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September 14, 2018 8 Restaurant Metrics You Should Know (+ Free Calculator)

restaurant metrics

Read on for more information about the 8 restaurant metrics you should be monitoring. Then, download our free calculator so you can easily track and measure everything from COGS to Customer Retention Rates, and more!

Free Restaurant Metrics Calculator

The ultimate resource for owners & managers.

4 Restaurant Metrics for Operational Success

1) Cost of Goods Sold

Formula:

Cost of Goods Sold (COGS) = Beginning Inventory + Purchased Inventory – Final Inventory

Restaurant Metrics Reveal:

How Much It Costs to Create Each Food and Drink Item Sold

Let’s be honest. The word COGs isn’t sexy, and it’s not a fancy formula. Still, knowing your cost of goods sold (COGS) is essential for running the next 3 restaurant metrics. So, what are COGS? It’s what you pay your distributor for your food and beverages – and how much you use up over a set period of time.

For accurate COGs, calculate them on a weekly basis – same time, same day. Here are the numbers you need for COGs restaurant metrics:

  • Starting Inventory: This is the value of inventory you have in your physical location on the designated day/time you do the COGs calculation.
  • Purchases: What you bought throughout the week from your distributor.
  • Ending Inventory: The total amount of inventory remaining at week’s end.

If sales are holding steady or even decreasing, yet you see COGs creeping up in your restaurant metrics? That’s a red flag, here’s how to take action:

  • Watch for theft: Knowing COGs could alert you to an employee theft issue. If your distributors aren’t raising rates and you’re not going gangbusters selling tons of food and drinks, the missing link could be stolen goods.
  • Go local: If your distributor is raising prices, think local. Use these 11 sources for buying local ingredients. When produce is in season, it often costs less. Plus, customers are hungry for food grown close to home…
  • Watch your waste: Are your prep chefs chopping up too many veggies that get tossed? Are portions getting bigger? Chat with your kitchen crew if you see your purchased inventory restaurant metrics are on the rise.

Pro Tip!

The latest tech can streamline the time-consuming process of taking inventory. Digital inventory management tools are extra handy when it comes to your bar. Use these 10 reviews of beverage inventory management software to get started.

2) Prime Cost Percentage

Formula:

Step 1: Monthly Labor + Monthly COGS = Prime Cost

Step 2: Prime Cost / Total Monthly Sales = Prime Cost Percentage

Restaurant Metrics Reveal:

How Much You’re Spending on Controllable Expenses

Knowing – and then optimizing – your prime cost ensures your restaurant is a profitable enterprise. Prime cost is a percentage that shows how much of your total monthly sales are dedicated to covering variable expenses…and how much is left over for your gross profit.

Many restaurants think running prime cost once a year is enough, we say no way! Run the prime restaurant metrics calculation monthly. Why wait a year to know if you’re profitable?

Prime cost ignores your fixed costs (rent, utilities, and other restaurant metrics that don’t change much). Instead, prime cost focuses on the two biggest variables you can control to become more profitable: labor and COGs.

Score! You already know your weekly COGs restaurant metrics (just add them up to get a total for the month). What about labor costs? All you need to know for these restaurant metrics is simple addition. Add up these monthly costs:

  • Wages
  • Overtime
  • Bonuses
  • Benefits: Health Insurance
  • Payroll Service
  • Payroll Taxes
  • Training

The last restaurant metrics needed for calculating prime are your total monthly sales. Your POS system should be able to generate that report ASAP. Now you have your 3 building blocks for prime cost. Run the formula, and you’ll get a percentage. But what do the numbers mean?

60%: The Magic Prime Cost

Experts recommend aiming for a 60% prime cost percentage, which means you’ll earn 40% of every dollar as gross profit. However, prime does NOT mean you get to take home $40,000 in gross profits if you turn $100,000 in sales for the month. Fixed costs – such as your rent/mortgage and equipment maintenance – must first be deducted. Then, what is left is your net income.

Ideal Labor Costs

As for labor cost restaurant metrics, Jonathan Deutsch, PhD of Restaurant Express recommends between 25%-35% percent of total sales (about half of your prime costs).

3 Tips for Lowering Labor Costs

The above section on COGs restaurant metrics hooked you up with tips for lowering those numbers. Here’s how to get a handle on labor costs:

  • Digitize Scheduling: Use software that integrates with your digital POS to post staff schedules – as 1 in 3 restaurant and bar owners are doing today according to the National Restaurant Association. 7 Shifts software claims users spend 80% less time scheduling staff and see reduced labor costs of up to 3%.
  • Partner with a Local College or Highschool: Seek students from local culinary programs who are eager to start a career in the biz. There may even be programs that pay their wages – so it’s free labor.
  • Boost Employee Retention: To keep employees happy, you don’t always have to pay them more. Run teambuilding activities or reward them for meeting benchmarks. Skip to #7 on this list of restaurant metrics to calculate employee turnover rate.

Pro Tip!

Work backwards with your restaurant metrics! If you know the net income you want to achieve each month, and your fixed costs are set, you can work on lowering prime costs to increase gross profits – and meet your goal.

3) Food Cost Percentage

Formula:

Cost of Goods Sold (COGS) / Total Sales = Food Cost Percentage

Restaurant Metrics Reveal:

How Much You’re Spending on Raw Ingredients, How Much is Left for Profits

The food cost formula is one of the simplest restaurant metrics to run. That’s good news since it’s critical for determining profitability.

Basically, food cost percentage is the percentage of your total sales that are spent on the actual food or drinks. What’s left over is your gross profit. We’ll be referring to food cost in this section, but it works for beverages, too.

