Are you looking to boost your drive-thru restaurant's performance? Whether you're a seasoned owner or just starting out, the key to success is tracking the right metrics. In this article, we'll highlight the top seven KPIs that you should be tracking, and show you how to calculate them effectively.
- Average Order Value (AOV) - Maximizing your AOV is crucial for driving revenue. By tracking AOV, you can better understand how customers are spending money at your restaurant.
- Employee Turnover Rate (ETR) - Employee retention is essential for creating a consistent experience. It's important to attract and retain top talent in your drive-thru restaurant to ensure a smooth operation.
- Revenue Growth Rate (RGR) - Tracking revenue growth over time will help you gauge whether you're on track to meet your business goals. It's essential for growing your restaurant business.
At the end of the day, tracking these KPIs will provide you with valuable insights into your drive-thru restaurant's performance. Stick with us as we dive into each of these metrics in detail and show you how to calculate them effectively.
Average order value (AOV)
The average order value (AOV) is a vital KPI metric for drive-thru restaurants. It determines the average value of orders placed by customers, which assists in analyzing customer spending habits and in identifying sales trends over a given period. Here's everything you need to know about this crucial metric:
Average order value (AOV) is the mean amount of money spent by a customer in a single transaction, calculated by dividing the total revenue from all orders by the number of orders placed.
AOV is a crucial metric for drive-thru restaurants since it is a useful tool for analyzing sales trends and customer purchase habits. Restaurants may use AOV to identify customer spending habits and to identify opportunities to increase revenue per transaction.
How To Calculate KPI
Suppose a drive-thru restaurant recorded $20,000 in total revenue and received 1,000 orders for a certain period. So, the AOV for that period would be:
In this case, the AOV at the restaurant was about $20.
- Allows for the identification of customer trends and spending habits.
- Assists in identifying sales opportunities, such as promotions and bundling.
- Assists in determining optimal menu pricing to increase revenue per transaction.
- AOV can be thrown off by unusual purchases, making it less reliable.
- Difficult to benchmark across restaurants and food categories.
KPI Industry Benchmarks for the KPI: 'Average order value (AOV)'
- Burger Restaurants: $8-$15
- Pizza Restaurants: $15-$25
- Mexican Restaurants: $10-$20
- Coffee Shops: $3-$6
- Bakery Cafes: $7-$10
- Fast Food Restaurants: $6-$8
Some tips and tricks to improve AOV include:
- Introduce new items with greater value to the menu, such as meal deals.
- Use targeted promotions that incentivize customers to spend more.
- Offer substantial discounts on bulk purchases.
Drive-Thru Financial Model
Customer satisfaction rate (CSR)
Customer satisfaction rate (CSR) is a KPI that measures how satisfied customers are with the products or services provided by a drive-thru restaurant. Knowing how to track and calculate CSR is critical for drive-thru restaurants to improve their customer experience and increase customer loyalty. In this chapter, we will explain how to calculate CSR, provide an example, and list the KPI advantages, disadvantages, and industry benchmarks.
CSR is a KPI that measures the percentage of customers who are satisfied with their overall experience at a drive-thru restaurant. It takes into account various aspects of the customer experience, such as the quality of the food, the speed of service, the cleanliness of the restaurant, and the friendliness of the staff.
Drive-thru restaurants can use CSR to identify areas for improvement in their operations and customer service. By tracking CSR over time and comparing it to industry benchmarks, drive-thru restaurants can gain insights into customer satisfaction trends and adjust their operations accordingly.
How To Calculate KPI
Suppose a drive-thru restaurant served 100 customers in a day, and 80 of them reported being satisfied with their overall experience. The CSR would be calculated as follows:
Therefore, the CSR for that day is 80%.
