This guide on restaurant sales will teach you how to assess your current restaurant sales performance, ways to increase revenue, and which restaurant sales KPIs you should be tracking to assess the success of your efforts. You’ll learn the metrics you need to understand the financial health of your restaurant and get tons of great sales and marketing ideas to improve your business.
The health of an industry is largely determined by the amount of revenue generated during a fiscal year. In this regard, the restaurant industry is showing signs of recovery after the chaos and challenges of the COVID-19 pandemic, which left restaurants reeling with a nearly 24% decrease in revenue in 2020.
The National Restaurant Association projects collective restaurant sales to surpass $731 billion in 2021.
This astronomical growth can be attributed to many things, but one big contributor is the fact that our culture has shifted towards valuing experiences — like eating in restaurants — over material goods.
By staying on top of trends and statistics in the industry, you can harness that knowledge and make your restaurant business stronger. Check out the following statistics about sales in the restaurant industry today.
To learn more about restaurant sales in your state, check out this interactive map from The National Restaurant Association.
This is an important metric to track because it’ll show you exactly how your restaurant is doing financially compared to last year. Monthly metrics fluctuate because of seasonal factors, but when you look at yearly progress, you’ll get a great snapshot of how your business is doing as a whole. You can use the following calculation with any metric to track its change. We’ve used Gross Profit.
FORMULA: [(January Gross Profit This Year – January Gross Profit Last Year) / January Gross Profit Last Year] x 100
RevPASH stands for Revenue Per Available Seat Hour during a given time period. Developed by Sheryl E. Kimes at Cornell University, RevPASH is used to optimize labor scheduling, plan food purchasing, and to improve table turn times.
FORMULA: Total Revenue / (Available Seats x Opening Hours)
RevPASH is a good measurement because it uses time and capacity in addition to average check to paint a clearer picture than just margins or average checks do on their own.
Customer lifetime value (or CLV) is a calculation every business must do. Basically, it tells you what the monetary return will be on the average guest in your restaurant.
Before you do the calculation, you will need to gather some data from the previous year’s sales. Make sure it’s a full year’s worth of data you’re working with.
First, you’ll need to find the average order value and purchase frequency.
Average Order Value = Total Revenue ÷ Total Number of Orders (over 365 days)
Purchase Frequency = Total Number of Orders ÷ Total Number of Unique Customers (over 365 days)
Customer Value = Average Order Value x Purchase Frequency
Customer Lifetime Value = Average Lifespan of a Customer (in years) * Customer Value
By establishing a CLV for different guest types, you can more effectively tailor your marketing efforts by maximizing where you invest your time and energy. If you can play to your strengths and really invest in attracting loyal customers, you can drive up your restaurant’s CLV.
Your table turnover rate tells you how many parties are able to be fed in your restaurant in a given period. The higher number of parties served, the higher your revenue.
FORMULA: Number of parties served / number of tables
If you serve 20 parties at five tables during dinner service, your table turn rate is 4 turns per table for that time period.
A restaurant is only as strong as its loyal customers. Some experts argue that all other metrics are moot points if the customer experience isn’t up to par. If acquiring a new customer is six to seven times more expensive than keeping an existing customer, this might be the best way to measure the success of the business.
FORMULA: ((Number of customers at end of period - Number of new customers acquired during that period) ÷ number of customers at start of period)) x 100
Note: The most difficult thing about calculating Retention Rate is finding the data to plug into that formula. Check out systems with built-in customer relationship management to track customer history.
Table turnover rate is a key factor in your restaurant’s sales. The faster you seat and serve your guests — getting them in and out — the more profit you’ll rake in.
Here are just a few techniques you can train your restaurant staff on to decrease table turn time and increase profits:
Ask about time constraints. Start with a simple question: “What brings you folks in today?” This opener gives your guests the opportunity to share why they're here and for you to tailor your service accordingly. If they’re off to the movies, for example, you can keep everything as quick as possible.
Don’t seat incomplete parties. Incomplete parties can cause table turn times to increase, causing a bottleneck in your restaurant's meal service. A table sat with an incomplete party won’t turn as quickly as others, making it difficult to seat waiting parties and costing both the server and the restaurant money.
Don’t be afraid to get “campers” off the table. If guests have paid and are lost in conversation, don’t be afraid to tactfully take action. Slowly clear the table over the course of multiple visits, and continue to engage with them. If that doesn’t work, politely ask if they’d be interested in sitting at the bar, if you have one.
Consolidate table visits. Don’t take two trips when you could have easily accomplished both in one. For example, bring the table glasses of water at the start rather than introducing yourself empty-handed. This will help shave minutes off of service time.
