You’ve always strived to create a truly unforgettable dining experience. From crafting delectable dishes to ensuring my guests receive top-notch service, you’re constantly hustling to make my restaurant stand out.
But in an industry as competitive as this one, simply putting in hard work isn’t enough. That’s why you always make it a point to benchmark my restaurant against others in the area.
Benchmarking restaurants will become an integral part of your business strategy. It helps me stay ahead of the curve and ensure that my guests always leave with a smile on their faces.
So if you’re a fellow restaurant owner looking to make a name for yourself in this industry, I highly recommend taking the time to benchmark your restaurant’s performance.
It’s the key to success in this cutthroat business!
- Benchmarking restaurants allows you to compare your restaurant’s performance to industry standards, helping you identify strengths and weaknesses.
- Monitoring front-of-house and back-of-house benchmarks is crucial for comprehensively understanding your restaurant’s performance.
- Regularly reviewing and updating benchmarks enables you to set strategic goals and improve your restaurant operations.
Front-of-house restaurant benchmarks
The front-of-house is where your customers experience the heart of your restaurant. As a restaurant owner, you must ensure that this area operates efficiently and meets industry standards. Let’s dive into some critical front-of-house metrics that you should be monitoring.
1. Revenue per seat
Your revenue per seat is one of the crucial front-of-house metrics representing how much money your restaurant brings in for each seat. The industry average in 2022 per seat is about $27 a seat.
This number will help you determine if your dining room generates enough revenue and whether you should expect customers to spend more or less than the industry average.
2. Table turnover rate
Table turnover rate is the number of times a table is occupied and vacated during a given period, such as a single dinner service. The average restaurant in a single dinner service turns a table about three times.
A high turnover rate indicates that you are serving more customers, which can lead to increased annual sales and customer satisfaction.
However, if your turnover rate is too low, you may need to examine factors such as menu pricing, service quality, or foot traffic to identify areas for improvement.
3. Employee Turnover Ratio
Employee turnover is a significant concern for most restaurants as it can lead to increased labor costs and decreased productivity. Employee turnover is expensive, costing up to $5,864 per employee.
To calculate your employee turnover ratio, divide the number of employees who left your restaurant during a specific time period by the average number of employees during the same period.
A high turnover rate may indicate workplace culture, management style, or compensation structure issues. Addressing these issues can increase staff satisfaction and retention, benefiting your restaurant operations.
Back-of-house restaurant benchmarks
The back-of-house is where the magic happens. It’s where your team prepares delicious meals, manages inventory, and keeps everything running smoothly.
Let’s explore some key back-of-house benchmarks you should be tracking to ensure your restaurant is operating efficiently.
4. Food cost percentage
The food cost percentage is a key performance indicator that measures the total food costs of the ingredients used to make a dish relative to the dish’s selling price. The industry standard for food cost percentage is about 28-35%.
If your food cost % is higher than the industry standard, it’s essential to reevaluate your menu pricing, portion sizes, or ingredient sourcing to increase your profitability.
5. Inventory turnover ratio
The inventory turnover ratio is a critical metric that shows how efficiently your restaurant manages its inventory. The average industry rate is around 5.
A higher ratio indicates that you’re selling inventory quickly, which can help reduce waste and improve cash flow. If your ratio is low, you may need to reassess your inventory management processes, menu offerings, or purchasing strategies to ensure you’re not tying up too much capital in unused inventory.
6. Prime Cost %
Prime cost is the combined cost of your total food sales, beverages, and labor. It’s a crucial metric for determining your restaurant performance. If your prime cost percentage exceeds 60%, it becomes increasingly difficult to profit from your restaurant.
This will give you a percentage that reflects your prime costs. Keeping your prime cost percentage in check is essential for maintaining profitability and ensuring the long-term success of your restaurant.
7. Store Labor %
Store labor percentage measures how much your total sales are spent on labor costs, such as wages and benefits. As a restaurant owner, you should aim for your store labor percentage to be around 29%.
