In the fast-paced and ever-evolving world of the restaurant industry, understanding key performance benchmarks is essential for staying competitive and driving growth. Benchmarks provide valuable insights into how your restaurant is performing compared to industry standards and help you make data-driven decisions that improve operations, increase profitability, and enhance the overall guest experience.
In this blog, we’ll break down some of the most important restaurant industry benchmarks you should be aware of, how to track them, and why they matter for the success of your restaurant.
What Are Restaurant Industry Benchmarks?
Restaurant industry benchmarks are standard metrics that restaurants use to measure performance across various aspects of their operations. These benchmarks can be related to financial performance, customer satisfaction, operational efficiency, and employee productivity. By comparing your restaurant’s performance against these benchmarks, you can identify areas for improvement, set realistic goals, and ensure that your business is on the right track.
Key Restaurant Industry Benchmarks You Should Track
Food Cost Percentage
- What it is: This benchmark measures the proportion of revenue that goes toward the cost of food. It’s calculated by dividing the total food cost by total food sales and multiplying by 100.
- Why it matters: Maintaining a healthy food cost percentage is crucial for profitability. According to industry averages, food cost percentages typically range from 28% to 35%, though it varies based on your restaurant type and location. A high food cost percentage could indicate inefficiencies or waste, while a low one could signal that quality is being compromised.
- How to improve it: Regularly track inventory, use portion control, optimize menu pricing, and negotiate with suppliers to get the best prices.
Labor Cost Percentage
- What it is: This is the percentage of your restaurant’s revenue that is spent on employee wages, including salaries, tips, and benefits. It's calculated by dividing total labor costs by total sales.
- Why it matters: Labor costs are one of the largest expenses in a restaurant. Industry standards suggest that labor costs should typically fall between 20% and 30% of total sales, but this can vary based on the concept of the restaurant (e.g., fast-casual vs. fine dining).
- How to improve it: Optimise staff scheduling based on demand, cross-train employees, and monitor labor laws and overtime to ensure efficiency.Average Check Size
- What it is: This metric calculates the average amount of money customers spend per visit. You can determine this by dividing total sales by the number of customers served during a specific period.
- Why it matters: Tracking average check size helps you understand customer spending behavior and can be used to assess the effectiveness of your pricing strategy and upselling techniques.
- How to improve it: Encourage upselling by training staff to suggest appetizers, drinks, or desserts. Offering promotions and bundles can also increase check size.
Table Turnover Rate
- What it is: This benchmark measures how many times a table is occupied during a given period (usually a shift or day). It’s calculated by dividing the total number of covers (customers) by the number of tables available.
- Why it matters: Table turnover rate is crucial for maximizing revenue during peak times. High turnover means more customers are being served, which can directly lead to higher sales and profits.
- How to improve it: Streamline operations, reduce wait times, and ensure quick service without compromising quality. Efficient table management systems can help optimize this metric.Customer Satisfaction (CSAT)
- What it is: This benchmark measures how satisfied your customers are with their experience at your restaurant. It can be gauged through surveys, online reviews, or direct feedback.
- Why it matters: A satisfied customer is more likely to return and recommend your restaurant to others, which drives revenue growth and brand reputation.
- How to improve it: Focus on delivering excellent customer service, providing quality food, and ensuring a clean and inviting atmosphere. Use feedback to continuously improve operations.
Revenue per Available Seat Hour (RevPASH)
- What it is: RevPASH measures how much revenue each seat generates during a specific time period (typically an hour). It's calculated by dividing total revenue by the number of available seat hours.
- Why it matters: RevPASH is a powerful indicator of how efficiently your restaurant is utilizing its seating capacity. A higher RevPASH means you're maximizing the potential of your dining room.
- How to improve it: Optimise seating arrangements, improve reservations management, and implement pricing strategies that drive higher demand during slower periods.
Restaurant Profit Margin
- What it is: This is the percentage of revenue that becomes profit after all expenses (including food costs, labor, and overhead) are deducted. The ideal profit margin varies depending on the type of restaurant, but for most establishments, the industry average is around 5-10%.
- Why it matters: Profit margin is a key indicator of your restaurant’s overall financial health. If margins are too low, you may be overspending in certain areas or failing to generate enough revenue.
- How to improve it: Focus on reducing waste, optimizing labor, and controlling food costs. Increasing your average check size and improving customer retention can also help boost margins.
Inventory Turnover Rate
- What it is: This benchmark tracks how often your restaurant sells and replenishes inventory over a certain period. It's calculated by dividing the cost of goods sold (COGS) by the average inventory.
- Why it matters: A higher inventory turnover rate indicates that you are efficiently managing stock, reducing the risk of food spoilage, and keeping costs in check.
- How to improve it: Track inventory regularly, optimize ordering schedules, and use inventory management software to ensure you are ordering the right amounts of stock at the right time.
How to Use Benchmarks to Improve Your Restaurant’s Performance
- Regular Monitoring: Track key benchmarks regularly (daily, weekly, or monthly) to spot trends early and adjust strategies as needed.
- Set Goals: Use industry benchmarks to set realistic goals for your restaurant. For example, if your food cost percentage is above the benchmark, aim to reduce it by a specific percentage.
- Benchmark Against Competitors: Compare your performance against local competitors or similar restaurants in your niche to assess where you stand in the market.
- Make Data-Driven Decisions: Use your benchmarks as a guide to make informed decisions about pricing, staffing, menu adjustments, and marketing efforts.
Conclusion: Why Restaurant Benchmarks Matter
Restaurant industry benchmarks provide invaluable insights that can help you understand where your business stands and where improvements are needed. By monitoring these key metrics, you can optimize your operations, enhance customer satisfaction, and boost your bottom line.
However, achieving success requires more than just hitting benchmarks. You need to continuously analyze your performance, stay ahead of industry trends, and make strategic adjustments to keep your restaurant running smoothly and profitably.
Use these benchmarks as a tool for improvement, and you'll be on your way to creating a restaurant that not only meets industry standards but exceeds them.