- Provides insights into customer satisfaction trends
- Helps drive-thru restaurants identify areas for improvement in operations and customer service
- Helps drive-thru restaurants increase customer loyalty and retention
- The KPI is based on customer perception, which may not always be accurate
- There may be variations in customer expectations, which can make it difficult to interpret results
- Small sample sizes can result in inaccurate or unreliable results
KPI Industry Benchmarks for CSR
Quick Service Restaurants (QSRs): The average CSR for QSRs is around 80%. The top-performing QSRs have CSRs of 85% or higher.
Casual Dining Restaurants: The average CSR for casual dining restaurants is around 85%. The top-performing casual dining restaurants have CSRs of 90% or higher.
Tips and Tricks
- Collect customer feedback regularly to ensure accurate CSR measurements
- Ask specific questions to identify areas for improvement, such as 'Was the staff friendly and helpful?' or 'Was the food cooked to your liking?'
- Track CSR over time to identify trends and patterns
Average Order Processing Time (AOPT)
As a drive-thru restaurant owner or manager, one of the crucial metrics you should track and measure is the Average Order Processing Time (AOPT). It helps you analyze the amount of time it takes to take an order, prepare and deliver it to the customer. By using AOPT, you can identify bottlenecks in your restaurant processes and make necessary improvements to increase customer satisfaction and drive more revenue.
Average order processing time (AOPT) is the amount of time taken to complete one order processing cycle, from order taking to order delivering, on average. It includes the time taken to process an order, cook the food, pack it, and deliver it to the customer. It is calculated in minutes.
AOPT is a crucial metric for drive-thru restaurants because customers expect fast service. Long wait times can lead to customer dissatisfaction and loss of revenue. On the other hand, by keeping AOPT low, you can attract and retain more customers and increase revenue.
How To Calculate KPI
You can calculate the AOPT for your drive-thru restaurant by using the following formula:
Let's assume that your drive-thru restaurant served 200 customers in a day, and the total time taken to process all orders was 1,000 minutes. You can calculate the AOPT as follows:
- Helps drive-thru restaurants identify bottlenecks and inefficiencies in the order processing cycle.
- Helps optimize staffing levels and improve customer service.
- Enables restaurants to monitor and improve overall efficiency and productivity.
- Does not account for wait times for customers in the line before placing their orders.
- May not capture variations in order complexity and preparation time.
KPI Industry Benchmarks
The industry benchmark for AOPT is around 3-4 minutes per order. AOPT under 3 minutes is considered excellent, while above 4 minutes is below average. However, the benchmark may vary depending on the type of restaurant, menu, and location.
Three Tips to Improve AOPT:
- Optimize your menu and reduce complexity to reduce processing time.
- Train your staff to work efficiently and continually monitor their performance.
- Invest in technology such as point-of-sale systems and kitchen display systems to increase efficiency.
Employee turnover rate (ETR)
Employee turnover rate (ETR) is a key performance indicator that measures the rate at which employees leave an organization over a given period.
Employee turnover rate (ETR) is a metric that quantifies the number of employees who leave an organization in a given period, usually annually, expressed as a percentage of the total workforce.
ETR is a crucial metric that helps organizations understand the attrition of their workforce. High rates of employee turnover can be indicative of an unhealthy work environment, poor management, inadequate employee training or compensation, or simply a lack of employee engagement and motivation.
How To Calculate KPI
To calculate ETR, you need to divide the number of employees who left the organization during a particular period by the average number of employees during the same period. The resulting number is then multiplied by 100 to arrive at the percentage figure.
ETR Formula: ETR = (Number of employees who left ÷ Average number of employees) x 100
Suppose that an organization had 25 employees at the beginning of the year and 30 at the end of the year. During the year, 5 employees resigned. The ETR would be:
ETR = (5 ÷ ((25+30) ÷ 2)) x 100
ETR = 16.67%
- ETR is a simple and easy-to-calculate metric that provides a clear picture of employee retention levels in an organization.
- It helps organizations identify problem areas and take corrective measures in time to prevent further employee attrition.
- ETR allows for benchmarking against industry standards, which can be helpful in evaluating recruitment and retention strategies.
