What Are Restaurant Finances?
Mastering Restaurant Finances: Key Metrics for Success
Tracking restaurant finances is one of the best ways restaurants have to monitor their success.
And the idea that it is important to track metrics that have a significant bearing on your restaurant revenue may seem a bit straightforward. But it is not only important because this data can be used to ensure that your restaurant keeps generating positive restaurant revenue, but also because it can be used to compare your financial performance with the rest of the restaurant industry’s financial statistics. This gives you a more contextualized understanding of your restaurant revenue.
Some of these restaurant industry financials include restaurant sales, restaurant traffic, PPA (per person average), sales per labor hour, daypart, beverage versus food sales, and on and off-premise sales. It is important in analyzing these restaurant financials to pay particular attention to the composition of your sales, and that of your restaurant traffic. These two large categories together have the most bearing on restaurant finances.
guestXM can track all of these with its financial intelligence offering, which is where all the trends cited below have come from. Read on to learn more about which positions in a restaurant company should be concerned about restaurant finances, as well as the current state of restaurant industry finances to make sure your restaurant isn’t falling behind.
Who Should Be Tracking Restaurant Financials?
Restaurant CFOs are the primary persons who should be concerned with restaurant finances. However, since the success of your restaurant revenue determines the overall success of your restaurant, there are a lot of positions that should be paying attention to these numbers. Therefore, CEOs (especially those of smaller companies) should be tracking these metrics, as should restaurant operators and CMOs, the latter particularly when TV or LTOs are launched.
These metrics can help CMOs determine the efficacy of more short-term marketing efforts and promotions, and they can help restaurant CFOs and CEOs find out if their restaurant is competitive in its vertical.
The list below contains many of these metrics, as well as the recent overall trends that we have seen in our tracking. Read on for insights on the state of the industry.
Latest Trends in Restaurant Finances
Increased Check Growth, Decreased Restaurant Traffic
Over the last few months, we have seen check growth continue to climb as restaurant traffic and value sentiment continue to fall.
Now, this correlation might seem counterintuitive, so here’s an explanation: As supply chain issues and lower restaurant traffic data numbers persist, restaurants have to drive up costs, leading average checks to increase. Unfortunately, as the average check increases, guest sentiment has to follow for this pattern to be sustainable. Higher costs have to match the value consumers think they’re getting. Unfortunately, our guest intelligence tool shows that value sentiment is also falling, meaning restaurants are having to work harder to get guests in the door and keep them coming back.
Slight Increase in Restaurant Sales
But don’t think that this increase in restaurant sales spells long-term good news for the restaurant industry.
Restaurant sales are up mainly because of the increase in restaurant prices, which has caused overall sales to increase. Thus, going to restaurants is more expensive, causing people to go less, but spend more when they’re there, which statistically might appear to be a slight overall increase in restaurant traffic when in reality, the increase in sales does not indicate more customers coming through the door.
Increase in Off-Premise Restaurant Sales
Since the beginning of COVID, we have seen a huge jump in to-go sales for restaurants across the board. Restaurants are now starting to allocate budgets towards hiring individuals to explicitly handle to-go orders.
This choice brings up an interesting fundamental in restaurant finances: The idea that the restaurant revenue a section brings in should be proportionately balanced with the amount of money a restaurant puts into it.
If off-premise dining is generating a lot of restaurant revenue, consider adding a position to give an adequate amount of your labor force into making that popular experience the most efficient and effective it could be.
Increased Wage Growth
The restaurant industry is already one in which it is notoriously hard to work, and COVID-19 served as a catalyst for many people who had been wanting to leave the industry for quite some time. Due to this “Great Resignation”, we have seen a rapid increase in wage growth to encourage people to apply for, take, and keep jobs in the restaurant industry.
Unfortunately, other industries often offer more than the entities in the restaurant industry, making employee retention even harder. This has caused restaurants to start offering things like sign-on bonuses, referral bonuses, and, of course, overall higher wages in an attempt to get employees in the door.
Alcohol Sales are Down
When you consider the recent favor off-premise sales have been receiving, the decline in alcohol sales makes sense: alcohol sales usually happen inside the walls of a restaurant. Therefore, since the beginning of the decline in in-person dining, alcohol sales have also been going down.
However, those restaurants in the top quartile of performance are not experiencing the same drop in alcohol sales as those below them. This could be because their guest sentiment is higher, and therefore more individuals are dining in with them when they do decide to eat at a restaurant.
About BBI’s Financial Intelligence Tool
The restaurant industry is experiencing a very unique time right now, a time in which the old pricing models and industry trends need not apply. In times like these, the most valuable resource in which one can invest is data.
These trends certainly have a face value, but it is more important to be able to benchmark your restaurant’s numbers with that of your specific vertical and the competitors therein. BBI’s technology helps restaurants compare their success with that of competitors in their specific regions, states, and DMAs to see how they are stacking up.
More specifically, BBI allows you to look at your underperforming locations to see if market conditions for your segment are driving the declines. You can compare your check average and growth to others in your area to see if you are overpricing your items, or if your check is growing more rapidly. Get direct visibility into things like daypart, food sales, beverage sales, off-premise, and more.