Suppose your store labor percentage is higher than the industry standard. In that case, you may need to reevaluate your staffing levels, scheduling practices, or employee compensation to bring your labor costs under control.
8. Cost of Goods Sold
The cost of Goods Sold (COGS) is the total cost of producing the food and beverages sold at your restaurant. The average COGS should be 30% or less, with 30% for food sales, 15% or less for nonalcoholic drinks, and a cost range of 18% and 40% for liquor, beer, and wine.
Monitoring your COGS can help you identify opportunities to reduce waste, optimize menu pricing, and improve profitability.
9. Profit Margin
Your restaurant’s profit margin is the percentage of your total sales that represents your net profit. The range for restaurant profit margins typically spans anywhere from 0 – 15 percent, but the average restaurant profit margin usually falls between 3 – 5 percent. A higher profit margin indicates that your restaurant is more profitable and financially stable.
10. Sales per square foot
Sales per square foot is a useful measure to assess how efficiently a restaurant is utilizing its space. The metric indicates the revenue generated per square foot of space available.
For full-service restaurants, the break-even point is typically between $150 and $250 per square foot, while counter-service establishments must aim for slightly higher returns, ranging from $200 to $300 per square foot.
This metric can help you identify whether you’re maximizing your restaurant’s potential and provide insights into potential layout improvements or seating adjustments to boost revenue.
Standards of Restaurant Industries
For the restaurant industry, costs are calculated as a percentage of total sales. Here are some standard percentages to keep in mind:
- Wine: 35% to 45%
- Food: 28% to 35%
- Bottled Beer: 24% to 28%
- Liquor: 18% to 20%
- Draft Beer: 15% to 18%
How to Apply Benchmarks to Restaurant Business?
Applying restaurant benchmarks to your business is essential for understanding your restaurant’s performance and making data-driven decisions to improve operations.
Here are 5 steps for applying benchmarks to restaurant management:
1. Identify suitable benchmarks
The first step in applying restaurant benchmarking is identifying the most important restaurant benchmarks relevant to your business, such as food cost percentage, labor costs, and prime costs.
When selecting benchmarks, research industry standards and consider factors like your restaurant type, location, and size.
Understanding the benchmarks most relevant to your restaurant will provide a solid foundation for comparison and improvement.
2. Collect data from your restaurant
Next, gather data on key performance indicators such as total sales, menu item profitability, and employee turnover from your restaurant’s financial records, point-of-sale system, and other sources.
Ensure that the data is accurate, up-to-date, and covers a given period to provide a reliable basis for comparison. Proper data collection is crucial for making informed decisions and setting realistic goals.
3. Compare your performance to benchmarks
Analyze your restaurant’s performance by comparing your collected data to the identified benchmarks. This will help you identify areas where your restaurant excels, such as customer satisfaction or foot traffic, and where improvements can be made, such as operating costs or inventory management.
Comparing your performance to industry averages and other restaurants can provide valuable insights into your restaurant’s strengths and weaknesses.
4. Use benchmarks to set goals
Based on your comparison, set specific, measurable, achievable, relevant, and time-bound (SMART) goals for your restaurant.
These goals should focus on improving areas where your restaurant’s performance falls short of industry benchmarks, such as menu benchmarking or occupancy costs.
Setting goals based on benchmarks can help you make targeted improvements and track your progress over time.
5. Review and update benchmarks regularly
Finally, regularly review your restaurant’s performance against benchmarks and update your goals as needed. This will help you continuously adapt and improve your restaurant business to stay competitive in the ever-changing industry.
Keep an eye on industry trends and standards, as well as the performance of other restaurants, to ensure that your benchmarks remain relevant and up-to-date.
Benchmarking is an essential tool for restaurant owners to measure their performance against industry standards and identify areas for improvement. You can make data-driven decisions that enhance your restaurant’s operations and boost your bottom line by tracking key metrics such as revenue per seat, table turnover rate, and food cost percentage.