Use a handheld POS system. With a handheld POS system you can take and instantly send orders to the kitchen from anywhere in the restaurant, allowing you to serve more guests and increase revenue.
Try out Order & Pay technology, along with the New Steps of Service. The New Steps of Service is a modern way of structuring your front of house that combines the traditional touchpoints of hospitality with the efficiencies of technology. It streamlines the flow of service by empowering your guests to order and pay whenever they like, and it keeps the orders coming to increase average check sizes. By putting ordering and payment technology in the hands of their guests, servers can embrace a more rewarding role: welcoming guests, helping them choose the right menu items, checking in, and not having to spend time running to the point of sale and swiping credit cards. And guests are given the opportunity to keep ordering food and drinks whenever they’re craving them – not having to hesitate while flagging down a server.
For more ideas on how to improve your restaurant’s table turnover rate, check out this post.
Hosting events like live music, readings, or trivia nights is a great way to drive people into your restaurant and drive sales. When hosting an event, it’s likely that guests will stay longer — meaning slower table turns — but it also increases the likelihood of them buying more food and drinks. If you’re worried about table turn issues, schedule an event for a slow night in hopes of bringing in more customers than you would normally expect.
One important reminder: Make sure you have the appropriate licenses and permits. In some cases, you might need a permit for live entertainment.
Paying to advertise your business on social media or elsewhere can provide excellent ROI when done correctly. Restaurant advertising options vary in cost and effectiveness. According to the 2019 Restaurant Success Report, the three most popular advertising channels are social media ads, community/event/charity sponsorship, and Google/search engine ads.
Where and how you advertise will depend upon a number of factors, from your restaurant concept and brand to your customers and location. Think through what you think will have the most impact and drive customers into your restaurant.
By tapping into your local community, you can get the word out about your restaurant, create long-lasting customer relationships, and give your sales an added boost.
There are a few ways you can leverage your local community to help drive sales:
Plan a promotion around a big event nearby. By planning a promotion around a local sporting event, concert, or festival, you will help drive business and generate awareness of your restaurant to a larger audience. You’ll essentially be making use of the larger event’s marketing.
Participate in your town or city’s Restaurant Week. If your city or town does a Restaurant Week, it can be a great way to boost exposure, increasing traffic and sales.
Host community events. Promotions that address a community challenge or point of excitement are always a helpful way to generate business. Allowing local organizations to use your space taps into their network, plus, they’ll do all the promoting for you.
Sponsor local sports teams and groups. Local sports teams and other groups are always looking for sponsorships, which usually require a small investment on your end and can be a great means of gaining exposure. It’s also a great way to build your restaurant up as a community leader, which will only send more customers your way.
What if the key to increasing sales at your restaurant was your menu? Enter menu engineering: an empirical way to evaluate current and future restaurant menu pricing, using your restaurant data to influence design and content decisions.
By knowing each item’s food cost percentage and popularity, you can use menu engineering to guide guest choices towards your most profitable menu items. Menu engineering allows you to continually improve your restaurant’s profitability and the effectiveness of your menu’s design.
You can engineer your menu for maximum profitability by completing this five-step analysis:
Choose a timeframe. Determine how often you will be able to do menu engineering and update your menu.
Measure profitability. Look at menu item food cost, food cost percentage, and gross profit to measure profitability.
Measure popularity. Make measuring popularity easy by plotting your menu items on a menu engineering matrix.
Design with careful consideration. Consider visual cues, dollar signs, and menu descriptions when designing your menu.
Determine your new menu’s success. Train your staff on your new menu and complete a food cost analysis once you’ve begun using your new menu.
For a deep dive into this five-step menu engineering analysis, check out this post.
Lunch is known to be a slower time for restaurants, particularly those that are full-service. But increasing lunch sales is key to greater profitability. In full-service restaurants, most of the costs associated with preparing for the dinner rush happen during the daytime. So, if you think about it, you’re paying for labor, rent and utilities whether you’re generating sales or not, and you front labor costs to get all the prep done to have a successful dinner shift. If you can generate enough sales to at least cover the daytime expenses, the next shift becomes pure profit. You can boil it down to this: The busier your lunch, the sooner you start making money.
One way to make the most of lunchtime is to use a set lunch menu designed to get diners in and out quickly. You can also offer lunch specials that drive customers in with lower cost menu item pairings.
You can apply a similar mindset to slow nights and other off-hours. Run promotions like drink specials or host events on off-peak nights like Mondays and Tuesdays to bring more customers in when your restaurant is usually near-empty and your staff is under-utilized.
Unreliable technology that can’t match your restaurant’s pace will only put a damper on your efficiency — and your restaurant sales. Clunky computers, slow-moving POS systems, and handwritten orders can clog up your lines, cause mistakes, and frustrate staff and customers.
