Running restaurant operations smoothly is challenging. Getting time to focus on what is important and not just dealing with emergencies is half the battle. There are lessons to be learned from the ways other industries deal with this constant lack of time. Let’s see if we can learn from them.
While doing research to write this post, I found out that much has been written about Key Performance Indicators (KPIs) but little about how you get to define the ones you care about. Sure, we have some obvious ones - such as Cash Flow or Food Cost - but, as with any journey one undertakes, knowing the destination is essential in order to define the roads on which one will travel.
Before filling your head with KPIs, you need to ask yourself some very important, and sometimes hard, questions. What are your struggles with and your dreams for your restaurant? Making money or being profitable, while essential, can’t be all you hope for. Those questions will vary based on how long you have been in business, the competitive landscape you are evolving with, your location, your ownership, etc. Now that you have identified what matters and what your overall objectives are, it’s time to dive a little deeper and define goals.
Goals will change, but at least they give you direction. It’s critical for your goals to “make sense” and for you to also be able to see progress. That’s why I strongly recommend that your goals be SMART, which stands for:
Specific: State exactly what you are trying to accomplish (who, what, where, why).
Measurable: How will you demonstrate and evaluate the extent to which the goal has been met?
Achievable: Stretch and challenge yourself with goals that are within your ability to achieve the outcome.
Relevant: How is the goal aligned with your objectives?
Time-bound: Set one or more target dates, the “by then” that will guide your goal to successful and timely completion.
Now you can decide which KPIs you want to track. KPIs will help you measure and monitor your progress. Each SMART goal should have at least one KPI linked to it. These are some suggested examples of goals and their related KPIs.
Lilly owns a small restaurant/coffee shop in a little country town. Some customers come in the morning and stay all day while drinking only a few cups of coffee. They occupy a table without bringing much revenue, and other guests have to walk away. Lilly’s SMART goal is to improve table turnover by 20% before the end of October. After deploying different measures in her restaurant, she is tracking the following KPIs to measure her success:
Table turnover rate
Revenue per available seat hour (= total revenue/(available seats x opening hours)
Becca runs a busy place in the suburbs. She frequently sees large tables with few guests, while small groups patiently wait in the lobby. She feels that she is leaving money on the table by not optimizing her space. Her SMART goal is to augment the seating efficiency and hopefully reduce waiting time by 10%. She will track the following KPIs:
Average wait time by party size
Paul manages a very nice high-end restaurant in the city. The menu changes daily and he lets his chef design it, but Paul is concerned that he is losing money on some days. His SMART goal is to get a steady 3% profit margin for his restaurant every day. After talking to his chef about his concerns and asking him to remedy this problem, he is monitoring the following KPIs:
Food Cost: Cost of Goods Sold measured against Food Sales
Once you reach your target date for a goal, reflect on the initiatives you took and how it moved the needles with the KPIs you tracked. You may not get it right the first few times, but soon enough, you will see progress and start seeing improvements in what is important for your success. Take the time to look back at the results and set a new set of SMART goals for the next iteration.
I am not saying it’s the cure for all. There is no way to avoid operating in fire-fighting mode from time to time, but you will do so knowing that your big vision for your business is slowly but surely taking shape. Next time, I will provide a non-exhaustive, but highly valuable list of affordable tools to help you track those KPIs.
by Marylise Fabro
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