Again, the goal is to lower your food cost percentage so you have more profits. But what’s a good food cost percentage?

Ideal Food Cost Percentage: 25%-35%

Most restaurant experts recommend aiming for anywhere between a 25%-35% food cost. That means 75-65% of your sales are going towards gross profits. Beverage costs should be a bit lower at 20-25%.

Pro Tip!

Don’t forget “extras” when calculating your COGs in these restaurant metrics. It could be the paper wrapping around a burger or garnish.

4) Ideal Menu Price

Formula:

Direct Costs Per Menu Item / Food Cost = Menu Price

Restaurant Metrics Reveal:

How to Price Your Menu Items for Profit

Yes, this will take a little time. You’ll need to calculate what you pay for every ingredient in every menu item. But it’s worth it to run these restaurant metrics if it means thousands of extra dollars in revenue, right? Here’s how to do it.

Step 1) Find out your per-portion cost of each raw ingredient in a menu item.

Many distributors make restaurant metrics easy on you by including the per-portion cost on your invoice. Otherwise, simple math will help you determine it. Let’s use a cheeseburger example. You buy pretzel buns at $20 per bag of 60. Divide $20 by 60 to get a per-burger ingredient cost of 30 cents. Do the same for the ground beef, cheese, and even ketchup and mustard. You’ll get a total cost per burger. For these restaurant metrics, lets say your direct costs add up to $3.75.

Step 2) Divide your total direct costs by your ideal food cost.

Get aggressive! Don’t apply your restaurant’s actual food cost – go a few percentage points lower. For example, if your food cost is 30%, go lower to 28% to add in profits without overcharging guests. Here’s what these restaurant metrics look like in action:

(Cheeseburger Direct Costs $3.75) / (Food Cost .28) = $13.39

Boom! You should sell that gourmet cheeseburger for around $13.39. However, unless you cater to a value-seeking crowd, $13.39 looks kinda tacky. So, round up to $13.50. Then, use this proven trick to increase sales: Don’t include the dollar sign or zero on your menu, according to Cornell University Research. Simply put 13.5 next to your burger.

Pro Tip!

Like other restaurant metrics, you can use this one in reverse to see if your menu prices are in line with your ideal food cost.

Direct Costs Per Menu Item / Menu Price = Food Cost

Marketing Restaurant Metrics

5) Customer Acquisition Cost (CAC)

The Formula:

CAC = Marketing Expenses / Total New Customers Acquired

What the Restaurant Metrics Reveal:

How Much It Costs to Get a New Customer in the Door

Are your promotions working? The customer acquisition cost (CAC) is one way to measure your success.  By dividing the total cost of your marketing expenses by the amount of customers who came in for your promotion, you’ll know how much you spent per customer on your campaign.

For accurate restaurant metrics, ensure your campaigns are trackable. For example, require customers to show their server a digital coupon on their smartphone. Better yet, enter the promotion into your POS so servers can simply check a box to note that an offer was redeemed.

6) Customer Retention Rate:

Formula:

Customer Retention Rate = [(Total Customers at End of Month – Total New Customers Acquired During Month) / Total Customers at Start of Month)] x 100

Restaurant Metrics Reveals:

How Many Customers Are Returning to Business

Now that you got customers through the door, how many are actually staying? Your customer retention rate (CRR) is one of the main restaurant metrics to help you figure that out. You should run the calculation monthly, quarterly, and annually.

Customer retention is a critical marker of success. According research by Frederick Reichheld of Bain & Company, just a 5% increase in customer retention rates can boost profits by 25-95%. And, knowing your CRR restaurant metrics will help you determine how effective your marketing efforts are.

One way to determine your restaurant metrics for customer retention is through a loyalty program. Use these 10 reviews of restaurant loyalty programs to find the best one. Some will even automatically calculate your CRR.

Otherwise, you’ll need to use your POS to calculate how many people you served. Then, require your servers to ask guests “have you dined with us before?” to get a rough number of how many new people are dining with you each month.

Key Performance Indicators (KPIs)

7) Employee Turnover Rate

Formula:

Annual Employee Turnover Percentage =  # of Employees That Left / [(Beginning Number of Employees + Ending Number of Employees) / 2] x 100

Restaurant Metrics Reveal:

If You’re Losing Employees at a High Rate

According to a recent Cornell Hospitality Report, the average cost of replacing one hourly employee is $5,864. The lower your employee turnover rate, the better for your business. The average turnover rate for restaurants is one of the highest for all industries at 70%, according to a 2017 report by the National Restaurant Association.

Your employee turnover rate is also one of the restaurant metrics that can give you additional insight into your operations. If it’s particularly higher than normal during a set period of time, it could be a sign of underlying issues with your restaurant’s management operations or culture.

8) Table Turnover Rate

Formula:

Table Turn Time Per Daypart = Number of Guests Served in Daypart / Number of Seats Available

Restaurant Metrics Reveal:

How Quickly Your Restaurant Turns Tables During Set Periods of Time

Knowing your table turnover means reveals how long your guests dine on average during specific periods of time. Calculating table turnover rates are easy. But to get the value out of these restaurant metrics, compare table turnover rates by daypart, day of the week, and season. If diners are staying too long during certain dayparts, it could be an issue with your waitstaff, a slow kitchen, or patrons who won’t leave (see these 9 tips for dealing with them).

The average restaurant turnover per seat during any daypart is 1.5, according to research by Deloitte and the National Restaurant Association. How do you measure up?

You can’t improve what you can’t measure. So, use these 8 restaurant metrics to take a closer, more calculated look at your business. Once you know where you stand, make a plan to achieve the numbers you want. Cheers to your success – and happy calculating!

 

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