Running a successful pub is about more than just great drinks and atmosphere. To truly understand the performance of your establishment, you need to track key performance indicators (KPIs). These metrics give you valuable insights into what's working and what needs improvement. In this article, we'll explore the top seven pub KPI metrics that every owner should be tracking.
- Sales revenue per customer. This KPI is a measure of how much money each customer spends on average. It's an important number to know, as it can help you identify trends and make strategic decisions about pricing and menu offerings.
- Average length of stay per customer. The longer customers stay at your pub, the more money they're likely to spend. This KPI can help you identify ways to create an environment that encourages customers to stay longer and order more drinks and food.
These are just a few examples of the KPIs we'll cover in this article. By tracking these metrics and others, you'll be able to optimize your pub's performance, increase revenue, and attract more customers. So, let's dive in and explore the data that matters most to your business.
1. Sales revenue per customer
Definition: Sales revenue per customer is a key performance indicator that measures the average revenue generated by each customer in a pub.
Use Case: Sales revenue per customer is an important metric for pubs as it helps them understand the amount of revenue generated by each customer on average. This KPI aids in identifying the customers who are the biggest contributors to the pub's revenue and enables the pub to segment its customer base based on the revenue generated per customer.
How To Calculate KPI: The formula for calculating sales revenue per customer is as follows:
Calculation Example: Suppose a pub generated a total sales revenue of $50,000 in a month and had 500 customers, then:
- Helps identify high-value customers
- Aids in customer segmentation
- Assists in setting revenue goals
- Does not account for customers who do not make purchases
- Does not identify profitability per customer
KPI Industry Benchmarks: According to industry benchmarks, the average sales revenue per customer in a pub is approximately $50 - $100.
Tips & Tricks:
- Use the sales revenue per customer KPI to identify your top customers and create personalized experiences for them to maximize their lifetime value
- Segment your customer base based on their sales revenue per customer to understand the revenue generated by each customer group and tailor your marketing efforts accordingly
- Regularly track this KPI to identify trends and adjust your pricing strategy accordingly
Pub Financial Model
Average length of stay per customer
Average length of stay per customer refers to the average amount of time a customer spends at a pub during each visit.
This KPI is valuable to track for several reasons. Firstly, it helps identify the pub's busiest times so that staffing levels can be maximized. Secondly, it can be used to optimize pricing strategies, especially during peak hours. Thirdly, it can be a great way to measure customer satisfaction. If customers are staying longer, it is a good indication they are enjoying themselves and potentially spending more money.
How To Calculate KPI
To calculate the average length of stay per customer, divide the total time customers spent at the pub by the total number of customers during the same period. The formula for calculating this is:
If a pub had 100 customers who collectively spent 500 hours at the pub, the average length of stay per customer would be 5 hours per person.
- Helps identify the pub's busiest times so that staffing levels can be maximized
- Can be used to optimize pricing strategies, especially during peak hours
- Great way to measure customer satisfaction
- May not gauge customer loyalty
- Doesn't account for customers who visit multiple times in a single period
KPI Industry Benchmarks
According to a survey of American pubs, the average length of stay per customer is approximately 50 minutes. However, this number varies depending on several factors such as the pub's location and target audience.
Tips & Tricks
- Encourage customers to stay longer by offering promotions during quieter times.
- Use a customer loyalty program to track who is visiting the pub multiple times and why.
- Use this KPI in conjunction with others, such as sales per customer, to get a better picture of customer behavior.
3. Customer satisfaction score
Customer satisfaction score (CSS) is a metric used to measure the degree to which customers are satisfied with the products, services, or experiences provided by a business. A high CSS indicates that customers are more likely to return to the business and recommend it to others.
The CSS is an essential metric to track for businesses that want to improve customer loyalty and retention. It can be used to identify areas where customers are not satisfied and to make improvements to the products or services offered.
How to calculate KPI
The CSS is calculated by asking customers to rate their satisfaction with the business on a scale of 1 to 10. The formula for CSS is:
CSS = (Total of all ratings / Number of respondents) * 100
Suppose a business asked 100 customers to rate their satisfaction on a scale of 1 to 10, and the total of all ratings was 850. The CSS would be calculated as:
CSS = (850/100) x 100 = 85%
- The CSS provides a direct measure of customer satisfaction.
- It is a simple metric that is easy to understand and calculate.
- A high CSS can lead to increased customer loyalty and retention.
- The CSS can be subjective and may not capture all aspects of the customer experience.
- Customers may provide ratings that are not representative of their true satisfaction.
- The CSS does not provide insight into the reasons why customers are satisfied or dissatisfied.
KPI industry benchmarks
The industry benchmark for CSS varies depending on the type of business. However, a CSS of 80% or higher is generally considered to be good. For comparison, the average CSS for the retail industry is around 75%, while the average CSS for the banking industry is around 85%.
Tips & Tricks
- Make sure to ask for feedback from a representative sample of customers to get an accurate CSS.
- Consider using a third-party survey service to ensure unbiased results.
- Use the CSS in combination with other metrics, such as customer retention rate and net promoter score, to get a more complete picture of customer satisfaction.
4. Number of repeat customers
The number of repeat customers KPI measures the percentage of customers who return to a pub after their initial visit. This metric is an essential indicator of customer satisfaction and engagement, and it can help you understand how effectively you retain customers.
A healthy number of repeat customers indicates that your pub has an established customer base that enjoys returning for your offerings. By tracking this KPI, you can identify areas where you need to improve to retain customers and increase revenue.
How To Calculate KPI
To calculate the number of repeat customers KPI, divide the number of customers who have made multiple visits by the total number of customers and multiply by 100.
