Restaurant Calculations: Financial Metrics Every Restaurateur Should Track to Outperform the Competition
In the highly competitive foodservice industry, where restaurant profit margins are often razor-thin, tracking your progress is vital to driving growth. Understanding key restaurant calculations will help you assess your performance and plan your menu, labor needs, operating hours and marketing campaigns. Since the pandemic accelerated the digitization of business, many restaurants are swimming with data. So, which metrics should you track to truly understand your performance? Read on to learn what to measure and how to interpret the data.
Comparable Restaurant Sales
Comparable sales data tells you how much your restaurant sales changed year over year. This restaurant calculation is important because it helps you measure revenue, which you can use to determine everything from how much to pay employees to your ability to make future investments. Once you understand how one unit is performing year over year, you can compare it to the rest of the market. Tracking comparable sales allows you to know whether your performance is consistent with the rest of the market, or if your restaurant is an outlier among the competition.
To calculate comparable sales, take your net sales figures for the two years you want to compare, and subtract by one:
(restaurant sales in the current period/restaurant sales in the base period) – 1
Typically, growth should be at about 1-2% per year, but those are pre-pandemic numbers. According to our data, as of July 2021, sales are up by 2% on average. Since 2020 completely turned the industry on its head, you can’t make comparisons like you used to. As you benchmark your growth against the competition and within your own business, use this guide to understand How to Look at Your Restaurant Data in the Wake of Coronavirus.
Once you’ve tracked your restaurant sales data, you can make changes to improve it. We recommend you look at these numbers in the form of a growth rate. To drive your growth rate higher, implement marketing and social media tactics that will help you win over new guests or find ways to get current guests to come in more frequently.
Comparable Restaurant Foot traffic
Comparable traffic is the measurement of how many people are coming in the door. This is an important restaurant calculation because it helps you add context to your comparable sales. When you compare your results to the benchmark, you can see the size of your market share and how many guests are coming to your restaurant versus your competition. If you have access to competitor data, you can also segment your competition based on geography, restaurant, type or cuisine. Drilling down allows you to see how well you’re truly doing. Are you getting an amount of traffic that only seems satisfactory, when in reality you’re the least populated pizza place in the area?
To calculate comparable traffic, take the volume of traffic in the base period, divide it by the volume of traffic in the current period, and subtract one:
(volume of traffic in the base period/volume of traffic in the current period) – 1
How to improve restaurant foot traffic
To improve your restaurant foot traffic, there are a number of strategies you can implement.
For starters, you can expand your sales channels. For example, if your restaurant is very busy at dinner, expand to off-premise. With delivery and drive-thru, you can serve those customers you have to turn away because your dining area is too packed. You may even have enough off-premise traffic to consider opening a ghost kitchen.
Another solution is to maximize staffing by only opening at peak times. Restaurants that can limit their operating hours are often able to provide a high-quality, focused menu and increase sales with each visit. They’re getting as many sales as they can per customer and per employee. This also allows them to maximize sales per labor hours, which is key to improving restaurant profit margins. To learn how you can make changes like these to drive restaurant sales, consider using a guest intelligence tool that will help you eliminate guesswork. Learn what your guests are saying, so you can address their pain points and improve overall service.
Average check is the measurement of how much guests spend when they dine with you. It’s important to track this restaurant calculation because it tells you how much revenue you’re generating per customer. With this data, you can measure whether changes, like new menu items, increase how much guests spend.
To calculate average check value, take the total number of sales in a given period, and divide that by the total number of customers in the same time frame:
(number of sales/number of customers)
How to Increase Average Check Value
To increase average check values, find ways to encourage patrons to spend more on higher-priced entrees or add non-entree choices like drinks, appetizers or alcohol. Many restaurants were able to offset some of their losses at the height of the pandemic by selling cocktails to go. Some lawmakers are considering whether to make off-premise alcohol sales legal permanently, potentially providing a new revenue stream for operators.
You can also increase average check value by raising prices. This is always a tricky calculation because it’s hard to know what tolerance customers will have for higher prices. In our Q3 2021 analysis, we found that restaurants were able to increase average check value by raising prices. Operators who have a clear understanding of their restaurant financials will be best positioned to improve the value of each customer without reaching the point of diminishing returns.
How BBI’s Financial Intelligence Helps You Track the Most Important Restaurant Calculations
With so much data flowing through your business, it’s important to use tools that automate data collection and make it easy for you to understand the story the data tells. Top-performing restaurants rely on BBI’s Financial Intelligence solution to track the metrics that matter most to their business. High-volume restaurants use Financial Intelligence to benchmark their performance across the industry, their competition or geographic area.
Track Key Restaurant Performance Metrics
BBI’s Financial Intelligence solution allows you to track sales, traffic, sales per labor hour, PPA, food, beverage, dine-in, to-go, catering, banquet, drive-thru, delivery and daypart data. It gives you context around the raw numbers. You can gauge whether your restaurant is doing particularly well, or if it’s actually the market doing well overall. And with that context, you can make better decisions.
Unlike many other restaurant data providers, we provide market comparison data that allows you to access competitive benchmarking. You can compare your performance against other units, other regions, segments or cuisines. It’s completely customizable to your needs.