- ETR may not always provide a complete picture of the reasons behind employee attrition, as some employees may leave due to personal reasons rather than organizational issues.
- The metric doesn't account for the quality of employees who left, as the departure of low-performing employees may not necessarily be a bad thing for an organization.
- ETR can be distorted by seasonal variations or unusual events such as mergers, restructuring or lay-offs, which may affect the average number of employees.
Industry Benchmarks for the KPI: ' Employee turnover rate (ETR) '
The average employee turnover rate varies by industry, but according to a report by the Society for Human Resource Management (SHRM), the average voluntary turnover rate across all industries in the US was 16.8% in 2020. Meanwhile, turnover rates in the restaurant and hospitality industry are typically much higher, with some estimates putting them at around 80%.
Tips & Tricks
- Regularly track ETR to identify trends over time and take proactive measures to address high rates of employee turnover.
- Ensure that you have clear and up-to-date job descriptions, employee contracts, and a comprehensive employee handbook, which can help reduce misunderstandings and disputes that can lead to employee departures.
- Offer competitive compensation and benefits packages, develop a positive and supportive work culture, and provide training and development opportunities to help retain employees.
Gross profit margin (GPM)
Gross profit margin (GPM) is a key performance indicator that measures a company's profitability by showing the percentage of revenue left after deducting the cost of goods sold (COGS).
Gross profit margin (GPM) is the ratio that shows how much profit a company generates before deducting operating expenses such as salaries, rent, and marketing costs.
Gross profit margin (GPM) is an essential metric for drive-thru restaurants as it enables them to measure the efficiency of their operations. High GPM indicates that the restaurant is pricing its products correctly, managing its inventory effectively and minimizing wastage of raw materials.
How To Calculate KPI
The formula to calculate Gross Profit Margin (GPM) is:
GPM = (Revenue - COGS) ÷ Revenue x 100
Suppose a drive-thru restaurant generates $10,000 in revenue and incurs $3,000 in COGS. The calculation for GPM would be:
GPM = ($10,000 - $3,000) ÷ $10,000 x 100 = 70%
- Helps to determine the restaurant's profitability
- Enables monitoring of cost and pricing strategies
- Allows for comparison among different restaurants within the industry or region
- Does not factor in operating expenses
- May not paint the full picture of a drive-thru restaurant's financial health
- Can be impacted by seasonal changes, cyclical trends, and other external factors
KPI Industry Benchmarks
The average gross profit margin for drive-thru restaurants typically ranges between 60-80%.
Tips & Tricks
- Compare the GPM metric with industry benchmarks to determine the business's competitiveness.
- Consider reviewing GPM along with other metrics to gain a more holistic view of the business's financial health.
- Track GPM consistently and regularly to stay informed about changes in profitability.
Revenue growth rate (RGR)
As a serial entrepreneur, I know that drive-thru restaurants are all about maximizing revenue. The revenue growth rate (RGR) is a vital Key Performance Indicator (KPI) that tracks how fast your revenue is growing over a specific period of time. In this article, I will explain everything you need to know about this critical KPI, including its definition, use case, how to calculate it, calculation example, KPI advantages, KPI disadvantages, and industry benchmarks.
RGR simply measures the percentage change in your revenue, comparing it to the same period in the previous year. This KPI is the best indicator of how fast your business is growing and how well it's performing financially in the long run.
The purpose of tracking the RGR is to determine whether your business is growing or declining. This KPI helps identify trends in past performance, which can be used to forecast future revenue. It's essential to track the RGR regularly, as it enables you to evaluate your business's performance and respond to changes quickly.
