Catering Success: The Top 7 KPI Metrics Every Entrepreneur Should Master

Welcome to the exciting world of catering, where every event is an opportunity to delight your customers!

As a seasoned entrepreneur, you know that success in catering depends on understanding the right KPIs (Key Performance Indicators) and how to track and calculate them. Whether you're just starting out or looking to fine-tune your operations, developing a keen understanding of these metrics can help you identify areas for improvement and make data-driven decisions that will drive growth and profitability.

In this article, we'll explore the top seven catering KPI metrics that every catering business should be tracking. From customer satisfaction rates to average order values, these metrics provide valuable insights into the health of your business and can help you better understand your customers' needs and preferences.

• Customer Satisfaction Rate: This critical metric measures how satisfied your customers are with your services and can help you identify areas for improvement.
• Repeat Business Rate: Tracking how many customers return to use your services can help you understand loyalty and customer relationships. They also help to reduce acquisition costs.
• Average Order Value: The amount that a customer is willing to pay in order for you to provide your services is a key indicator of your success in the industry.

But these are just a few of the KPIs that we'll be diving into in this article. So, grab a cup of coffee and let's get started!

Customer satisfaction rate

One of the most important Key Performance Indicators (KPIs) for any catering business is customer satisfaction rate. This metric measures how satisfied customers are with the food, service, and overall experience they receive from the catering company.

Definition

Customer satisfaction rate is a percentage that represents the number of satisfied customers divided by the total number of customers. It is important to note that satisfaction can be measured in a variety of ways, including surveys, feedback forms, and online reviews.

Use Case

Tracking customer satisfaction rate is important for catering companies because it helps them identify areas where they can improve and make changes to better meet the needs of their customers. If a company consistently has a low satisfaction rate, it may indicate that there are issues with the quality of food, service, or overall customer experience.

How To Calculate KPI

To calculate the customer satisfaction rate, divide the number of satisfied customers by the total number of customers and multiply by 100 to get a percentage.

Calculation Example

If a catering company had 100 customers and 80 of them were satisfied, the customer satisfaction rate would be:

KPI Advantages

• Helps catering companies identify areas for improvement
• Allows companies to track their performance over time
• Provides insights into customer preferences and needs

KPI Disadvantages

• Can be subjective and based on individual opinions
• May not account for external factors that impact customer satisfaction
• Can be costly and time-consuming to gather feedback and data

KPI Industry Benchmarks

Industry benchmarks for customer satisfaction rate vary depending on the type of catering services provided and the target market. However, according to industry research, the average satisfaction rate for catering companies is around 80%.

Repeat Business Rate

As a catering business owner, you know how important it is to not only attract new customers but also to retain existing ones. This is where the Repeat Business Rate KPI comes in, allowing you to measure the percentage of customers who have made more than one purchase from your business.

Definition

Repeat Business Rate refers to the percentage of customers who have made more than one purchase from your business within a specific period.

Use Case

The Repeat Business Rate KPI is crucial for any catering business looking to maintain a loyal customer base. By measuring this metric, you can identify any shortcomings in your customer service, food quality or other aspects that may have caused customers not to return.

How To Calculate KPI

Calculation Example

KPI Advantages

• Helps identify customer satisfaction levels and areas of improvement.
• Allows you to track customer engagement and loyalty over time.
• Helps predict future revenue and customer retention rates.

KPI Disadvantages

• Does not account for the frequency of purchases made by returning customers.
• May not capture accurate data if there are errors in the customer database or tracking methods.
• Some customers may prefer trying different caterers for each event or have other specific reasons for not returning.

KPI Industry Benchmarks

The Repeat Business Rate KPI can vary depending on the type of catering business and its target customers. On average, the industry benchmark for the Repeat Business Rate KPI is around 25-30%.