For example, you can see the average check in your locations in San Francisco versus Dallas, and make comparisons based on cost of living, labor, etc. Understanding the cost differences in various cities can help you refine your pricing and increase average restaurant revenue.
How We Collect Restaurant Data
We’re able to gather restaurant data through direct client relationships. We collect our clients’ weekly sales and traffic data to build the largest and most comprehensive set of restaurant calculations in the marketplace. Our database contains the six main segments of the restaurant industry: quick service, family dining, fast casual, casual dining, upscale/polished casual and fine dining.
Security is paramount, and we never allow our clients to see one another’s company-level data. In the Financial Intelligence tool, all competitor data is aggregated and presented in benchmark format. This allows our clients to gain the insights they need without giving up sensitive financial information.
How One Customer Is Using Financial Intelligence to Understand Restaurant Financials
Razoo’s, a cajun-style restaurant with locations throughout Texas, used BBI Financial Intelligence to adjust its operating hours when shelter-in-place orders went into effect due to COVID. “Part of what the tool allows us to see is that we’re actually doing really well in sales for the lunch, afternoon and dinner dayparts, but we’re losing that one hour at the end of the day in the late night day part,” says Jacques Barjon, Director of Financial Planning & Analysis.
Barjon and his team decided to close their doors one hour earlier and have kept those hours in place throughout the pandemic. Now, as they determine how they’ll move forward through the recovery, they plan to use Financial Intelligence to help them determine which operating hours will allow them to maximize staffing and operating costs.
Top Restaurant Performance Metrics We’re Watching
We track industry-wide data to provide insights on how restaurants are performing and which issues may be cause for concern. As of mid-2021, restaurant sales performance is surging, with comp sales up by 8.10% compared to 2019. Average check value is also up, driven primarily by menu price increases.
However, traffic growth has stagnated, hovering around -4% for the past several months. With the delta variant of the coronavirus causing concern in the fall of 2021, we’ll continue to see how it impacts restaurant sales, traffic and growth. Keep up with restaurant industry averages with the Restaurant Industry Performance Pulse, a weekly tracker of the latest, most relevant trends to watch.
Restaurant Calculations FAQs
How to Increase Restaurant Sales?
There are a number of ways to drive higher sales. You can make adjustments to pricing, menu items or operating hours. The challenge is cutting through the guesswork to find which change (or combination of changes) will actually lead to growth. Collecting your restaurant financials, along with intelligence on your guests and your workforce will help you better understand which changes will really move the needle.
How Much Do Restaurants Make?
Average restaurant earnings can depend on a number of factors, from the type of cuisine you serve, to the areas where you operate. According to a survey of 350 owners, the median revenue for a restaurant is $1,125,000 per year, or $325 per square foot.
However, to really understand how much a restaurant makes, you need to understand restaurant financial ratios. Average sales numbers may look high, but the cost of food, labor, building costs, packaging, etc. may be eating into profit margins.
How to Get More Customers in My Restaurant?
To drive higher restaurant foot traffic, look at your guest intelligence data. Identify which menu items or amenities they like best. Invest more time and resources into improving and marketing those aspects of your restaurant. You can also encourage your current customers to review your restaurant on review sites and share their visit on social media. Word-of-mouth marketing is an excellent way to drive growth without spending a lot of money.
How Much Does it Cost to Run a Restaurant?
A Restaurant Owner’s survey found that the median cost to open a restaurant is $375,500. Ongoing operating costs will depend on location, the cuisine offered as well as the cost of labor and supplies. Marketing costs, utilities, and other miscellaneous expenses, such as equipment repairs and upgrades, must be factored in as well.
What is the Average Profit Margin For a Restaurant?
The average profit margin in the restaurant industry is 3-5%. Understanding what drives profit margins is critical to sustaining a restaurant business. Slight fluctuations in the cost of food and supplies can quickly cut into what is an already thin margin for many operators.
To unlock higher profits, it’s critical to have access to up-to-date, granular data. Being able to track your restaurant calculations can help you avoid costly trial-and-error. To learn more about how to get access to real-time data on your restaurant portfolio, as well as competitive intelligence, request a demo for BBI’s Financial Intelligence solution.
Are you tracking the right financial metrics?
Speak with a product expert to learn how Black Box Financial Intelligence™ can help you impact your overall restaurant performance and unlock access to the most comprehensive dataset in the restaurant industry.
What do I get with my Black Box Financial Intelligence subscription?
- 2-year growth rate metrics published weekly during coronavirus recovery for more accurate performance benchmarking
- Measure performance across four interactive dashboards to create endless possibilities for drilling down into the data.
- Track sales and traffic performance at the industry level all the way down to the unit level to identify outliers
- Benchmark your brand against six segments and the entire industry through weekly interactive reports with drill-down capability
- View your metrics and compare with competitors down to the daypart to understand where your brand has a sales gap
- Metrics include sales, traffic, sales per labor hour, PPA, food, beverage, dine-in, to-go, catering, banquet, drive-thru, delivery & daypart
- Access to the Market Share Report, the largest data set available for the restaurant industry, including market share, total sales growth, unit growth and average weekly sales at the national, regional, state and DMA level
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