Looking for ways to see how your restaurant is performing?
Sometimes, knowing where to start is the most difficult part.
There are so many areas to cover: Are my staff performing at their best? Am I using my space effectively? Is our inventory being managed well?
Without specific things to measure, it’s easy to feel lost.
That's why we're exploring ten essential Key Performance Indicators (KPIs) that capture some of the most important efficiency metrics you need to consider.
Ready to find hidden opportunities and make your restaurant run better than ever?
Let's get started!
First, we have a straightforward but important metric that shows your restaurant's overall financial efficiency.
We're talking about the Gross Profit Margin, which is the percentage of total sales revenue that a restaurant ends up with after accounting for total expenses.
This KPI gives you a clear picture of how much money you're actually making.
Let's take a look at the formula.
Source: Tablein
Revenue refers to the amount of money your restaurant brings in from sales before any expenses are deducted. For this calculation, we also need to figure out our cost of goods sold (COGS), which is calculated as follows:
COGS = Beginning Inventory + Additional Purchases – Ending Inventory
After doing these, you end up with a percentage that shows if you're actually profitable and by how much.
Unfortunately, the restaurant industry is known for having notoriously low profit margins, so every percentage point matters. According to multiple sources, the average figures are between 3% and 5%.
Overall, a healthy gross profit margin can indicate that you're pricing your menu items correctly and managing your costs effectively. You can find many free calculators online to help you with this.
Let's dig a bit deeper into revenue KPIs.
Your Revenue Per Available Seat Hour (RevPASH) measures how much revenue your restaurant generates for each available seat during each hour you're open.
It’s calculated with the next formula.
Source: Tablein
Let's give you an example. Say your restaurant has 50 seats and is open for 10 hours a day. In one day, you generate $25,000 in revenue. Your RevPASH would be:
RevPASH = $25,000 / (50 seats × 10 hours) = $50
As Maxim Tygaly, former hospitality CFO, explains, this figure shows the efficiency of one of your greatest assets—your seats.
Illustration: Tablein / Quote: LinkedIn
RevPASH helps you see if you're efficiently using your seating capacity and how it relates to your revenue.
It can highlight times when you're underutilizing your space or when you might be leaving money on the table.
Monitoring this metric regularly can help you make informed decisions about everything from operating hours, seating arrangements, and even pricing strategy.
Now for a related metric, Sales per Square Foot.
If the previous KPI shows how revenue relates to available seats, this one shows whether you're effectively using your entire available space.
Let's take a look at the calculation.
Source: Tablein
Calculating this metric shows if you're using your restaurant's physical space to generate enough sales.
It's a key indicator of your restaurant's productivity and can help you understand if you're maximizing the potential of your location.
Many factors can affect your sales per square foot, including the following:
Optimizing this metric is important, but it doesn't mean simply stuffing more tables into your space or changing your fine dining establishment into a fast food joint.
Instead, the goal is to use this metric to maximize every square foot without compromising on the quality of your service or the comfort of your guests.
A source of both customer satisfaction and frustration, average table wait time is a key indicator of how efficient your seating process is.
In simple terms, it measures how long guests have to wait from the moment they walk through your door (or check in for their reservation) until they're actually seated at their table.
This metric can typically be measured within your restaurant's point-of-sale (POS) system. You can gather the necessary data by marking the time when guests arrive and when they're seated.
Over a given period, like a week or a month, you can then calculate the average wait time.
Ideally, you want this number to be as low as possible, as most guests are only willing to wait a limited amount of time to be seated.
Illustration: Tablein / Data: Toast
Given this data, it's clear that keeping your table wait time low is crucial.
By continuously monitoring and improving this metric, you ensure guests have a positive experience from the moment they walk through the door.
Average order processing time measures how long it takes to process an order, from the moment it's placed to the moment it’s on the table.
It's a crucial indicator of your restaurant’s efficiency and can significantly impact customer satisfaction, especially in fast-paced dining environments or for takeout and delivery orders.
The calculation is pretty straightforward: you take the total time spent processing all orders within a given period and divide it by the total number of orders.
Source: Tablein
Again, you can track this metric using your POS system if it has this capability, or manually by timing orders during peak hours to get a rough figure.
If you want to go a bit more in-depth and have the means, you can measure the time spent in each of the order processing steps shown below.
Source: Tablein
This detailed breakdown can pinpoint inefficiencies in specific areas.
Is your kitchen backed up?
Is packaging for delivery taking longer than expected?
Even the time it takes to input an order at the POS system is worth considering, which, according to HungerRush, is around 120 seconds on average.
Small improvements in each of these areas can have a big overall impact, so every bit of effort counts.
This KPI measures how many times a table is occupied by different parties during a given period.
It's a very common and useful indicator of overall efficiency, reflecting how quickly you can seat, serve, and flip tables to accommodate new customers.
Let's take a look at the formula.
Source: Tablein
Table turnover rate is usually measured for a specific period, such as lunch or dinner service, or over an entire day.
And while it's useful to compare your rate to industry averages, it's even better to estimate the table turns in your area and see if you can reach this number.
As Jim Laube, founder and CEO of restaurantowner.com, says, this is best done by looking at what your local competition is doing.
Illustration: Tablein / Quote: RRG
By observing your competitors, you can set realistic goals for your own restaurant.
