17 Essential Restaurant Metrics Every Owner Should Know

Running a restaurant is not just about great food and excellent service—it’s also about keeping a keen eye on your finances and performance metrics. Understanding and monitoring key restaurant metrics can help your management team make informed decisions, improve your profitability, and ensure your restaurant’s long-term success.

Let’s dive into some common restaurant metrics every restaurant owner should know.

Revenue Metrics

Sales Revenue

Sales Revenue measures the total income generated from food and beverage sales. Calculate sales revenue by adding up all sales receipts over a specific period. Sales revenue reflects your restaurant’s ability to attract and serve customers, serving as a foundation for many other financial calculations. To manage this effectively, track daily, weekly, and monthly sales to identify trends and peak times, using this data to optimize staffing and inventory levels.

Average Check Size

Average check size measures the average amount spent by customers per visit. Calculate this metric by dividing Total Sales Revenue by Number of Customers. Increasing the average check size can significantly boost your revenue without the need for more customers. Upsell high-margin items, introduce specials, and create combo deals to increase the average check size.

Cost-Related Metrics

Cost of Goods Sold (COGS)

Cost of Goods Sold, or COGS, measures the direct costs of producing the food and beverages sold by your restaurant, and directly impacts your gross profit. Calculate COGS by adding the beginning inventory and purchases, then subtracting the ending inventory. By keeping COGS low, you can increase your gross profit margin. Manage COGS by negotiating better prices with suppliers, minimizing waste, and regularly updating your menu to focus on high-margin items. Learn more tips for reducing COGS in this article.

Labor Cost Percentage

Your labor cost percentage measures the portion of revenue spent on staff wages and benefits, and is calculated by dividing Total Labor Costs by Total Sales Revenue, then multiplying by 100. Labor costs are one of the largest expenses in the restaurant industry. Keeping this percentage in check is crucial for maintaining profitability. Check out this article to learn how to effectively manage labor costs.

Food Cost Percentage

Food cost percentage measures the percentage of sales revenue spent on food ingredients. Calculate this metric by dividing Total Food Costs by Total Sales Revenue, then multiplying by 100. Keeping food cost percentage low is crucial for maintaining a healthy profit margin. Monitor food waste, portion sizes, and ingredient costs to keep food costs in check.

Beverage Cost Percentage

Beverage cost percentage measures the percentage of sales revenue spent on beverages. Calculate this percentage by dividing Total Beverage Costs by Total Beverage Sales Revenue, then multiplying by 100. Similar to food cost percentage, controlling beverage costs helps maintain overall profitability. Implement strict inventory controls and promote high-margin drinks.

Profitability Metrics

Gross Profit

The profit made after deducting the cost of goods sold from sales revenue is your gross profit. Gross profit indicates how well your restaurant is performing in terms of generating profit from its core operations. A higher gross profit margin means more money is available to cover other expenses. To manage gross profit, focus on increasing sales and reducing COGS.

Net Profit Margin

Net profit margin shows the overall profitability of your restaurant by measuring the percentage of revenue that remains after all expenses are paid. Divide your Net Profit by Total Sales Revenue, then multiply by 100 to calculate your net profit margin. It’s a clear indicator of your ability to generate profit after covering all costs.

Break-Even Point

The break-even point measures the sales volume at which total revenues equal total expenses. Calculate your break-even point by dividing Fixed Costs by (Sales Price per Unit – Variable Cost per Unit). Knowing this number helps you understand the minimum performance required to avoid losses. It’s critical for setting sales targets. Regularly calculate your break-even point to understand how much you need to sell to cover costs.

Cash Flow

Cash flow measures the net amount of cash being transferred into and out of your restaurant. It is calculated by subtracting total cash outflows from total cash inflows over a specific period. Positive cash flow indicates that your restaurant is generating enough cash to maintain operations, invest in growth, and meet obligations. Monitor cash flow regularly to ensure you have enough liquidity to cover expenses and handle emergencies.

Burn Rate

Burn Rate is the rate at which your restaurant is spending its cash reserves, and is crucial for assessing how long your restaurant can continue to operate without additional funding. Divide the total cash expenditures by the number of months over which the expenditures occurred to calculate burn rate. A high rate indicates that your restaurant is spending cash quickly, which may not be sustainable in the long term. To manage burn rate, closely monitor expenses, look for ways to reduce costs, and focus on increasing revenue.

Efficiency Metrics

Prime Cost

Prime cost is the sum of COGS and labor costs. It is calculated by adding COGS and Total Labor Costs. Prime cost is a key indicator of operational efficiency. A lower prime cost means better control over your two largest expenses. Aim to keep prime costs below 60% of total sales to ensure profitability.

Operating Expenses

Operating expenses measure the costs required to run your restaurant, excluding COGS and labor. It is calculated by summing all operating expenses (rent, utilities, marketing, etc.). Keeping these costs under control is essential for the overall financial health of your restaurant. Regularly review and negotiate contracts, and look for areas to cut unnecessary expenses.

Inventory Turnover Ratio

The inventory turnover ratio measures how quickly inventory is used or sold over a period. It is calculated by dividing COGS by Average Inventory. A higher inventory turnover ratio means you’re managing inventory efficiently, reducing the risk of spoilage and waste. Keep inventory lean, order frequently, and avoid overstocking to reduce waste and spoilage. Check out this article to learn how to effectively manage your inventory.

Customer Metrics

Customer Acquisition Cost (CAC)

Your Customer Acquisition Cost (CAC) measures the cost of acquiring a new customer. Measure your CAC by dividing Total Marketing and Sales Costs by the Number of New Customers Acquired. Understanding CAC helps you assess the effectiveness of your marketing strategies and optimize spending to focus on retaining existing customers.

Customer Retention Rate

The customer retention rate measures the percentage of customers who return to your restaurant over a period. Calculate this rate by dividing the Number of Returning Customers by the Total Number of Customers, then multiplying by 100. High customer retention indicates customer satisfaction and loyalty, which are critical for sustainable growth. Enhance customer loyalty programs, improve service quality, and engage with customers through personalized marketing.

Table Turnover Rate

The table turnover rate measures how often tables are occupied by new customers during a specific period. It is calculated by dividing the Number of Customers Served by the Number of Seats. A higher table turnover rate indicates efficient use of your seating capacity, leading to higher sales. Streamline service processes to increase table turnover without compromising customer experience.

In summary, understanding and managing these restaurant metrics is crucial for the success of your business. Regularly review these metrics, make data-driven decisions, and continuously look for ways to improve your operations. By doing so, you’ll be well on your way to running a profitable and sustainable restaurant business.