Average Order Value

Catering is a fantastic business full of opportunities, but measuring success can be hard. This is why every catering business needs to have a set of Key Performance Indicators (KPIs) to track how well they're doing and identify areas for improvement. One of the most important KPIs in catering is the average order value.

Definition

The average order value is a metric that calculates the average amount of money that a customer spends on an order. This includes everything that the customer pays, including taxes and any additional charges. It's calculated by dividing the total revenue by the number of orders.

Use Case

The average order value is a critical KPI for any catering business because it helps them understand how much customers are willing to spend. By tracking this metric, businesses can set pricing strategies, meal plans and menus that maximise revenue. A low average order value could indicate that the business either has a pricing issue or needs to work on creating more upsell opportunities.

How To Calculate KPI

To calculate the average order value, you need to take the total revenue earned and divide it by the number of orders received. The formula is:

Calculation Example

Suppose a catering business earned $5000 in revenue from 100 orders this month. The average order value would be:

KPI Advantages

• The average order value helps caterers identify areas where they can increase revenue and improve profitability.
• It gives insights into customers' behaviours and spending habits, helping businesses tailor their marketing and promotion efforts towards profitable customers.
• It's simple to calculate and easy to understand, making it a great metric to benchmark against competitors

KPI Disadvantages

• The average order value does not take into account the catering business's costs, such as labour, overhead, and food expenses.
• It doesn't consider the proportion of new or loyal customers. A business could have a low average order value but high customer retention rates, which could still be profitable.
• It does not reflect variations in the size or type of orders. A business could have high average orders in one product category, but not another.

KPI Industry Benchmarks

As of 2021, the average order value for catering businesses range from $30 to $50 per order. However, catering businesses need to benchmark their average order value against their direct competitors and local industry standards to understand what's possible.

Gross Profit Margin

If you're running a catering business, it is essential to know how to calculate your gross profit margin which is a key performance indicator (KPI). It is a metric used to measure revenue-generation efficiency of your business and tells you how much profit you're making on the sale of your goods (i.e., food and beverages) minus the cost of goods sold (i.e., raw materials, kitchen supplies, labor cost).

Definition:

Gross profit margin is the percentage of sales that exceed your cost of goods sold. It is often expressed as a percentage, which means it is calculated by dividing your gross profit by your total revenue and multiplying the result by 100.

Use Case:

Gross profit margin is a useful KPI, which helps caterers identify if their business is profitable, and where to cut costs to maximize profit margins. It helps caterers determine pricing strategies, forecast sales, set budgets, and control costs.

How To Calculate KPI:

Calculation Example:

Assume that your catering business had revenue of $100,000 and spent $30,000 on Cost of Goods Sold, the Gross Profit Margin calculation would be:

So, your gross profit margin is 70%.

KPI Advantages:

• Helps identify profitability of your catering business.
• Helps identify where to cut costs to increase profit margins.
• Provides insight into pricing strategies, budget forecasts, and sales trends.

KPI Disadvantages:

• Does not reflect overhead and operating expenses, which could impact your profit margin.
• Results could be skewed if your cost of goods sold is not accurately measured.
• It does not indicate cash flow or liquidity status of your catering business.

KPI Industry Benchmarks:

In general, gross profit margins can vary significantly by catering business and industry type. In the catering industry, the average gross profit margin is around 70%.

Food and ingredient cost percentage

One of the most important KPIs in the catering business is the food and ingredient cost percentage. This KPI measures the cost of ingredients used in a dish as compared to its selling price. Every catering business should keep a tab on this KPI as it can significantly impact their profitability.

Definition

The food and ingredient cost percentage is the ratio of total food and ingredient costs to the total revenue generated from selling the dish. It is expressed as a percentage.

Use Case

This KPI helps catering businesses determine the profitability of a particular dish. They can analyze which dish is costing them more and which dish is bringing in more profits. Catering businesses can use this valuable information to optimize their menu offerings.

