Performance Metrics For Measuring Success Of Food And Beverage Outlets

Assess the various performance metrics managers can utilize when measuring the success of food and beverage outlets.

Performance metrics executives can use to assure the probability of success about food and beverage outlets

Key performance indicators are essential metrics which can be used by managers to measure the success and helps them to enhance its profit margin. By using the effective performance metrics, Managers can capture the real-time information to the company and also provides the easy way to understand at a glance outlook of food and beverage outlets. This report discusses the several performance metrics that managers can utilize while measuring the success of food and beverage outlets.

There are certain key metrics which can be utilized by a manager to measure the success of food and beverage outlets. These metrics are net profit margin, operating margin and debt measures. The food and beverage sector entails restaurants, food and drink wholesaler, grocery stores, and food processing companies. Moreover, corporations in food and beverage field are dealing in highly competitive markets (Renton, et. al., 2016). It tries to make profit margin and financial efficiency with the objective of evaluation. The debt performance of food and beverage organization is essential performance measure to assess the financial soundness and evaluates the company’s ability to weather market decline due to rivalry (Schwartz, et. al., 2017).

In addition to this, operating margin of the company is key measures to assess the operational efficiency. It offers a better indication of how management of the company can handle cost with respect to revenues. Operating margin is a key profitability ratio that can be used to evaluate the business. However, it is significant to assess corporations that deal in the high rivalry environment. After assessing the operating profit margin, there is needed to measure the bottom-line profitability for many investors. It can be demonstrated through net profit margin and percentage of sales revenue which remains after declining cost of running a business (Farris, et. al., 2015).

It can be also stated that comparison amid debt position can facilitate the good indication for corporations which are in sound financial position. It also assesses the best position of the company and also assesses at which period revenue has declined. Moreover, a debt position of the company is also significant in case it needs capital expenditure to respond towards changing market condition.

Debt and liquidity evaluation is a performance metrics that indicate the ability of the company to perform its entire debt obligation for the upcoming period with its current resources (Rushton, et. al., 2014). Another key performance metrics which can be used by the manager to assess the success of food and beverage outlets:

A number of the customer is a performance metrics that can be used by the manager to assess business awareness. This is good measures to assess the popularity because the company can count it even there is a crowd for takeaway food. A people-counter at a front of food and beverage outlets is effective to estimate the closer data of customers even if the manager does not take an order at the table. The transaction number is another way to estimate the number of customers however it is distorted by a single purchase for over one person (Nagle, et. al., 2016). Once the data is identified, it is easier to find out the outcome.

Number of Consumers

Managers assess the total sales per head to measure the success of food and beverage outlets. In this way, the manager will divide the total revenue by a number of customers. It also compares total sales per head to earlier week and month. This may vary among different times of day and day of the week (Buckingham, and Coffman, 2014). 

Total sales must be categorized into a different field like a starter, main course, non-alcohol beverages, desserts, side orders, alcohol, and other product sales. Further, the manager can assess different things like how much menu appeals to customers and how well workforces are selling. The key performance measure can be a good foundation for a bonus system. It should also use price sensitivity analyzer to assess their sales (Madanoglu, and Ozdemir, 2016).

This is an effective performance measure that can be used by a manager to assess whether tables are turning over while manager providing quality facilities. There are different factors which may have a larger impact like service, and clearing, the speed of seating, hosting and cooking time. Further, the company should use seating efficiency calculator to assess some data (Fulker, et. al., 2016).  

Managers can use sales per hour as a performance metrics which would be beneficial to measure the success of food and beverage outlets. This metrics can be beneficial to gain speed and revenue by managing the touchscreen layout. Therefore, resources can be assessed by manager quickly and make sure to gain productivity. Along with this, the manager should update the technology according to market (Kim, et. al., 2016).

It is key performance metrics that can be used by a manager to assess the success of food and beverage outlets. Managers can divide the total sales by a total number of labor hours. Moreover, they can also compare the average cost of staff per hour from previous periods (Starks and Carroll, 2018).

It is useful for function and event staff in case, they can earn bonuses. They can also measure reward for gross sales and can compare the actual gross profit from the standard. Furthermore, it can be evaluated that manager can assess the expenses from total sales of the function of food and beverage outlets (Patiar, 2016).

Managers can compare their strategy with similar business and at different times. For example, if only 20 of these diners are in desserts then strike rate would be 1 in 5. It can be enhanced by using the better menu selection and indicative promotion (Gerschewski, and Xiao, 2015).

The company can measure the success of food and beverage outlets by using the revenue per available room night. To assess RevPASH, managers can divide total revenue by the number of seat hours. For example, managers can open a restaurant of 100 seats for per hours. It can also exercise the RevPASH calculator to measure some data (Davis, et. al., 2013). 

Managers can use the grade recipes from most to least productivity. It can also use recipe software and recipe cards to obtain an accurate result. It can also compare the number of sale of each recipe to measure the success of food and beverage outlets. Food and beverage outlets that have both low profit and revenue should focus on providing innovative menu rapidly to customers (Wu, et. al., 2014). In this case, managers can use menu profit analyzer by using the download library and for assessing the figures. It can also integrate the measurement of popularity and profitability to assess the whole profit power of a menu. It is an effective tool to measure the success of food and beverage outlets (Pilar Martínez-Ruiz, et. al., 2014).

Sum of per head sales

The breakeven point is another performance metrics which can be used by a manager to measure the success of food and beverage outlets. These metrics define that how much business invest in sales and get back return from it. This performance metrics can also enable the manager to forecast the amount that it will earn from the investment. This can be effective for investors who invest in opening a new restaurant (Patiar, and Mia, 2015). Managers can also use the break-even to influence the new big purchase decision. For example, this metrics can be used before launching the marketing campaign and redesigning of a commercial kitchen. Moreover, managers can assess the breakeven point by using the below formula:  

Break Even Point= TFC ÷ ((Total Sales - TVC) / Total Sales) (Bernhardt, et. al., 2012).  

