Understanding KPI Metrics in Restaurant Franchising

Introduction

Measuring success in the restaurant industry is an important task that can help owners, managers, and even staff understand how the business operates and develop the most effective strategies for future growth.

Key performance indicators (KPIs) used in restaurant franchising reflect how well a business is achieving its goals, especially in areas such as food cost, sales growth, and customer satisfaction. Tracking and calculating these metrics is critical when it comes to making good business decisions and evaluating overall performance.

In this article, we’ll explore seven of the best KPI metrics used in restaurant franchising and provide tips on how to track and calculate these metrics.

The price of food %

Definition

Food cost % (also known as cost of goods sold) is the percentage of total sales spent on food or beverage ingredients that are used to prepare a dish. It is calculated by dividing the total cost of ingredients used to make a dish by the total sales of that dish.

Benefits of Tracking

Tracking food cost % is an important metric for franchise restaurants because it helps them understand how much they are spending on food to create a dish. It also helps them identify savings and potential areas to optimize their operations. By regularly tracking food cost, franchise restaurant operators can ensure they are not overspending on ingredients and providing the best value to their customers.

Industry Benchmarks

The average food cost % for franchise restaurants is usually between 25-35%. However, this may vary depending on the type of cuisine, the ingredients used and the price of the dish.

How to calculate

Calculation example

For example, if a franchise restaurant spent on ingredients to create a dish and sold the dish for , the food cost % would be calculated as follows:

Tips and tricks

• Track food costs regularly to make sure you’re not overspending on ingredients.
• Compare your Food Cost % with industry benchmarks to identify areas of potential savings.
• Optimize your operations by efficiently reducing waste and using ingredients.
• Use economy strategies such as buying in bulk and buying in season.

Average check size

Definition

Average check size is a key performance indicator (KPI) that measures the average amount spent by a customer for a single restaurant visit. This metric is important for understanding customer spending habits and restaurant profitability.

Benefits of Tracking

Tracking the size of a restaurant’s average check offers valuable insight into the restaurant’s sales performance. It can be used to measure the effectiveness of marketing strategies, identify customer spending trends, and increase profitability. By understanding the average check size, restaurants can adjust their menus and prices accordingly to optimize sales.

Industry Benchmarks

The size of the average franchise restaurant check varies depending on the type of restaurant. For example, fast food restaurants have an average check size of around .50, while full-service restaurants have an average check size of around .00.

How to calculate

The formula to calculate the size of the average check is:

Calculation example

For example, if a restaurant had total revenue of ,000 and the number of transactions was 10,000, then the average check size would be .00.

Tips and tricks

• Regularly monitor average check size to track customer spending trends.
• Make sure the menu is competitively priced and meets industry benchmarks.
• Encourage customers to purchase add-ons such as drinks or desserts to increase the average check size.
• Analyze data from different days and times to identify peak selling periods.

Service speed

Definition

Speed of service (SOS) is a restaurant KPI that measures the average time it takes for a customer to receive their order. By tracking speed of service, restaurants can gain insight into how quickly they are able to fulfill customer orders and identify areas for improvement.

Benefits of Tracking

• Improves customer satisfaction by reducing wait times.
• Helps identify areas for improvement in the kitchen and the ordering process.
• Ensures orders are filled in a timely manner.

Industry Benchmarks

The industry benchmark for service speed is 5 minutes or less. The goal is to have an average serve speed that is as close to this benchmark as possible.

How to calculate

To calculate service speed, use the following formula:

Calculation example

For example, a restaurant receives 10 orders in an hour. The total time for all these commands to be completed is 40 minutes. The service speed for this restaurant is then:

Tips and Tricks for KPIs

• Train staff to be aware of speed of service and strive to keep it as close to the benchmark as possible.
• Encourage communication between staff to ensure orders are met quickly.
• Regularly analyze data to identify trends and areas that have improvement that need improvement.

Sales growth

Definition

Sales growth measures the rate at which sales increase over a period of time. It is calculated by comparing the sales of the current period to the sales of the previous period. Sales growth is a key performance indicator (KPI) for franchises and restaurants because it shows how the business is performing compared to previous periods.

Benefits of Tracking

Tracking sales growth is an important metric for franchise restaurants because it provides insight into how the business is doing. It can help indicate whether the franchise is meeting its goals and provides an indication of customer demand. Tracking sales growth can also help identify trends and opportunities for improvement.

Industry Benchmarks

The average sales growth rate for franchise restaurants varies by industry. The restaurant industry report revealed that the average sales growth rate for full-service restaurants was 3.7% in 2019. The report also revealed that the average sales growth rate for restaurants quick service was 4.1%.

