The 15 Most Important KPIs of Restaurant Franchising

The majority of restaurants are franchised. According to the United States Economic Census, approximately 122,042 limited-service franchise restaurants represent approximately 54% of all fast food restaurants in the United States. With so much competition, it is essential that you determine and follow the right KPIs, so that your franchisees can effectively manage their units. Below, we explore 15 of the best restaurant franchise KPIs to measure, categorized into four categories.

A) Sales and marketing

1) Average online rating

Most 18-34 year olds (91%) say they trust online reviews as much as personal recommendations, and consumers say they are willing to pay 31% more for a business with positive reviews. These statistics convincingly explain why the average online rating should be at the top of restaurant KPIs list. Consider the average star rating of a franchise, as well as the number of reviews in the past month or quarter.

2) Net Promoter Score (NPS)

NPS = (% Promoters) – (% Detractors)

NPS is a measure of customer loyalty that rates customers as promoters, detractors, or neutrals based on their response to the following question: “How likely is it that you would recommend us to a friend or member of your family ? »Customers rate their response on a 10-point scale. A score of 9 to 10 indicates a promoter; 7-8 is neutral and 0-6 is a detractor.

3) Number of transactions

The number of transactions is one way to assess the number of customers. This can usually be retrieved from your point of sale system.

4) Average check size

Average Check Size = (Total Sales) / (Total Transactions)

Some restaurants would rather look at this simple metric than worry about upselling metrics. Essentially, a high average check size shows that the location is getting more from each of its customers.

5) Number of new loyalty program members or app downloads

Loyalty programs and apps count in the restaurant space. Increasing loyalty by just 5% through customer loyalty programs can increase revenue by 25-95%. Measuring this allows the franchisee to keep an eye on the ball when it comes to this vital business. Another way to look at this is the percentage of transactions using the loyalty app.

B) Services

6) Speed ​​of service

Service Speed ​​= (Food Order Time) – (Food Delivery Time)

This is a great metric for increasingly time-pressed customers, and it doesn’t require any new data points. Use your point of sale to automatically measure this from the time the customer enters or visits your restaurant until the time food is delivered to them based on your kitchen display system. Some also compare it to NPS.

7) Customer retention rate (CRR)

CRR = [(# of customers at the end of the period) – (# of new customers for that period)]/ (# of customers at the start of the period)

Customer retention rates vary widely depending on the location and size of the restaurant. For example, you would expect the CRR at one location in the airport to be low, given the audience in transition.

8) RevPASH (revenue per available seat per hour)

RevPASH = (Revenue / Hour) / (Seats available) / Hour)

If your franchisees have empty seats, their bottom line is likely to suffer. If you look at this hour-by-hour metric, you can make adjustments to improve the results.

9)% of online orders

% of online orders = (sales of online orders) / (total sales)

With offsite sales (e.g. DoorDash, Uber Eats) becoming such an important part of the franchise, this is a great metric to start with, especially since online orders tend to be size. larger check. The only caveat is that you don’t want to punish those who increase their income in the traditional sector.

C) Expenses

10)% of labor costs

% Hourly labor costs = (Hourly labor costs) / (Total income)

You may want to measure your staff’s hourly salary separately from your manager’s salary. Some owner-operator franchisees pay themselves a salary. Others pay themselves a dividend on profits for tax purposes. By splitting hourly wages into a separate entry, the values ​​become more comparable when compared to the system.

11)% of food costs

% Food costs = (Purchases) / (Total income)

You need to factor in the cost of the items you sold in each period in order to properly assess profitability. However, some systems do not have this data readily available; instead, they make an approximation using the purchases during this period. These two numbers don’t necessarily match, so be careful. Make sure to use consistent information for each unit.

12)% of a strategic category

% of a strategic category = (Sales by category) / (Total sales)

Some franchise systems have a particular category with great profitability, such as soft drinks. Once you determine this category, you can aim to sell a greater percentage of non-alcoholic drinks, or whatever category excels in your system.

13) Food cost variance

Food cost variance = (Actual cost of food) / (Expected cost of food)

One metric that many franchisors are talking about today is the actual cost of the food versus the expected cost. Tracking can help you more accurately predict and manage fluctuations in certain costs in the future.

D) Employees

14) Employee turnover rate (ETR)

ETR = (number of employees who left during this period) /[(# of employees at the beginning) + (# of employees at the end)]/ 2

Every industry has to deal with turnover. It is a good idea to determine what is an acceptable rate in your system.

15) Employee Net Promoter Score (eNPS)

Similar to the Net Promoter Score for Customers, above, the Employee Net Promoter Score can help you understand your team’s happiness. Although some franchisees are reluctant to measure employees in this way, it can provide valuable information. Remember, happy frontline employees mean happy customers.

Metrics are a beautiful thing

The best way to help your franchisees achieve their goals is to measure performance along the way. Learn more about FranConnect’s performance tools that can help you track the most important KPIs and make a positive difference in your business.

This article first appeared on the FranConnect website and is used here with permission. For more information, visit their website.

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Cecil N. Messick

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