Best-in-class restaurant technology — from POS to team management to kitchen display systems, handhelds, and Order & Pay technology — will help you drive sales by streamlining operations so you can focus on what really matters: spending time with your guests, food, and team.
Great strides are being made every day in software, technology, and services for restaurateurs. For a look at the latest and greatest restaurant tech that can help you boost sales, read our post about finding the right restaurant platform for your business.
Great food and service aren’t always enough to stand out and grab attention anymore. You have to use social media to promote your restaurant, extend its brand outside the walls, and connect with new and existing customers to help drive sales.
With so many restaurants now utilizing social media to engage with guests, how will you make your restaurant stand out? Here are a few best practices to apply to your restaurant social media strategy:
Use consistent messaging and imagery.
Share great photos that show off your menu items.
Put out exclusive offers for your social media followers.
Share customer testimonials and encourage guest feedback.
Share customer-generated content.
Put your restaurant staff in the spotlight.
Social media helps increase awareness for your restaurant in an oversaturated market and, in turn, can help you boost sales. For more ideas on how to stand out on social media, check out this post.
Want customers to buy more? Offer them more ways for them to do it. Here are a few different revenue streams you should consider implementing at your restaurant:
Add a takeout- and delivery-specific menu so your guests can still be served when your dining room is full or when they’d rather spend the night in. Be mindful about the items you’re advertising for takeout, since some menu items may not translate well to a takeout audience; you can even curate a section dedicated to top-sellers to help guests avoid digital decision paralysis. When implementing or refining a takeout system, consider the impact that having both on-premise and takeout items on your chefs and line cooks — a helpful kitchen display system can help keep things organized and reduce errors.
Consider offering online ordering paired with third-party or in-house delivery services to allow your customers to order food from your website using their computers and phones. Third-party online ordering and delivery services charge commission fees on every order and can limit your ability to manage the online order experience. By hosting online ordering on your own website, you’ll give customers the ability to order food from your restaurant without having to pay a commission fee.
Toast Delivery Services is a commission-free service, available for a per-order flat fee, so it’s a great alternative if the commissions charged by third-party companies don’t make economic sense for you.
In addition to encouraging repeat business and being relatively inexpensive to offer, gift cards are a great way to encourage guests to buy more. According to a 2018 study, the average consumer spends $59 more than the original value of the gift card they receive. Because of this, a robust gift card program offers a revenue stream beyond gift card sales alone. Be sure to offer physical and digital gift cards, in-store and online.
If you can handle the volume, also consider offering catering services. When planned ahead of time, catering services can help offset lower sales on slower days. Catering is also a great way to advertise your business — not only is it a chance to serve a large group of eaters, but it also provides you with an instant base of potential diners to introduce your restaurant to. Tools like ezCater can help market your menu and manage your orders online. You can also look into offering family-sized menu items and bundles of dishes that play well with each other — almost like a mini catering event.
Getting customers into your restaurant is the first step in the sales process, but you also need to keep customers coming back. One of the best ways to increase customer retention (and drive repeat sales) is to create a customer loyalty program with points, tiers, and rewards.
According to the 2019 Restaurant Success Report, 25% of guests surveyed said loyalty programs are extremely important to their guest experience. Not only are they important to guests, but they’re important to your restaurant’s profit:
· It costs a business about 5-25 times more to acquire a new customer than it does to sell to an existing one.
· By increasing customer retention just 5%, a business’s profitability will increase by an average of 75%.
· 80% of future profits come from 20% of current customers.
If you don’t already have a customer loyalty program in place, you should consider starting one. To get the most out of your customer loyalty program, remove any roadblocks: Provide simple enrollment options and make it easy for guests to earn points, track progress, and redeem rewards.
A customer loyalty program plays perfectly with an automated email marketing solution. At its simplest level, you can use email marketing to engage with basic customer groups, such as faithful repeat customers, infrequent customers, or big spenders. However, by combining customer loyalty information with their ordering data through an integrated POS provider, you can create lists of guest personas that you can target using highly personalized email marketing campaigns.
For example, maybe you have a set of guests that come to your restaurant just to order that one favorite dish of theirs — you could run a special for that dish and inform them through a marketing campaign to bring them back to your restaurant. These personal touches go a long way when it comes to keeping customers happy and retaining them through the years.
Now you know about the health of the industry, the health of your restaurant’s finances, and hopefully, you’re planning on implementing a few of our tips to increase sales. Once your new strategy has run for a determined time period, it’s time to check in again and see if they’ve moved the needle. To do so, you’ll need to check on the KPIs of your sales initiative.
Tracking KPIs before and after a new sales-boosting initiative is the best way to find out if your plan worked, and to set up your next steps forward.