In the restaurant industry, there is no shortage of responsibilities assigned to restaurant owners and managers. For this reason, having the right management strategy is crucial to the success of any restaurant. Responsibilities range from hiring (to firing), ordering inventory, bookkeeping, and staff scheduling to only name a few. But when it comes to performance metrics, what should a good manager look for?
Employee Turnover Rate
According to the National Restaurant Association, the restaurant industry on average has a higher turnover rate than most other industries. But a high turnover rate can often times create additional challenges for management.
It takes time to hire and train new staff, especially in a fast paced industry when there are other larger issues to deal with daily. There is also a risk of not being able to maintain a high level of customer service due to a less experienced staff.
It’s important to hold on to staff with great customer service skills because no matter how amazing the food is, poor service can diminish a restaurant’s reputation in the same way that a poor attitude can. Even with a high turnover rate for the industry, there are still some strategies that may help keep quality employees at the job longer.
More times than not, when employees choose to quite it because they feel underpaid, over worked, unappreciated, or have found a better growth opportunity. Minimizing the chances you will loose a great employee while maintaining the balance of weeding out the less-than-stellar ones can be a challenge.
Try these ideas to decrease staff turnover at your restaurant:
- Reward employees for great performance; provide bonuses, good parking, better shifts or sections.
- Provide good training and career opportunities for employees to advance their careers or even turn a job into a career!
- Listen to your employees. Experienced members in both the back of house and front of house can be a huge asset to your bottom line. Don’t run yourself ragged listening to each and every comment but be on the lookout for employees with great insight on how to expedite operations or improve workflow.
Percentage of Repeat Customers
Repeat customers are very important. It shows that they like your business. It could be the amazing customer service, the food, or maybe even the ambiance- either way they want to keep coming back for more.
According to RestaurantEngine.com the majority of profit is made through repeat customers and we all know it is cheaper to retain existing customers then to bring in a new customer. In fact one of the many benefits of repeat customers is word of mouth. They tend to be the best form of free advertisement. Happy customers love to spread the word to their friends and word of mouth goes a long way.
A company called Gourmet Marketing offers a few tips on how to retain customers such as; engaging in personal contact with customers, communicating regularly through technology like social media, newsletters, or rewards programs, and making sure not to focus on new customers at the expense of regulars. By following a few of these tips you will be able to keep satisfied customers coming back to dine with you time and time again.
According to the U.S. Chamber of Commerce an estimated 75% of employees steal from their employers. In the restaurant industry situations such as servers doing no-sale ring-ups and cash refunds or staff consuming food without it being a shift meal can really cut into your profits. Installing video integrated with POS systems can be a fairly simple solution to this problem and gives the employer the ability to act quickly. By taking a proactive approach to loss prevention profits can greatly improve.
Profits, Costs & Pricing
There are quite a few things that affect profits. One of the first places to start is food cost Food cost measures the amount of money it takes to make a certain food item compared to the sale price of the dish. It’s is important to calculate the food cost to know how much an item should be priced at for their customers in order to make the ideal profit.
To calculate food costs and revenue use the following steps:
- Calculate cost per ounce of unprepared food in recipe.
- Calculate your ounce per serving of uncooked product.
- Multiple your cost per ounce by the ounces of uncooked product to get your cost per serving.
For example if you pay $1.60 per pound of ground beef to make your burgers. You are paying about $0.10 an ounce for the ground beef alone. If your recipe for hamburgers calls for 18 pounds of ground beef, 1 cup of breadcrumbs, and seasoning which makes 96 hamburger patties. You should calculate the cost of all of those in order to get your final cost per serving.
For the sake of simplicity, let’s just say your hamburger is just ground beef, no seasoning or anything else and you make a 3 ounce patty. And your bun and toppings calculate out to $0.95 cents of costs.
- Ground Beef = $1.60 per pound or $0.10 per ounce
- Hamburger Patty = 3 ounces uncooked
- 1 Hamburger Patty Cost = 3 ounces uncooked by $0.10 per ounce = $0.30 per patty
- Hamburger + Bun + Toppings = $0.30 per patty + $0.95 for bun and topping = Cost of $1.25 per burger
At $1.25 per hamburger you can serve to your guest you now know the very minimum you should charge to break even on food cost alone. How do you move from the hamburger costing $1.25 in food material to what price to put on your menu so you can make some money?
There are a few more steps.
You may hear the combination of cost of goods or food sold, labor hours, and salaries referred to as “Prime Costs”. This is generally a term used to describe product cost of a product and excludes costs such as marketing expenses, delivery, insurance, benefits, liquor costs, licensing fees and more.
Generally you want to add the labor hours) to the food cost to get the prime cost.
Let’s say it takes the prep cook, who makes $9.50 a hour, 1 hour to prep the recipe of hamburgers from early. That’s 1 labor hour. If you had a cook, making $13 a hour, that got to stand on the line and cook and plate only burgers (don’t laugh to hard, because we all know that would never happen on a real line) for 1 hour and was able to cook all 96 burgers you have 1 more labor hour to add. The counter server that serves your customers makes $7.50 over the course of the hour as well.
To calculate the prime cost of those 96 cooked and plated burgers you would do the following:
(96 x cost $1.25 per burger) + $9.50 for prep cook labor + $13 for line cook +$7.50 for the counter server = $150 prime cost for that batch of burgers = $1.56 per burger in prime cost.
Now you know for sure you need to charge more than $1.56 to pay for the cost of food and staff plus still make some revenue.
That revenue will in turn pay insurance, facility and maintenance costs you should build into your menu pricing with extra padding on top of the prime cost. This includes indirect employee’s salaries or hourly pay along with benefits all employees receive, such as shift meals, drinks, and various insurances.
These are important metric to measure because they make up the majority of a restaurant’s controllable expenses, which can always be adjusted to maximize profits.
Tip: Keep in mind, if the owner works as employees during scheduled shifts their salary should be included in calculations. An owner that works in the restaurant will take a salary before profits are calculated but an owner that works on the restaurant will generally take a percentage of profits.
Where to Go from Here
Now you know a few of the terms to watch for in order to have a successful and prosperous restaurant. By properly paying attention to key indicators of performance you should be able to make improvements to your day-to-day operations.