20 Restaurant Financial Metrics to Master This Year
As a restaurant owner, it's crucial to have a deep understanding of your financial performance. This includes not just your overall profit, but also various financial metrics that can provide insight into different aspects of your business. By tracking these metrics, you can make informed decisions to improve your financial health and achieve long-term success.
Here are 20 financial metrics that every restaurant owner should be aware of:
- Revenue: This is the total amount of money a restaurant brings in through sales of food and drinks. It's important to track revenue to see if your sales are increasing or decreasing over time. When you track your revenue trends you can start to develop ideas on why revenue might be going up or down, then take actions to increase the ups, and decrease the downs.
- Cost of goods sold (COGS): This is the total cost of ingredients and supplies used to prepare and serve the restaurant's menu items. By keeping an eye on COGS, you can ensure that you're not overspending on ingredients and supplies, which can eat into your profit margin. There are lots of ways COGS can get out of control, which is why tools like Dashy Dash are great for helping you easily find opportunities to reduce COGS. In fact, Dashy Dash Insights automatically categorizes and analyzes your spend for you for free.
- Gross profit: This is the difference between revenue and COGS. It's a good indicator of how much profit you're making from your menu items, before taking into account operating expenses. The key here is calculating gross profit per plate. How much are you charging for each specific menu item, and how much are you spending in COGS to prepare that menu item. Get gross profit right first, then worry about your other expenses.
- Gross profit margin: This is the percentage of revenue that is left after COGS have been subtracted. A high gross profit margin means that you're able to generate a lot of profit from your menu items, while a low margin could indicate that you're not pricing your menu items appropriately or that your COGS are too high.
- Operating expenses: These are the costs of running a restaurant, including rent, utilities, labor, marketing, and other expenses. It's important to keep these expenses under control to maximize profit.
- Operating income: This is the profit a restaurant makes after subtracting operating expenses from gross profit. It's a good measure of the overall efficiency of a restaurant.
- Net income: This is the profit a restaurant makes after subtracting all expenses, including taxes, from revenue. It's the bottom line of a restaurant's financial performance.
- Customer acquisition cost: This is the cost of acquiring new customers through marketing and advertising efforts. It's important to keep this cost as low as possible to maximize the return on your marketing investments.
- Customer lifetime value: This is the estimated amount of money a customer will spend at a restaurant over the course of their relationship with the business. Knowing this can help you understand the value of each customer and make informed decisions about marketing and customer retention efforts.
- Average transaction value: This is the average amount of money spent per purchase by a customer. Tracking this metric can help you understand how much money each customer is spending and identify opportunities to increase average transaction values.
- Average check size: This is the average amount of money spent per table or per person. It's important to track this metric to ensure that you're maximizing revenue from each table or customer.
- Revenue per available seat: This is the amount of money generated for each seat in the restaurant. It's a good measure of how efficiently you're using your seating capacity.
- Revenue per employee: This is the amount of money generated per employee. It's a good indicator of how efficiently your staff is working and can help you identify opportunities for improvement.
- Labor cost percentage: This is the percentage of total revenue that is spent on labor. A high labor cost percentage means you may be over staffed, or that you aren’t generating enough revenue to cover the way you staff your business. A typical labor percentage for a restaurant is between 20-30% of revenue.
- Food cost percentage: the percentage of total revenue that is spent on ingredients and supplies. Generally, you do not want this percentage to be above 30% of revenue
- Alcohol cost percentage: the percentage of total alcohol revenue that is spent on purchasing alcohol (this is also called a “pour” cost). Most bars and restaurants try to keep pour costs at between 18-24% with a target of 20%.
- Prime cost: This is a combination of labor and COGS (food costs, alcohol cost, paper cost, and other material costs directly related to making a meal). Labor and COGS are the two biggest costs associated with running a restaurant, so they deserve close attention. You should aim to keep prime costs under 60%.
- Rent as a percentage of revenue: the percentage of total revenue that is spent on rent.
- Marketing and advertising expenses as a percentage of revenue: the percentage of total revenue that is spent on marketing and advertising efforts.
- Profit margin: the percentage of total revenue that is profit after all expenses have been subtracted.
Knowing your metrics is a great place to start when you want to improve the financial performance of your restaurant, but the number one reason restaurant owners don't stay on top of their finances is lack of time. Dashy Dash is an easy and free tool for getting on top of your expenses. The basic features of Dashy Dash are free for restaurants and help you automatically and quickly understand where you money is going, which of your supplies are changing prices, and uncover the fair prices for the supplies you buy.
About Dashy Dash
Dashy Dash helps restaurants, restaurant groups, and chains of all types control supply costs with less work.
With Dashy Dash restaurants can manage invoices, track product price histories, and drill down into expense categories. We help restaurants...
- Automatically catch rising prices before they spin out of control
- Benchmark prices for supplies against those paid by similar restaurants and bars
- Easily find alternative products and suppliers in their area
- Capture credits by automatically auditing invoices for errors