Indicators

Indicators show the progress of the restaurant business’s goal. The main indicators that are selected by a business to watch carefully as an indicator of performance are called Key Performance Indicators.

Examples of indicators are:

Break-even points

The point at which the sum of all costs is equal to sales, such that profit equals zero.

Menu Sales Mixes

Sales mix figures may be taken from a sales summary sheet and shown in a simple report form. Food and drink sales may be broken down further to provide sales mix data. This not only reconciles sales of items with different gross profits, but also provides information on:

• Popular / unpopular items on the menu
• Records for stock control, e.g., helping predict future demands
• Changes in customer interest
• Where profits / losses are being made

Labour cost percentage

Total cost of labour expressed as a percentage of sales.

Cost of Goods Sold (CoGS)

Cost required to make each item on a restaurant’s menu.

To calculate CoGS = (Beginning inventory of F&B) + (Purchases) – (Ending inventory)

Breakeven point

The break-even point is one of the most important metrics to calculate. It helps determine how sales should be performing to earn back what has been invested into the business. This number can be used to calculate how long it will take to earn back what has been invested.

How to calculate the Break-even Point

Break-even Point = Total fixed cost / [(total cost minus total variable cost) / total sales]

Gross Profit

Gross profit, as explained in week 1, is the total sales less the cost of sales (goods sold). What is left is what is used to pay for overheads.

Net profit (margin)

The Net Profit is the money your business makes after accounting for all the expenses. Net profit or net profit margin is expressed as a metric. Net Profit Margin = (Gross Sales – Operating Expenses) / Gross Sales This can also be expressed as a percentage.

Activity

Do an internet search to find any other indicators that are used in the restaurant business? Please share any that you find with other learners in the comments below.