Financial Metrics Every Restaurateur Should Track

In the highly competitive food service 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.

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 (YoY). 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 YoY, 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

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 several 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-premises. With delivery and drive-through, you can serve those customers you have to turn away because your dining area is too packed. You may even have enough off-premises 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 employee. This also allows them to maximize sales per labor hour, which is key to improving restaurant profit margins.

To learn how you can make changes like these to drive restaurant sales, consider using a feedback and sentiment analysis 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

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 the 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 guests to spend more on higher-priced entrees or add non-entree choices like drinks, appetizers, or alcohol.

You can also increase the 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. Our research has shown that restaurant brands that increased menu prices in the past few quarters benefitted from short-term financial gains. However, for three years, restaurants with the lowest check growth had better traffic, guest sentiment, and customer retention.

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 GuestXM 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 GuestXM’s Market Intelligence solution to track the metrics that matter most to their business. High-volume restaurants use Market Intelligence to benchmark their performance across the industry, their competition, or geographic area.

Track Key Restaurant Performance Metrics

GuestXM’s Financial Intelligence solution allows you to track sales, traffic, sales per labor hour, per person average (PPA), food, beverage, dine-in, to-go, catering, banquet, drive-through, delivery, and daypart data. It gives you context around the raw numbers. You can gauge whether your restaurant is doing particularly well or whether it’s 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

Based in Houston, Texas, Willie’s Grill & Icehouse, a fast-casual restaurant concept operating 17 restaurants across Central Texas, used GuestXM’s Financial Intelligence solution to find efficiencies throughout their operations as their team prepped for new store growth and LTOs.

They were facing a couple of challenges, including understanding how Willie’s compares to the competition, managing multiple areas of the business while keeping a balance of their teams’ digital activities, and not having the right tools for sales and traffic data.

For example, Willie’s realized they were putting too much energy and focus on digital activities, while other areas of the business required more attention. “We had team members investing time, effort, and energy into monitoring digital stats. The information would be piecemealed together after hours spent digging in one online channel after another. Our sales and traffic data was compiled with a pencil and a calculator,” says Marty Wadsworth, Willie’s VP of Marketing.

By removing the manual administrative work, Willie’s was able to reshape their workforce, investments, and resources. These improvements helped Willie’s gain the output and benefit of having an additional headcount without the additional labor hours.

Results:

• Willie’s can set attainable benchmark goals, and their team can monitor progress.

• Insights are shared with every department and member of their team.

• Streamlined data has allowed Willie’s to better monitor the overall health of the brand.

• With more cohesive data, they’ve become more proactive in their approach to addressing the health of their employees and businesses.

Read the full case study here.

Top Restaurant Performance Metrics We’re Watching

We track industry-wide data to provide insights into how restaurants are performing and which issues may be cause for concern.

Same-store sales growth was 2.8% for the industry in July, down 0.8 percentage points compared to the previous month’s YoY growth.

Same-store traffic growth was -2.6%, a deceleration of 0.4 percentage points compared to June. One of the biggest concerns for chain restaurants continues to be the sustained traffic erosion. YoY same-store traffic growth has now been negative during 15 of the last 17 months.

Average guest check growth was only 5.8% YoY in July, the lowest it has been in the last three months and the second lowest since February of 2021. More modest price increases, as well as guests moderating their spending when they eat out, are providing less of a lift for sales this year but are providing some aid for traffic growth to beat expectations this year.

Restaurant FAQs

How Do I Increase Restaurant Sales?

There are several 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 lead to growth. Collecting your restaurant financials, along with intelligence on your guests and your workforce will help you better understand which changes will move the needle.

How Much Do Restaurants Make?

Average restaurant earnings can depend on several factors, from the type of cuisine you serve to the areas where you operate. According to a Toast survey, the average monthly revenue for a new restaurant that’s less than 12 months old is $111,860.70.

However, to understand how much a restaurant makes, you need to understand the restaurant’s 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 visits 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% to 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 GuestXM’s Financial Intelligence solution.