How to calculate

To calculate sales growth, you’ll need to compare the current period’s sales to the previous period’s sales. You can do this using the following formula:

Calculation example

For example, if a franchise restaurant had sales of 0,000 in the previous period and sales of 0,000 in the current period, sales growth would be calculated as follows:

Tips and Tricks for KPIs

• Track sales growth over a longer period of time to better understand the trend.
• Compare sales growth with industry benchmarks to gauge franchise performance.
• Identify opportunities for improvement by looking for areas where sales growth is lagging.
• Track sales growth on a daily, weekly, and monthly basis to better understand customer demand.

The net profit margin

Definition

Net Profit Margin (NPM) is a KPI that measures a company’s profitability by expressing its net profit as a percentage of its total sales. It is a key metric for understanding a company’s financial health, as well as its ability to generate profits from its operations.

Benefits of Tracking

Tracking the NPM of a franchise restaurant is beneficial as it provides insight into the profitability of the business. It also allows franchisees to compare their performance against industry benchmarks and make informed decisions on how to increase their profits.

Industry Benchmarks

The average net profit margin for franchise restaurants is between 2 and 3%. This varies by franchise type, business size, and location. It is important to note that net profit margins can vary widely depending on the franchise and its operations.

How to calculate

Calculation example

For example, if a franchise restaurant had total sales of 0,000 and net profit of ,000, the NPM would be calculated as follows:

Tips and tricks

• Track NPM regularly to understand how your franchise is performing and to identify opportunities for improvement.
• Compare your NPM to industry benchmarks to understand how your franchise is performing against other franchises.
• Look for ways to increase revenue and reduce costs to improve your NPM.

Customer Satisfaction Score

Definition

Customer Satisfaction Score (CSS) is a metric used to measure customer satisfaction with a restaurant’s services and products. This metric typically combines customer feedback, surveys, and other performance metrics to determine how satisfied customers are with their overall experience.

Benefits of Tracking

Tracking and monitoring customer satisfaction levels can provide invaluable insight into a restaurant’s performance. Monitoring customer satisfaction levels can help restaurants identify areas for improvement and identify customer needs more effectively. Additionally, tracking customer satisfaction can also help a restaurant build a stronger customer base because satisfied customers are more likely to return for future visits.

Industry Benchmarks

The average customer satisfaction score for restaurant franchises is typically between 75-85%. This score can vary based on restaurant type, customer demographics, and other factors. It is important to keep in mind that this score may be different from other industries.

How to calculate

The customer satisfaction score can be calculated by taking the average of customer feedback ratings and surveys. This can be done by taking the average of the ratings given by customers on a scale of 1-5. The formula for calculating CSS is:

Calculation example

For example, if a restaurant had 10 customers and they gave ratings of 3, 4, 5, 2, 4, 5, 4, 2, 4, and 5, the customer satisfaction score would be calculated as follows:

Tips and tricks

• Regularly monitor customer feedback to identify areas for improvement.
• Encourage customers to provide feedback by offering incentives such as discounts or coupons.
• Follow up with customers after their visit to ensure their satisfaction.

Staff retention rate

Definition

Employee retention rate is a metric that measures the percentage of employees who remain in the organization over a period of time. This is an important metric for evaluating a company’s success in retaining team members as it reflects the level of job satisfaction, commitment and loyalty.

Benefits of Tracking

Tracking staff retention rate can provide valuable insight into a franchise restaurant’s performance. It can help identify any issues that could be driving employees away and help inform decisions on how to improve the work environment. Additionally, it can provide an indication of the effectiveness of the organization’s recruitment and training processes.

Industry Benchmarks

The average staff retention rate in the fast food industry is around 65%. However, this rate can vary significantly depending on the size of the restaurant, the type of cuisine it serves, and other factors.

How to calculate

The employee retention rate is calculated by dividing the number of employees who remain in the organization over a period of time by the total number of employees at the start of the period. The formula is:

Calculation example

For example, if a franchise restaurant had 50 employees at the start of the year and 45 employees at the end of the year, the employee retention rate would be:

Tips and tricks

• Tracking employee retention rates can help identify issues that may be driving employees away, such as low pay, lack of advancement opportunities, or a hostile work environment.
• It is important to note that the staff retention rate should not be viewed in isolation, as there may be other factors that affect the rate, such as the availability of jobs in the area.
• The staff retention rate should be monitored regularly as it can be an indicator of the health of the organization and its ability to attract and retain quality employees.

Conclusion

Restaurant franchise KPI metrics have a major role to play in helping owners and managers assess the performance and profitability of their businesses. By tracking and calculating the seven key performance indicators described in this article, owners and managers can better understand the strengths and weaknesses of their business, as well as identify areas for improvement.

By monitoring these metrics over time, franchise owners and managers can develop strong strategies to improve performance and maximize profits for the long-term success of their businesses.