How To Calculate KPI

To calculate the food and ingredient cost percentage, use the following formula:

Calculation Example

Let's say a catering business sells a dish for $20. The total cost of food and ingredients used in this dish is $8. To calculate the food and ingredient cost percentage for this dish:

KPI Advantages

• Helps catering businesses determine the profitability of a dish
• Enables businesses to optimize their menu offerings
• Provides valuable insights into ingredient costs

KPI Disadvantages

• Does not take into account labor costs
• Does not consider overhead costs
• May not be accurate for dishes that require a lot of skill and time to prepare

KPI Industry Benchmarks

The industry benchmark for the food and ingredient cost percentage KPI is around 25-30% for full-service catering and around 35-40% for drop-off catering.

Labor cost percentage

When running a catering business, keeping track of important KPI metrics can greatly aid in making informed decisions and maintaining success. One of the most critical KPI metrics to track is labor cost percentage.

Definition

Labor cost percentage represents the total percentage of revenue spent on labor expenses, including salaries, wages, benefits, and training costs.

Use Case

This KPI metric is valuable for catering businesses to track because it helps determine the overall efficiency of labor and staff management. Properly managing labor costs can greatly increase profitability and business success.

How to Calculate KPI

To calculate labor cost percentage, use the following formula:

Calculation Example

For example, if a catering business spent $20,000 on labor costs and generated $100,000 in revenue, the calculation would look like this:

KPI Advantages

• Helps identify inefficiencies in labor management
• Allows business owners to adjust labor costs to maximize profits
• Aids in creating more accurate labor budgets

KPI Disadvantages

• May not account for variations in seasonal revenue
• Does not account for other factors that may affect labor expenses, such as turnover or hiring new staff
• May not accurately reflect the quality of service provided by staff

KPI Industry Benchmarks

Industry benchmarks for labor cost percentage can vary greatly depending on the type of catering business and location. However, a general benchmark is around 20-30% of total revenue.

Number of events catered per month.

As a catering business owner, tracking the number of events catered per month is crucial in determining business growth, revenue, and customer satisfaction. This KPI measures the total number of events a catering business serves per month.

Definition

The number of events catered per month is a KPI that measures the quantity of events a catering business serves per month. It helps owners to track their business growth and identify areas of improvement.

Use Case

This KPI is important for catering businesses to understand their potential customer base and target marketing strategies. It can also provide insights into the demand for specific event types and help allocate the correct amount of resources and labor for each event type.

How To Calculate KPI

The formula for calculating the number of events catered per month is:

Calculation Example

For example, if a catering business serves 50 events in a month, the number of events catered per month would be:

KPI Advantages

• Helpful in determining the growth of a business
• Provides insight into the demand for specific event types
• Can help allocate the correct amount of resources and labor for each event type

KPI Disadvantages

• Does not take into account the size of events catered
• May not accurately reflect the business's profitability
• Could be affected by seasonal changes or external events that affect the demand for catering services

KPI Industry Benchmarks

The average number of events catered per month varies depending on the industry. For example, according to the National Restaurant Association, the average catering revenue for a restaurant catering operation in the United States is around $438,000 per year, which equates to an average of 1-3 events per day.

In conclusion, tracking KPIs is a critical component of running a successful catering business. By measuring customer satisfaction rates, repeat business rates, and average order values, as well as gross profit margin, food and ingredient cost percentage, labor cost percentage, and number of events catered per month, catering business owners can gain valuable insights into the health of their business and make data-driven decisions that will drive growth and profitability.

Understanding these metrics is especially important for those who are just starting out, but even established businesses can benefit from fine-tuning their operations. By identifying areas for improvement and staying up-to-date on industry trends, catering businesses can better meet the needs and preferences of their clients and stand out from the competition.

So, whether you're sipping your morning coffee or winding down your workday, take a moment to reflect on how you are measuring these KPIs and where you can make improvements to deliver even better service to your customers. Here's to many successful catering events ahead!