Customers at the Start of the Year.

Adam Witmer, a business expert, has the story of a restaurant that went out of business after a few years of focusing on upselling and “squeezing” consumers. 

When the restaurant went down in performance, they didn’t take the time to think about the most critical part of the process: “..keeping customers loyal to their brand,” he adds.

Finding the data for calculating the retention rate is the most challenging part of the process. To keep track of previous customers, look at solutions that include customer relationship management (CRM) capabilities.

Takeaway

Restaurant KPIs will help determine how closely the performance is to your restaurant’s corresponding objective. These measurements are used to see if you are meeting your goal or if any areas need improvement. In conclusion, when you know your objectives and understand the various metrics, you can determine which KPIs are most appropriate to meet your business goals.

Want more restaurant tips? Check out my blog on what restaurant branding elements to use to build equity.