Do you know the vital statistics of your restaurant operation? If your boss happened to ask you to provide a big picture overview of your restaurant operation, would you be able to cover the most important metrics of your operation?.
Restaurant Performance Snapshot
Your restaurant operation is affected by many key elements which I call the Profit Triggers. These triggers impact your restaurant performance in a big way. In other words, these profit triggers contribute to your restaurant revenues, profits and related indices in a major way.
This blog post will look at four major categories of performance indicators for your restaurant operation which you must absolutely be on top of. A Restaurant Performance Snapshot format is also provided which you can download and customize for your needs.
The four major categories of performance indicators for your restaurant operation are:
- Performance
- Revenues and Profitability
- Statistics
- Forecasts
Performance
Performance is the first major category for your restaurant operation. It refers to how your restaurant fared compared to the market in which you compete or operate. It begins with knowing the revenue share of your restaurant versus the market. In short, this is knowing who your competition is.
Why is knowing about the competition so important?
If you operate in a particular competitive set, it is evident that decisions that you take on pricing, quality, presentation, products and services will impact not just your results but also that of the the competitive set. So, knowing where you stand versus your competition is key.
Performance can be seen from the point of view of market segments of your restaurant outlets and the catering operation. Generically, the catering is the most profitable operation in the food and beverage business. Results can be tracked both from a revenue perspective as well as covers served which indicates volume.
See below Restaurant Performance Snapshot for the elements of the performance category.
Revenues and Profitability
Revenues are the foundation on which any restaurant (or for that matter any business) operation rests. Understanding your revenue behavior from the perspective of actuals, budgets, last year allow you to make comparisons of business results and indicating where you stand. Knowing whether you are growing or not in your revenues over time is critical to sustain the operation itself.
If revenues are the foundation of your restaurant operation, then profitability is the very reason for survival and earning a good return on investment for your owners. Profitability is what sustains the restaurant operation and injects vital cash flow to run the business.
It is often said in the hospitality industry that if there is no top line, there is no bottom line too. Owners are constantly looking for sustainable profits to continue running the restaurant operation.
In measuring profitability, knowing how your food costs, labor costs move is critical to know. These are the costs which actually dictate what profits you are able to retain from the revenues you have earned.
See below Restaurant Performance Snapshot for the elements of the performance category.
Statistics
While performance versus competition and revenues and profits are major categories,knowing the price and volume elements of related performance indices is critical.
Here is where knowing how much of your restaurant results is coming from the occupancy of the hotel (for a restaurant operation within a hotel), how much of your guest patronage is in-house and how much non-resident, knowing what your overall average check is are indicators that allow you to take decisions in the right direction in the pursuit of budgets and targets.
Most times, the direction in which the statistics are headed can clearly point to what is happening to actual revenues and profits. So, keep a sharp eye out for indications of drop in volume or growth from these elements.
See attached Restaurant Performance Snapshot for the elements of the performance category.
Forecasts
While the measurement of revenues and profits during the current month and year-to-date is important, however, depending upon the month of the year you are presently in,knowing the big picture for the entire year is crucial.
For example, if you are in the month of March 2015, knowing what happened to your performance during March and year-to-date for three months is important.
However, you must also know what your forecast for the entire year is indicating. In a way, you are using three months actuals and projecting nine months of forecasts which completes the picture for the full year performance.
Forecasts need to be measured, actioned upon and monitored both for revenues and profits.
See attached Restaurant Performance Snapshot for the elements of the performance category.
Conclusion
Your restaurant is a complex business operation. Keeping it on a path of revenue and profit growth is key to survival and competing in the environment you are in.
If you are on top of the elements shown in the attached Restaurant Performance Snapshot and measure and monitor the indicators, you should be able to run a healthy, growth oriented restaurant operation.
Attachment
The Restaurant Performance Snapshot attached is a Microsoft Excel file that can be downloaded and edited to customize to your unique needs. However, it is important to keep the major four categories intact so that you get a comprehensive picture of your restaurant operation. Data inside the attached snapshot can be imported from your management reporting system or can be manually keyed in. The attached format is applicable for a single restaurant or for the total food and beverage operation of the hotel, in case your restaurant is part of a hotel operation.
Restaurant Performance Snapshot - Click here.
More of this kind of analysis and reporting is available in the full fledged Restaurant Profits A La Carte online course written exclusively for Directors of Food and Beverage and Executive Chefs about which you can learn here.
S Lakshmi Narasimhan is the Founder of Ignite Insight LLC a New York City based consultancy, which specializes in Group Executive Training, Coaching and Consulting.
Prior to founding his company, Mr. Narasimhan was the Vice President Finance of an award winning Hong Kong headquartered luxury hotel chain - Shangri-La Hotels & Resorts. He has more than 25 years of experience in the hospitality industry (14 in a senior corporate level) and has held diverse portfolios from a hotel Financial Controller to a group level Human Resources position, head of Corporate Internal Audit and head of Corporate Financial Systems. His career is epitomized by new and challenging roles.
Mr. Narasimhan has designed and developed a series of 2-Day Finance Courses titled “Optimizing Hotel Profits,” “Restaurant Profits A La Carte” and so on for non-financial managers in the hospitality industry, which he delivers personally. The unique aspects of the course presentations are: jargon free, simplified financial concepts, use of visual teaching methods through color, shapes and movement to reinforce and cement learning, practical exercises in budgeting and financial analysis and many more.
Mr. Narasimhan runs an online financial academy called Cloud Academy " Master Numbers without a Degree. Visit www.elearningcloudacademy.com for details on the courses that are offered. These courses are self-paced, easy to understand in an inter-active, blended learning environment.
Mr. Narasimhan teaches Hospitality Finance, Business Development, Financial Management courses during the Spring and Fall semesters as an adjunct faculty member at the New York University, School of Professional Studies, Tisch Center for Hospitality and Tourism. Mr. Narasimhan can be contacted at 201-253 5000 (US Cell), narasimhan@ignite-insight.biz or at LinkedIn www.linkedin.com/in/slakshminarasimhan
