Key Performance Indicator (KPI)

A key performance indicator (KPI) is a measurable value used to evaluate progress toward an important operational, financial or strategic objective. In restaurants, KPIs help managers understand performance, identify problems and make decisions about staffing, purchasing, menu pricing, service and profitability.

Examples of restaurant KPIs

• Food cost percentage: ingredient cost expressed as a percentage of food sales.
• Labour cost percentage: labour cost expressed as a percentage of sales, using a defined payroll basis.
• Prime cost: combined cost of goods sold and labour cost.
• Average cheque: average sales value per guest or transaction, depending on the reporting method.
• Table turns: how often a table is occupied and released during a service period.
• Ticket time: the time taken to prepare and deliver an order.
• Waste percentage: the quantity or cost of waste compared with a defined purchasing or production basis.

How to choose useful KPIs

Choose indicators that relate directly to a business objective, can be measured consistently and lead to an action when performance changes. Define the calculation, data source, reporting frequency, target and person responsible. Too many indicators can make it harder to focus on the measures that matter.

Leading and lagging indicators

A leading indicator can help predict future performance, such as completion of preventive maintenance or staff training. A lagging indicator measures an outcome that has already occurred, such as monthly food cost or guest complaints. Both can be useful in a restaurant dashboard.

Chef’s tip: Pair a financial KPI with an operational measure. For example, monitor labour cost alongside sales per labour hour and guest service standards so that cost improvements do not damage service.

Key distinction: A KPI is a selected measure tied to an objective; not every number on a report is automatically a key performance indicator.