When you’re juggling the many aspects of a fast-paced foodservice business, it can feel darn near impossible to take a step back to evaluate how things are going. But, it’s worth your while. By taking a regular look at a few key performance metrics, you can figure out which operational areas you need to optimize and as a result, boost your bottom line. After all, knowledge is power, right?
1. Contribution margin
The contribution margin measures how much profit you’re making on an individual menu item. In other words, it’s the revenue leftover from each dish after the cost of ingredients has been subtracted. Why is this important? Knowing the profitability of each menu item will help you strategically price them. Not only that, but if you’re clear on contribution margins, you can encourage your employees to promote the most profitable dishes. Alternatively, if the profit margin is too narrow on certain items, you can scrap them from your menu entirely and prioritize a more profitable dish.
What’s the formula?
Contribution margin = Selling price – cost of ingredients
2. Average cover (or revenue per seat)
If you want to evaluate the effectiveness of your serving staff, this metric’s for you. The term “cover” refers to one meal, or one customer that is served (presumably these would be one in the same — unless you have a very hungry visitor of course). The average cover measures the average amount per tab a single customer spends at your restaurant. Calculate this number, relay it to your employees, and motivate them to sell more by providing specific sales goals and incentives. Give them concrete suggestions for meeting those goals. For starters, help them improve their familiarity with the menu. Once you do that, you can teach them to be more effective with sales tips like pointing out daily specials or suggesting complementary add-ons.
What’s the formula?
Average cover = Total sales / number of covers
3. Employee turnover rate
Employee turnover costs a pretty penny, and in this labor market, hunting for a replacement is hardly an easy task. Considering the hefty price tag of hiring new employees (a whopping $5,864 to be exact!), it’s important to pay attention to employee turnover rate. This metric indicates the frequency at which employees leave your restaurant over a period of time. What can you do with that information? If your employee turnover rate is higher than what’s expected for the industry, it can reveal underlying issues you can address with hiring, training, management, or your company culture. If shortcomings in these areas are standing in the way of your success, take a look at your retention efforts. From onboarding to management, prioritize the happiness of your employees, so they’re inclined to stay on board.
What’s the formula?
Employee turnover rate = (Employees departed / number of employees) x 100
4. Table turnover rate
As the saying goes, “time is money.” If you’re efficient with your time, you can make more money. What does this have to do with table turnover? The table turnover rate measures the number of tables turned over during a specific time period, which gives you an idea of your staff’s efficiency. If your restaurant’s table turnover rate is slower than you’d like it to be, train your staff to provide quicker service. However, fast service isn’t strictly a matter of speed — it’s about being smart with your time. How? Teach your staff efficiency tricks, such as consolidating table visits (can’t those drinks and apps get delivered together?). Empower them from behind the scenes by investing in high-tech, efficient equipment. Whatever the case, adopt measures to increase the number of guests you’re able to serve — and in turn, put more money in your pocket.
What’s the formula?
Table turnover rate = Number of guests served during a specific period of time / number of seats
5. Time per table turn
Time per table turn measures the average time a table is seated for. If staff aren’t turning over tables fast enough — or they’re turning them too fast — you could be missing out on revenue. Keep this number on your radar so you can train staff on their customer service approach for different scenarios Over the lunch rush, encourage staff to turn tables more quickly, so you can serve more guests. Over the dinner hour, however, you may want to arm your staff with upselling techniques so time per table turn is higher (meaning your customers enjoy a more leisurely dinner, and perhaps indulge in wine and dessert).
What’s the formula?
Your point of sale (POS) system should do the math for you by tracking the time between when a server first inputs an order and when that table cashes out. Using this data, your POS can give you an average time according to breakfast, lunch and dinner.
Get creative — engage employees with clever training.
Keeping an eye on the metrics above will help you train employees more effectively. But to make sure they stay engaged, you’d better keep it interesting too. How? Check out these out-of-the-box training tips.
