Maximize Success: The Top 7 KPIs Every Franchise Restaurant Owner Needs to Track

Do you own a franchise restaurant or are you planning to invest in one? If so, you know that keeping track of key performance indicators (KPIs) is essential for your success. In this article, we will explore the top seven KPIs that every franchisee restaurant owner should track and calculate.

• Have you ever wondered what the average ticket price per customer is in the franchise restaurant industry? This KPI is a great indicator of your restaurant's performance and can help you optimize your menu pricing strategy.
• Another important KPI is the franchisee profit margin. By monitoring this metric, you can ensure that your franchise is making a profit and identify areas where you can reduce costs.
• Customer satisfaction rate is critical to keeping customers coming back to your franchise. By tracking this KPI, you can identify areas where your franchise may need improvement and make necessary changes to ensure customer satisfaction.

These KPIs are just the beginning. To learn about the remaining four key performance indicators, continue reading and discover how to track and calculate each one.

1. Average ticket price per customer

As a franchise restaurant owner, tracking your restaurant's KPI metrics is crucial to maintaining profitability and growth. One key metric to measure is the average ticket price per customer.

Definition

The average ticket price per customer represents the average amount of money spent by a customer per visit. This metric takes into account all sales made within a single transaction, including food items, beverages, and any additional services such as delivery fees or gratuities.

Use Case

The average ticket price per customer is an important KPI for franchise restaurant owners to track because it reflects the restaurant's ability to generate revenue from each customer visit. By analyzing this metric, owners can identify opportunities to improve sales, such as implementing upselling techniques or offering specials that encourage customers to spend more.

How To Calculate KPI

To calculate the average ticket price per customer, divide the total sales for a given period by the total number of customers for that same period. The formula for calculating the average ticket price is:

Calculation Example

Suppose your restaurant had total sales of $10,000 for the month of June and served 1,500 customers in that same period. To calculate the average ticket price per customer, you would perform the following calculation:

Therefore, the average ticket price per customer for that month is $6.67.

KPI Advantages

• Allows you to identify opportunities to increase revenue
• Helps you measure the effectiveness of sales strategies
• Provides insight into customer spending habits and preferences

KPI Disadvantages

• Does not take into account the frequency of customer visits
• Does not provide insight into the profitability of menu items
• Is influenced by external factors such as seasonal fluctuations

KPI Industry Benchmarks

According to industry benchmarks, the average ticket price per customer for restaurants ranges from $15 to $25. However, this can vary greatly depending on the type of restaurant and location.

Franchisee profit margin

Franchisee profit margin is an important KPI metric that measures the profitability of a franchise operation. It provides insight into how efficiently a franchise is running and helps franchise owners and investors determine whether a franchise is worth investing in or not.

Definition

Franchisee profit margin is the percentage of revenue remaining after deducting all costs associated with the operation of a franchise business. It is calculated as follows:

Use Case

Franchisee profit margin is used to help franchise owners and investors understand the profitability of a franchise business. It provides insight into how efficiently a franchise is operating and helps to identify areas where improvements can be made.

How To Calculate KPI

To calculate franchisee profit margin, you need to know the total revenue and total costs associated with running the franchise.

For example, if a franchise generates $500,000 in total revenue and has $400,000 in total costs, its profit margin would be:

Calculation Example

Let's say you are a franchise owner of a fast-food chain. Your franchise's total revenue for the year is $2 million, and your total costs are $1.5 million. To calculate your franchisee profit margin:

KPI Advantages

• Provides insight into the profitability of a franchise business.
• Helps to identify areas where improvements can be made to increase profitability.
• Can be used to compare the performance of different franchises.

KPI Disadvantages

• May not provide a complete picture of a franchise's financial health.
• Does not take into account non-financial factors that can impact a franchise's success.
• May be influenced by external factors beyond the franchise's control, such as changes in the economy or consumer preferences.

KPI Industry Benchmarks

The industry benchmark for franchisee profit margin varies depending on the type of franchise. However, a good profit margin for a franchise typically ranges from 10% to 20%. This may vary based on the franchise's location, size, and other factors.