COGS defines the expenses which could be required to produce each item of food and beverage that manager will present in front of their guest. Thus, COGS is a representation of inventory at the particular time period. For measuring the COGS, managers should maintain the record of inventory at the starting and end period of time along with should keep the data of additional purchased inventory. This is essential performance metrics for the manager because it tracks the highest cost for food and beverage outlets (Booi-Chen and Peik-Foong, 2012).

Managers can also assess the different ways to minimize the expenses such as negotiating better rates with the distributor of food and choose in-season components as it would be beneficial to gain margin (Henderson, 2011). COGS can be used by managers by using the below formula:  

Cost of Goods Sold (COGS) = Opening Inventory + Purchased Inventory - Ending Inventory

Fixed cost is another key performance metrics which can be used by a manager to measure the success of food and beverage outlets. However, it could not be beneficial for managers to access FC on hour by hour and daily basis. It is kind of cost accounting which aid the manager to managers how much-fixed cost is required to run the food and beverage outlet (Lin, et. al., 2012).

This cost can be calculated by a manager by using the following formula:

Overhead Rate = Total Indirect Expenditures / Total Hours

A prime cost of the restaurant is a total of all of its labor expenses and its cost of goods sold. A restaurant's prime expense makes up approximately 60% of its total revenue. Prime cost is an essential metric because it demonstrates the bulk of controllable expenses of the restaurant. It is analyzed that manager cannot control fixed rate expenses on the monthly or weekly basis. For example, the manager can address the strategy to decline prime cost by organizing the workforce carefully. Therefore, prime expenses of restaurant demonstrate the primary field of the restaurant owner (Booi-Chen, and Peik-Foong, 2012). As a result, the manager can lead to decline expenses and gain profit. This expense can be calculated by using the following formula:

Beverage, Food, Alcohol, and Dessert per head Sales

Prime Cost = Labor + COGS

It can be stated that measuring this expenses can be easy for managers as it needs to add up al labor-related expenses. These expenses are hourly wages, salaried labor, tax and benefits, and payroll. Managers can also add the sum of labor expenses and its COGS to assess the prime cost of the restaurant. Consequently, it can be stated that this is significant performance metrics that can be used by a manager to measure the success of food and beverage outlets (Wu, et. al., 2014).

Food cost percentage demonstrates the difference amid cost of developing a particular item in menu and selling rate of that particular item. It can be measured by using following formula:

Food Cost Percentage = Food Cost / Total Sales

It can be evaluated that food cost percentage demonstrates the difference amid expenses of developing a particular item of the menu (the expenses of the whole composition in a dish) and the selling rate of that particular item. For example, if development cost of the salmon dish is $3.28 and its selling rate is $15 then food cost percentage would be 21.9%. It relied on the novelty aspects of the dish, guest, desires and service type of food and beverage outlets. In this way, food cost percentage can be measured by managers for all good sold by dividing the total food expenses from total revenues during a specified duration (Davis, et. al., 2013). If manager identifies the food cost percentage for each of menu then they can select the upsell and design of menu to endorse the item. It contributes the high amount of revenues.

Gross profit demonstrates the profit which makes after calculating the cost of goods sold. The gross profit depicts the money available for paying the direct and indirect cost. To measure the gross profit managers should subtract the total COGS during the particular time period from total revenues which includes total sales of beverage, food, and merchandise (Pilar Martínez-Ruiz, et. al., 2014). It can be measured by using below formula:

Gross Profit = Total Sales - COGS

Turnover rate is another performance metrics which can be used by the manager to measure the success of food and beverage outlets. It is a percentage of workforces that can be fired or leave and replace by managers during specific time period. The restaurant industry has a notoriously high employee turnover rate as compared to all other industry segments. In the fast-paced foodservice atmosphere, high workforce turnover can decline operational efficiency and also need maximum time and attention to get new hires with high speed (Bernhardt, et. al., 2012). The below formula is used to measure the employee turnover rate:

Average Number of Employees = (Starting Number of Employees + Ending Number of Employees) / 2

Employee Turnover = Lost Employees / Average Number of Employees

Conclusion

From the above interpretation, it can be concluded that there are various performance metrics which are used to measure the success of food and beverage outlets. These performance metrics are Number of Customers, total sales per head, Food, Dessert, Beverage or Alcohol Sales per Head, prime cost and gross profit. Another performance metrics are COGS, food cost percentages, and overhead rate. Along with this, breakeven point, strike rate and Revenue per Available Seat Hour (RevPASH) are another key performance metrics which could be used by managers to measures the success of food and beverage outlets.

Seating Competence

From the above findings, it can be recommended that managers should match the characteristics of the market area with their strategy such as demographic data about potential guests in the wide-ranging area of the proposed site. Since, it could be beneficial performance metrics for managers to measure the success of food and beverage outlets. It can be also suggested that managers should address the feasibility and technology information for food and beverage outlets. Consequently, it would be effective to measure the success of food and beverage outlets (Gerschewski, and Xiao, 2015). Along with this, it can be recommended that managers should evaluate the proposed sites like metropolitan area, and walking distance and other convince areas which are beneficial to measure the success of food and beverage outlets. Managers should also analyze the competition by comparing their strategy from key market participants. It could be beneficial to easily measure the success of food and beverage outlets. It can be also suggested that manager should compare the actual demand with an estimated demand for food and beverages as it would be beneficial to measure the success (Patiar, 2016).  

References 

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