How Do Restaurants Measure Productivity? (Here's How You Do It)
Restaurant success is a fine line, and according to industry average five-year failure rates of 80%, not everyone can walk it.
No amount of planning can guarantee restaurant success. The most common way to achieve certainty in a volatile market is to understand restaurant productivity and what those indicators mean in terms of future prospects.
The best way to measure productivity in your restaurant is to use a point-of-sale solution such as Toast, Square, or Upserve to track daily sales volume, labor percentage, and product mix (which items are the most popular.)
Continue reading for more detailed information on how to do this.
What Do We Mean By Productivity? Common Types
Source: Inc.com
Measuring productivity in the restaurant world is the ratio between the output volume (staff operations and resources used) and the volume of inputs (revenue).
Tracking daily sales volume, labor percentage, and product mix (which items are the most popular) is a good place to start when tracking restaurant productivity.
Another good source of metrics is online reviews, particularly Google and Yelp. These data points alone can tell a restaurant operator most of what they need to know. Add in food costs and you’ll have a pretty good view of your restaurant’s health.
There are other ways to categorize your restaurant’s productivity, though.
Common Types of Productivity
In large part, the specifics of productivity are almost uniquely determined by pre-set KPIs that are individual to each restaurant in turn. That said, there are some commonly used types of restaurant productivity that, generally speaking, the vast majority of restaurant owners could benefit from considering in some form or at some stage. These include:
Partial-factor productivity: A standard definition of productivity that only considers one type of data, like labor, capital, or energy. Individual elements of restaurant productivity can be easily related to specific processes like labor-based hours.
Multifactor productivity: Multifactor productivity considers both labor and capital in determining output. These factors are then compared directly (usually by division) to see if there are any visible or relevant productivity correlations or declines.
Total factor productivity: Total factor productivity is determined by taking all resources used in the production of goods and services and dividing them by output. This gives a broad overview of a restaurant's prospects and highlights areas for future partial-factor analysis.
Beginner Ways To Measure Productivity
Use a point of sale solution such as Toast, Square, or Upserve. They provide most of the analytics necessary to gauge productivity. Add in a food-costing software like Restaurant365 to really see the whole picture.
The areas you should focus on and track are as follows:
1. Sales
If you don't understand your sales, your restaurant is doomed to fail. A restaurant's sales-based factors can indicate correct budgets or necessary spending cuts, such as over expenditure in the kitchen or staffing affordability. Luckily, this is an easy enough thing to get on top of, and includes relatively simple budget measurements such as:
Gross profit: Subtracting total sales by cost of goods sold (CoGS) reveals how much money your restaurant is making.
Break-even point: Dividing your total fixed costs by your total sales/variable costs reveals the break-even point of sales required for you to make back an investment.
2. Employee Turnover
Restaurants have high employee turnover rates, with fast-food restaurants having the highest at 144%. Restaurant owners can calculate this metric by dividing the number of employees who leave by the average number of employees during the same period. With this knowledge, turnover percentages can be used to highlight underlying issues (e.g. higher turnover on certain shifts) and average costs.
3. Customer Retention
Customer retention is one of the best ways to save money, especially when you consider that retention costs up to five times less than acquisition. Understanding customer retention rates by period, menu item, and staffing arrangement can help restaurant owners improve overall productivity.
Restaurant owners should calculate the total number of customers at the end of each period, then subtract the total number of new customers acquired during that period (best determined through the use of mobile apps, discount codes, etc.). By dividing that number by the number of customers from the start of the same period, you can see how many customers return and why.
Advanced Ways to Measure Productivity
Restaurant365, Galley, and Blanket are just a few of the services that can help a restaurant gain a better understanding of metrics like efficiency, cost of goods sold, and worker productivity, as well as food safety!
While simple productivity measurements are a great way for new restaurants to get going, true success and the growth potential also rely on more advanced focuses that track productivity and overtime. Partial-factor productivity especially relies on measurements like the following.
1. Cost of Goods Sold (CoGS)
CoGS calculations are used to calculate contribution margins for restaurants, which compare money spent vs. profitability on each menu item, which we briefly mentioned when discussing sales. Food cost percentages can be used to calculate detailed contribution margins and help stock leaner inventories and spend wisely. Adding opening inventory to product cost and ending inventory, then dividing by sales during the same period, yields this result.
2. Server Benchmarks
With 7 in 10 customers spending more money in restaurants that offer great service, server benchmarks that indicate server strengths, weaknesses, and training priorities are another fundamental for productivity. Restaurant owners can best determine the productivity of their existing team members by calculating things like:
Per-person averages: Calculating a server's per-person average earnings is an important way to track their sales volume and thus their strengths and weaknesses. Divide total server sales by total guests served to get this figure.
Server errors per guest: Recurring server errors can reveal incompatible hires, unhappy team members, and training priorities. This figure is obtained by dividing the total number of server errors by the total number of items placed into your system during specified periods.
3. Average Occupancy
Average occupancy metrics show how many customers visit your restaurant over time. This productivity indicator can then be used to better understand peak periods that require more staffing, as well as weekly sales fluctuations.
Restaurant owners must divide the number of occupied tables by the total number of tables, then multiply by 100 to obtain the average occupancy percentage.
Measuring Productivity Means Making Your Life Easier
In general, restaurant owners looking at basic and advanced productivity have one goal in mind: to simplify and maximize operations.
Getting this right requires understanding the most effective and actionable productivity measurements, as well as the data collection methods that enable this. This typically necessitates complex software running at peak performance to ensure long-term productivity calculations.
With 24-hour technical support to help you avoid downtime on your most critical pieces of software, our team at Science On Call can play an important role in helping you understand, and approach, productivity in a way that will quickly see your restaurant's productivity soar.
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