3. Customer satisfaction rate

Definition

Customer satisfaction rate is a KPI metric that measures a customer's overall satisfaction with a franchisee restaurant's products and services. It reflects the customer's opinion about the quality of food, service, ambiance, and overall dining experience.

Use Case

As a franchise restaurant owner, it is essential to track and improve the customer satisfaction rate metric. This helps in understanding the customer's needs and preferences, identifying areas of improvement, and providing a better dining experience to customers. A satisfied customer is more likely to return and recommend the restaurant to others, thereby positively impacting the overall revenue and profitability of the franchise.

How To Calculate KPI

Customer satisfaction rate can be calculated by dividing the number of satisfied customers by the total number of customers who responded to the survey and multiplied by 100.

Calculation Example

Let's assume that 80 customers responded to a survey, out of which 70 customers were satisfied, then the customer satisfaction rate can be calculated as:

KPI Advantages

• Helps in understanding the customer's needs and preferences
• Identifies areas of improvement
• Helps in providing a better dining experience
• A satisfied customer is more likely to return and recommend the restaurant to others

KPI Disadvantages

• Customer satisfaction is subjective and varies from person to person
• Customers may not provide honest feedback in fear of hurting someone's feelings
• Survey fatigue may cause customers to provide rushed or biased feedback

KPI Industry Benchmarks

• The average customer satisfaction rate in the restaurant industry is between 80-85%
• Chain restaurants have a higher customer satisfaction rate compared to independent restaurants
• Fast food restaurants have a lower customer satisfaction rate compared to casual dining restaurants

4. Number of repeat customers

Definition

Number of repeat customers is a key performance indicator that measures the percentage of customers who return to your franchisee restaurant to make additional purchases. This KPI provides insights into the loyalty of customers and their overall satisfaction with your restaurant.

Use Case

By tracking the number of repeat customers, you can gauge the effectiveness of your customer retention efforts. This KPI can help you identify areas of your business that need improvement, as well as measure the impact of any changes you make to improve customer satisfaction.

How To Calculate KPI

To calculate the number of repeat customers, divide the number of customers who have made more than one purchase by the total number of unique customers:

Calculation Example

Suppose your franchisee restaurant had 1,000 unique customers in the past month, and 200 of those customers made more than one purchase. To calculate the number of repeat customers:

Therefore, the number of repeat customers for your franchisee restaurant is 20%.

KPI Advantages

• Helps measure customer loyalty and satisfaction
• Allows you to monitor the effectiveness of your customer retention efforts
• Provides insight into the overall health of your franchisee restaurant

KPI Disadvantages

• May not accurately represent customer satisfaction if the sample size is too small
• Does not capture data on customers who visit your restaurant but do not make a purchase

KPI Industry Benchmarks

The number of repeat customers can vary widely across the restaurant industry, depending on factors such as price point, location, and target audience. However, a benchmark for a successful franchisee restaurant is typically around 20-30%.

5. Average order cycle time

Definition

Average order cycle time is a key performance indicator (KPI) used to measure the amount of time it takes to process an order from start to finish. This includes the time it takes for a customer to place an order, the time it takes for the kitchen to prepare the order, and the time it takes for the order to be delivered to the customer.

Use Case

Measuring average order cycle time is important for restaurants that want to provide fast and efficient service to their customers. This KPI can help restaurant managers determine if there are any inefficiencies in the ordering and delivery process that need to be addressed. By tracking this KPI, managers can identify areas where improvements can be made to increase efficiency and reduce wait times for customers.

How To Calculate KPI

To calculate average order cycle time, take the total time it takes to process all orders and divide that by the total number of orders processed during that time period.

Calculation Example

For example, let's say a restaurant processed 100 orders during a busy lunch hour that lasted 2 hours. The total time to process those orders was 3 hours and 30 minutes. To calculate the average order cycle time, divide 3.5 hours by 100 orders:

The average order cycle time for this restaurant during that time period was 2.1 minutes.

KPI Advantages

• Allows restaurants to identify inefficiencies in the ordering and delivery process.
• Can help restaurants improve customer service by reducing wait times.
• Can help increase overall efficiency and productivity in the restaurant.