Keep in mind that different types of restaurants will have different ideal turnover rates.
A fine dining establishment might aim for 1-2 turns per night, while a casual eatery could target 4-5 turns.
Improving your table turnover rate can significantly boost your revenue, but it's crucial to balance speed with quality.
Rushing customers to leave can lead to negative experiences, so focus on efficiency without compromising the dining experience.
While speed is essential, it shouldn't come at the expense of accuracy.
This means ensuring that the orders you serve or send out for delivery match exactly what was requested.
Every detail matters, from items and quantities to any special diner requests.
This KPI is measured as a percentage of accurate orders, calculated as follows.
Source: Tablein
You can define an "accurate order" however you like, but we recommend that you be strict!
Even small errors, like missing a side of sauce or forgetting to fulfill a special request can chip away at the customer experience.
Also, sending out orders with small mistakes might not seem like a big deal, but it's a recipe for disaster.
Source: Tablein
First off, nobody wants to receive the wrong item or wait for a replacement dish when they're already hungry.
This is particularly important for delivery, where a mistake means the guest has to wait even longer for a correct meal.
And here are some numbers to illustrate this point.
A survey by Circuit revealed that out of 1,066 Americans who received a wrong delivery order, 52% requested a refund, and 40% ordered from a different place next time.
As you can see, being imprecise not only hurts your reputation but also contributes to food waste and extra costs.
Ultimately, getting it right the first time saves you time and money, and keeps customers happy.
Now, let's talk about inventory turnover.
In essence, it shows how quickly your inventory is sold or used and replaced. First, you need to calculate your average inventory value:
Average Inventory Value = (Beginning Inventory + Ending Inventory) / 2
Then, use the following formula.
Source: Tablein
Let's say your COGS for the month was $15,000, and your average inventory value was $3,750. This means your inventory turnover ratio would be 4.
Now, according to Sculpture Hospitality, the ideal average inventory turnover ratio for restaurants is between 4 and 8 times per month.
So, if your ratio is lower than that, it could mean you are buying too many ingredients or that your sales are slowing down.
In either case, it's a red flag that contributes to the massive amount of food waste generated by the food service industry annually—costing billions of dollars.
Illustration: Tablein / Data: Refed
On the other hand, if your ratio is higher, it means you're selling your inventory quickly.
In this other situation, be careful not to reach too high inventory turnover levels, as you could run out of ingredients during busy periods.
Ultimately, aim for an inventory turnover that keeps your food fresh and your shelves stocked while minimizing waste.
Now, let's turn our attention to your employees and check your Employee Turnover Rate.
This metric tells you the percentage of employees who leave your restaurant within a specific period, whether due to resignation, termination, or other reasons.
It's a crucial indicator of staff satisfaction and your restaurant's overall work environment.
To calculate your employee turnover rate for a given period, use this formula.
Source: Tablein
The average number of employees for the period is calculated by adding the number of employees at the beginning of the period to the number at the end, then dividing by two.
This KPI is a great indicator of how your business is doing in terms of staff retention.
If your numbers are low, it means you're successfully keeping your employees engaged and satisfied, which can lead to better service, increased efficiency, and lower training costs.
If that’s your case, you’d count as a minority, because unfortunately, restaurants have high employee turnover rates.
While the situation has recently improved, according to the US Bureau of Labor Statistics, it's still a significant figure.
As illustrated below, employee turnover in the US restaurant industry went from 83% to 75% from 2022 to 2023.
Illustration: Tablein / Data: US BLS
Retaining staff is important for several reasons:
But sometimes, high turnover is not entirely the restaurant's fault.
The nature of the industry, with its often irregular hours and high-stress environment, contributes to these numbers.
However, what you can do is provide the best conditions possible and monitor this metric to see how you’re doing.
We have another staff-related KPI, Total Sales by Server.
This metric directly measures the performance of your servers and can provide insights into ways to improve your staff's effectiveness.
This is calculated in a straightforward way, as shown below.
Source: Tablein
This can be a valuable indicator of overall workforce efficiency, giving you an overall sense of how much revenue your servers are generating on average.
If the numbers are consistently low, consider following the advice of restaurant coach and best-selling author Donald Burns, who wrote the following for Medium:
Invest in regular staff training sessions to enhance their skills and knowledge. Teach them the art of upselling, suggestive selling, and the ability to anticipate customer needs.
Remember, while this metric is valuable, it shouldn't be the only measure of a server's performance.
Factors like customer satisfaction, teamwork, and adherence to restaurant policies are also crucial.
Use this KPI as part of a broader performance evaluation strategy to get a detailed view of your staff's effectiveness and to guide your training and development efforts.
Alright, we've explored ten top KPIs that can reveal just how efficiently your restaurant is running.
From understanding your financial health to optimizing staff performance and guest experiences, these metrics touch on various aspects of your business.
You don't need to start tracking everything at once. It can be overwhelming.
Start small, pick a couple of KPIs that align with your most pressing concerns.
Are you worried about staff turnover? Focus on that first. Need to boost revenue? Start tracking table turnover rate and gross profit.
By regularly monitoring these numbers, you'll gain a clearer picture of your restaurant's strengths and weaknesses, helping you make data-driven decisions that lead to lasting improvement.