Restaurant metrics give insight into the little details that make your business your business; what is working, and what isn’t. When running a small business every piece of data is valuable, and so is the analytics system you choose. Standard practice has seen a back room filled with orders and invoices, piles of manually logged inventories. But with the technological boom in analytics, things have changed in the world of restaurant metrics. Let’s take a look at different metrics; their importance, how to calculate them, and state of the art alternatives.
What are the important metrics for a restaurant?
The broadest umbrella of restaurant metrics can be broken down into three categories: operational, performance, and customer. These three categories recognize that your business function relies on the smooth operation of the day to day expenses, such as food cost and labor; revenue generated, and client retention. Keeping track of these things take a myriad of reports and accounting practices. Let’s take a look at a few main players.
1. Inventory Turnover Ratio
Inventory turnover ratio allows you to track your highest performing products and your lowest. This allows you insight into your inventory as a whole and affects your purchasing. By only purchasing the highest performing products you can cut down on waste in the kitchen, in your stock rooms and your accounts.
2. Food Cost Percentage
Your food cost percentage allows you to asses if an item on the menu is profitable or not. This will fluctuate as your suppliers are subject to change their prices. Whether it’s seasonal or there’s a shortage of a particular product on the suppliers' end, a high selling product may become non-profitable if the price spikes.
3. Cost of Goods Sold
The cost of goods sold breaks down how much goes into the raw materials to produce your menu. Tracking your bottom line and stacking it against sales, the cost of goods sold serves as a base for almost every equation when it comes to your business.
4. Actual Vs. Theoretical Cost
Your actual vs. theoretical cost shows you your variances. A positive variance may result in your reports are showing loss without waste or sales. Your usage is likely coming from the kitchen. Double-check that all recipes are logged correctly and adjust as necessary for accurate inventory. A negative variance works in the reverse. If you are finding a negative variance in your reporting your first stop should be your recipes, also. Negative variances can also indicate minor issues in over portioning, or more serious issues, like theft. Variances, on a small scale, are to be expected. Tracking them allows security in your business and protects your bottom line as well as your restaurant’s integrity.
5. Break-Even Point
The break-even point is the holy grail of your business. It sets the standard for how your restaurant should be performing to match your investment. The break-even point is also crucial when it comes to investors. How to calculate restaurant performance metrics? Calculating your restaurant performance metrics is an intricate web of paperwork and filing. While the equations themselves can be simple, it takes meticulous systems to keep track of inventory, orders, and spending, manually. Let’s take a look at some basic, yet vital, metrics that you can calculate yourself.
6. Inventory Turnover Ratio
To calculate your inventory turnover ratio you will need to add your beginning inventory with your ending inventory, divided by your cost of goods stored, then divide your answer by two. This means keeping close track of your inventory as well as the fluctuation that can come with the cost of goods stored.
7. Cost of Goods Sold
To establish your cost of goods sold take your starting inventory, add it with your purchases of the same period, and subtract the ending inventory. With the cost of goods sold you’re heavily relying on accurate purchases. When you’re using a manual system you are always at risk of simply overlooking something that can throw off your whole equation at the end of the month.
8. Break-Even Point
As your break-even point covers your entire business, you’ll be looking at more than just your kitchen for this one. You will need to calculate your total fixed cost, meaning the total of all your expenses that stay the same each month. Then you need to determine your variables. This refers to your costs that do change, like inventory. To do that you take your average sales, divided by the average cost of sales. Now that you have your fixed and your variable costs, you subtract your variable cost by 1. Divide your fixed cost by the result of your subtraction, and that will be your break-even point.
9. Average Food Cost/ Food Cost Percentage
To calculate your average food cost you will need your start of month inventory, end of month inventory, a complete list of purchases made throughout the month, total sales. Add your total purchases with your start of month inventory, then subtract the end of month inventory. To find your percentage, divide your average food cost by the monthly food sales.
10. Actual Vs. Theoretical Cost
Opening inventory + purchases – closing inventory = actual usage. Sales + waste events + production events = variance quantity A positive variance means a discrepancy in your usage report. For example, your report shows that you opened inventory with 15 units of buns and then you order 5 more units. You have 20 for the day. At the end of the day when you run your reports, you have 13 units left, indicating that you’ve used 7 units, but your theoretical sales are showing usage of 23 units. Simply put: You should have 3 units left, and instead you have 13. So, your positive variance is 10 units.
The more reports you generate the more informed your projections can be, the more smoothly your restaurant will run. The MarketMan dashboard updates reports on all your important metrics throughout the day. Not only is the dashboard generating reports, but you will receive real-time alerts right from the app.
From menu profitability report to price change reports, you will be able to stay up to date with the behind-the-scenes of your business from your phone. Once you’ve set up MarketMan, it can track each item of inventory, every recipe and every product sold. You can even log your storerooms as you would find them in real life, making stock take simple. Because MarketMan is also connected with your suppliers, it’s able to inform you of any changes, and automatically adjust the implications of the changes to your menu. This way you can buy the best of your products, at the lowest costs. You can also filter all your reports to see detailed breakdowns of your items, with their cost percentage and variables. Once you’ve taken a look at the data, you can make your purchases directly through the app. With orders and invoices being produced directly through the app, MarketMan is also on top of your purchasing, suppliers, and open orders report. This means cutting out the binders, and the endless stacks of invoices. You will be completely paperless, and completely in control. Conclusion: Your business’ metrics are important. By understanding your restaurant down to the last teaspoon of salt, MarketMan can provide you with in-depth, streamlined reports. With Marketman’s intuitive dashboard you’re able to navigate through your reports with the swipe of a finger. As MarketMan works silently in the background, you can have peace of mind knowing that you’re covering all your variables and setting your pars; Meaning, your business stays well-stocked, while your profit margin grows. Ready for your personal report generator? Sign up for a demo today!