KPI Disadvantages

• May not take into account factors that are beyond the restaurant's control, such as traffic or weather conditions.
• May not accurately reflect how long it takes to prepare different types of dishes.
• May vary depending on the time of day and day of the week.

KPI Industry Benchmarks

The benchmark for average order cycle time can vary depending on the type of restaurant and the time of day. Generally, the benchmark for fast food restaurants is around 3 to 4 minutes, while the benchmark for sit-down restaurants is around 10 to 15 minutes.

6. Franchisee turnover rate

Definition

Franchisee turnover rate is a KPI that measures the percentage of franchisees who leave a franchise system during a specific period. This KPI is calculated by dividing the number of franchisees who leave the system by the total number of franchisees in the system.

Use Case

Franchisee turnover rate is an important KPI for franchisors, as it can indicate issues with the franchise system, such as poor support, high fees, or inadequate training. A high franchisee turnover rate can also signal problems with the franchisor's recruitment and selection processes or with the viability of the franchise model itself.

How To Calculate KPI

To calculate the franchisee turnover rate, you need to find the number of franchisees who left the system in a given period and divide it by the total number of franchisees in that same period. The formula for calculating the franchisee turnover rate is:

Calculation Example

Let's say a franchise system had 50 franchisees at the beginning of the year and 10 of them left during the year. The franchisee turnover rate would be:

KPI Advantages

• Provides insight into the strength of the franchise system and the franchisor's performance in supporting and retaining franchisees
• Indicates potential opportunities to improve the franchise system and reduce franchisee turnover
• Enables comparison of franchisee turnover rates across different franchise systems for benchmarking purposes

KPI Disadvantages

• May not reflect differences in franchisee performance or market conditions that result in some franchises being more successful than others, leading to more turnover in weaker locations
• Does not account for the reason behind the franchisee's exit, so high turnover rates may be due to factors outside of the franchisor's control
• Can be influenced by factors not related to the franchisor's performance, such as economic downturns or changes in consumer preferences

7. Brand recognition and awareness level

Definition

Brand recognition and awareness level is a franchise key performance indicator (KPI) used to measure the level of awareness or familiarity of the brand among the target audience. It determines how successful a franchise is in creating a strong brand image and communicating it effectively to the customers.

Use Case

Brand recognition and awareness level is crucial for a franchise, as it directly impacts customer acquisition and retention, sales, and overall financial performance. High brand recognition and awareness level translate into increased customer loyalty and trust, which lead to repeat business and positive word-of-mouth marketing.

How To Calculate KPI

The formula to calculate brand recognition and awareness level is:

Calculation Example

Suppose, a franchise surveyed 1000 customers, and 700 of them knew the brand from its logo or slogans. Then the brand recognition and awareness level would be:

KPI Advantages

• Measures the effectiveness of marketing and branding strategies.
• Helps in identifying the target audience and their preferences.
• Provides a benchmark for the franchise's brand value and reputation.

KPI Disadvantages

• Results may vary based on the methodology and sample size of the survey.
• Does not account for the quality of brand perception or customer experience.
• Saturation of the market may lead to the loss of brand recognition and awareness level.

KPI Industry Benchmarks

The average brand recognition and awareness level for quick-service restaurants is around 50% to 70%, while full-service restaurants have it ranging from 40% to 60%. However, these benchmarks may vary based on the franchise's location, target market, and competition.

In conclusion, tracking key performance indicators (KPIs) is crucial for franchise restaurant owners who want to ensure their success in the industry. By monitoring the average ticket price per customer, franchisee profit margin, and customer satisfaction rate, owners can identify areas for improvement and make necessary changes in their operations.

• Measuring the number of repeat customers can give insight into the loyalty of your customer base and help you identify ways to retain them.
• The average order cycle time can reveal inefficiencies in your franchisee's operations and help you improve your service time to create a better customer experience.
• Tracking the franchisee turnover rate is essential to ensure franchisees are satisfied with their investment, as high turnover can negatively impact the brand.
• Lastly, brand recognition and awareness level can showcase the success of your franchise's marketing efforts and help you attract more potential customers.

By keeping track of these seven KPIs, franchise restaurant owners can improve their operations, increase profitability, and ultimately, achieve success in the competitive industry.