How to Calculate KPI
To calculate the RGR, subtract the previous year's revenue from the current year's revenue. Divide the result by the previous year's revenue, then multiply by 100. The formula is:
RGR = [(Current year's revenue - previous year's revenue)/previous year's revenue] x 100
Suppose your previous year's revenue was $500,000, and your current revenue is $600,000. The RGR would be:
RGR = [(600,000 - 500,000) / 500,000] x 100 = 20%
- RGR is simple to measure and communicate
- It's an effective way to monitor growth over time
- It can help identify potential issues before they become major problems
- It doesn't account for changes in expenses
- Seasonal fluctuations can affect accuracy
- The KPI relies on historical data, which may not indicate future performance
KPI Industry Benchmarks for RGR
The industry benchmarks for RGR vary depending on the type of drive-thru restaurant. For quick-service restaurants, the average RGR is around 4% to 6%, while full-service drive-thru restaurants average around 2% to 4%. The benchmark can vary based on the seasonality of the business.
Tips & Tricks
- Focus on increasing revenue by improving sales, reducing costs, and marketing your products effectively
- Monitor your competitors' growth rates to determine your market position
- Use analytics tools to track your revenue growth and forecast future performance accurately
Customer retention rate (CRR)
As a serial entrepreneur with plenty of experience running different businesses, it's clear to me that customer retention is key to long-term success. In this chapter, I'll be talking about the customer retention rate (CRR), one of the top seven drive-thru restaurant KPI metrics. I'll go into detail about what it is, how to measure it, and what the advantages and disadvantages of tracking it are.
Customer retention rate (CRR) is a metric that measures the percentage of customers who come back to your restaurant after their first visit. In other words, it's a measure of how good you are at keeping your customers coming back for more.
The CRR is an important KPI for any drive-thru restaurant because it directly impacts profitability. The more customers you retain, the less money you have to spend on customer acquisition, which means more money in your pocket. In addition, high CRR scores are a sign that your customers are happy with your food and service, which can lead to positive word-of-mouth and increased visibility.
How To Calculate KPI
The formula for calculating the CRR is as follows:
CRR = ((CE-CN)/CS)) x 100
- CE = Number of customers at the end of a particular period
- CN = Number of new customers acquired during that same period
- CS = Number of customers at the start of that period
Let's say that your restaurant starts the year with 500 customers. During the year, you acquire 200 new customers, and at the end of the year, you have a total of 550 customers (CE). To calculate your CRR, you'd use the following formula:
CRR = ((550-200)/500) x 100 = 70%
This means that 70% of your customers have returned to your restaurant at least once during the year.
- Accuracy: The CRR is a very accurate measure of customer retention, as it takes into account both new and existing customers.
- Cost-effective: Retaining customers is typically more cost-effective than acquiring new ones, so tracking your CRR can help you save money on marketing and advertising.
- Measurable: Because the CRR is a numerical score, it's easy to track and compare over time, which can help you identify trends and areas for improvement.
- One-dimensional: The CRR only measures the percentage of customers who come back to your restaurant after one visit. It doesn't take into account the frequency of those visits or the amount of money they spend while they're there.
- Short-term focus: The CRR is a short-term metric that can fluctuate significantly from month to month, which means it may not be a reliable indicator of long-term customer loyalty.
KPI Industry Benchmarks
Industry benchmarks for the CRR can vary depending on the type of restaurant and the demographics of your customer base. Generally speaking, though, a CRR of between 50-70% is considered good for a drive-thru restaurant.
Tips & Tricks for Improving Your CRR
- Offer personalized promotions and discounts to repeat customers
- Train your employees to provide excellent customer service
- Solicit feedback from your customers and use it to make improvements to your menu and operations
In conclusion, tracking key performance indicators (KPIs) is critical to the success of any drive-thru restaurant. The seven KPIs highlighted in this article provide valuable insights on how to optimize revenue and operations, attract and retain top talent, and achieve growth. By tracking metrics such as Average Order Value (AOV), Employee Turnover Rate (ETR), and Revenue Growth Rate (RGR), restaurant owners and managers can make data-driven decisions to improve customer satisfaction, increase productivity, and ultimately drive profitability. We hope these tips on calculating KPIs effectively help you take your drive-thru restaurant business to the next level.
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