The majority of restaurants are franchised. According to the U.S. Economic Census, an estimated 122,042 limited-service franchise restaurants make up approximately 54% of all fast-food restaurants in the United States.
With so much competition, it’s essential that you determine and track the right key performance indicators (KPIs), so your franchisees can manage their units effectively. Below, we explore 15 of the best restaurant franchise KPIs to measure.
Sales and Marketing
Average Online Rating
Most 18- to 34-year-olds (91%) report that they trust online reviews as much as personal recommendations, and consumers say they are willing to pay 31% more on a business with positive reviews. Those statistics make a convincing case for why average online rating should top the list of restaurant KPIs. Take into account a franchise’s average star rating, along with the number of ratings within the last month or quarter.
Net Promoter Score (NPS)
NPS = (% Promoters) - (% Detractors)
NPS is a customer loyalty metric that rates customers as promoters, detractors or neutral depending on their answer to the following question: “How likely would you be to recommend us to a friend or family member?” Customers rank their answer on a 10-point scale. A score of 9-10 indicates a promoter; 7-8 is neutral, and 0-6 is a detractor.
Number of Transactions
Number of transactions is a way to assess customer count. This can typically be retrieved from your point of sale (POS) system.
Average Check Size
Average Check Size = (Total Sales)/(Total Transactions)
Some restaurants prefer looking at this simple metric rather than worrying about upsell metrics. Essentially, a strong average check size shows that the location is getting more from each of their customers.
Number of New Loyalty Program Members or App Downloads
Loyalty programs and apps matter in the restaurant space. Increasing retention by just 5% through customer loyalty programs can boost revenue 25% to 95%. Measuring this helps keep the franchisee’s eye on the ball when it comes to this vital activity. Another way to look at this is percentage of transactions using the loyalty app.
Speed of Service
Speed of Service = (Food Order Time) - (Food Delivery Time)
This is a great metric for increasingly time-starved customers, and it does not require any new data points. Use your POS to automatically measure this from time the customer walks in or drives up to your restaurant to the time when the food is delivered to them based on your kitchen display system. Some compare this to NPS as well.
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 greatly depending on the location and the size of the restaurant. For example, you would expect the CRR at a location at the airport to be low, given the audience in transition.
RevPASH (Revenue Per Available Seat Per Hour)
RevPASH = (Revenue/Hour)/((Available Seats)/(Hour))
If your franchisees have empty seats, their profitability is likely suffering. If you watch this metric hour by hour, you can make adjustments to improve the bottom line.
% Online Orders
% Online Orders = (Online Order Sales)/(Total Sales)
With off premise sales (e.g., DoorDash, Uber Eats) becoming such a major part of franchising, this is a great metric to start with — especially considering that online orders tend to have a bigger check size. The only caution is that you don’t want to punish those that are growing their revenue in the traditional business.
% Labor Costs
% Hourly Labor Costs = (Hourly Labor Costs)/(Total Revenue)
You may want to separately measure your hourly staff wages versus your manager wages. Some owner-operator franchisees pay themselves a salary. Others pay themselves a dividend out of the profits for tax purposes. By carving out hourly wages into a separate entry, values become more comparable when benchmarked against the system.
% Food Costs
% Food Costs = (Purchases)/(Total Revenue)
You should account for the cost of the items you sold in each period so that you’re properly evaluating profitability. However, some systems don’t have this data easily accessible; instead, they make an approximation using purchases during that period. These two numbers don’t necessarily align, so be careful. Make sure you use consistent information for each unit.
% of a Strategic Category
% of a Strategic Category = (Category Sales)/(Total Sales)
Some franchise systems have a particular category with great profitability, such as soft drinks. Once you determine that category, you can aim to sell a bigger percentage of soft drinks, or whichever category that excels within your system.
Food Cost Variance
Food Cost Variance = (Actual Food Cost)/(Planned Food Cost)
A metric a lot of franchisors are talking about today is the actual cost of food compared to the planned cost. Tracking this can help you more accurately forecast and handle fluctuations in certain costs in the future.
Employee Turnover Rate (ETR)
ETR = (# of employees who left in that period)/((# of employees at the beginning) + (# of employees at the end))/2
Every industry has to deal with turnover, and it is a good idea to determine what is an acceptable rate in your system.
Similar to Net Promoter Score for customers, above, the Employee Net Promoter score can help you understand your team’s happiness. Though some franchisees are hesitant about measuring employees this way, it can provide valuable insight. Remember, happy front-line employees mean happy customers.
The best way to help your franchisees reach their goals is to measure performance along the way. Learn more about FranConnect’s leading performance tools that can help you track the KPIs that matter most and make a positive difference in your business.