Suppose your pub had 1,000 customers in a month, and 250 of them made multiple visits during the same period. The repeat customers KPI is calculated as follows:
- The number of repeat customers KPI can help you track customer loyalty and satisfaction.
- You can identify patterns and trends that can help you make informed business decisions.
- This metric can help you build and retain a strong customer base.
- The number of repeat customers KPI does not take into account the number of visits a customer makes.
- It may not provide a complete picture of your pub's customer retention efforts, as other factors can influence customer behavior.
- It can be challenging to define the criteria for a repeat customer.
KPI Industry Benchmarks for the KPI: 'Number of repeat customers'
According to industry benchmarks, the number of repeat customers varies depending on the pub's location, size, and niche. However, a healthy target for this KPI is between 18% and 25%.
Pub KPI Tips & Tricks
- Offer loyalty programs to encourage repeat visits and keep your customers engaged.
- Collect customer feedback regularly to identify areas where you can improve.
- Provide excellent customer service to make your customers feel valued and appreciated.
5. Upsell rate for cocktails and higher-priced beverages
The upsell rate KPI measures the percentage of customers who purchase additional high-priced beverages like cocktails or premium beers when already purchasing a drink at the bar.
The upsell rate KPI is crucial for bars as it helps them realize the effectiveness of their sales strategies. A high upsell rate implies that the bar staff is well trained and can convince customers to order high-priced drinks. This way, the bar can enhance the value of their sales and revenue.
How To Calculate KPI
Upsell rate KPI = (Number of premium-drinks sold / Total drinks sold) x 100
Suppose a bar has sold 600 drinks in a week, comprising 420 regular beers and 180 cocktails. Out of these, 120 customers purchased a premium drink, the upsell rate KPI would be:
Upsell rate KPI = (120 / 600) x 100 = 20%
- It can help bars measure the effectiveness of their sales strategies in persuading customers to buy high-priced drinks.
- Yields insights into consumer purchasing behaviors.
- Enables both personalized and profitable sales and revenue opportunities to promote.
- It's narrowly focused only on premium drink sales, which means other beverages may not be tracked.
- The KPI may not be helpful for bars that don't serve high-priced drinks or just sell beer, wine, and a few regular cocktails.
- It can report artificially high upsell rates if the prices of high-priced drinks are not significantly high.
KPI Industry Benchmarks for the KPI: Upsell rate for cocktails and higher-priced beverages
Industry benchmarks show that the average upsell rate across all beverage types for a bar is around 17%.
Tips & Tricks:
- Train staff to recommend high-priced drinks as add-ons to customers who have already ordered a regular drink.
- Create marketing strategies to promote high-priced drink specials, for instance featuring prominent cocktails on menus, table tents, social media posts, or bar posters.
- Offer customers trial samples so that they may be enticed to purchase more high-priced beverages.
6. Food cost percentage
Food cost percentage is a key performance indicator (KPI) used to track the cost of the raw materials used to prepare food and beverages as a percentage of total sales in a pub or restaurant. It helps to indicate the profitability of the pub's food menu.
Food cost percentage plays a critical role in determining the pricing of food items. A low food cost percentage ensures that the business is making a good profit margin on food sales while a high percentage can indicate a problem with pricing or operational inefficiencies. By regularly monitoring this KPI, pub owners and managers can adjust their prices and menu items to ensure maximum profitability.
How To Calculate KPI
The formula to calculate food cost percentage is:
Food Cost Percentage = (Total Cost of Food / Total Food Sales) x 100
Let's say that your pub has total food sales of $10,000 for the month and your total cost of food for the same period is $3,000.
Using the formula, we get:
Food Cost Percentage = ($3,000 / $10,000) x 100 = 30%
- Maximizes profit: By tracking food cost percentage, pub owners can see which menu items are profitable and adjust prices or operational strategies accordingly.
- Identifies operational inefficiencies: A high food cost percentage can indicate waste in the kitchen or operational inefficiencies that need to be addressed.
- Helps with menu planning: Tracking this KPI allows pub owners and managers to understand which menu items are most profitable and make data-driven decisions about future menu planning.
- Does not account for labor costs: Food cost percentage does not take into account the cost of labor, which can also impact profitability.
- Does not consider overhead costs: This KPI only accounts for the direct cost of food and beverages and does not include overhead costs such as rent, utilities, or marketing.
- Varies by industry: Benchmarks for food cost percentage can vary based on the type of pub or restaurant and its location, so industry benchmarks should be taken with a grain of salt.
KPI Industry Benchmarks for the KPI: '6. Food cost percentage'
While food cost percentage can vary significantly based on the type of pub, the industry benchmark is generally considered to be 25-30%.
3 Tips for Improving Food Cost Percentage
- Offer daily specials using ingredients that need to be used up to reduce waste
- Offer smaller portion sizes to help reduce food costs
- Perform regular inventory checks to ensure accurate tracking of food costs
7. Entertainment cost as a percentage of total revenue
Entertainment cost as a percentage of total revenue measures the percentage of revenue spent on entertainment expenses such as live entertainment, music, and promotions.
This KPI is commonly used in the pub industry to determine how much of the revenue should be allocated to entertainment expenses. It helps to assess the impact of entertainment expenses on revenue and profits. A high percentage may indicate that too much money is being spent on entertainment, while a low percentage may suggest that more investment is required in this area to attract customers and increase revenue.
How To Calculate KPI
Entertainment cost as a percentage of total revenue can be calculated using the following formula:
If the total revenue of a pub is $100,000 and the total entertainment cost for the same period is $10,000, then:
The entertainment cost as a percentage of total revenue is 10%.
- Helps in determining the appropriate amount to be spent on entertainment expenses.
- Allows for better tracking and management of entertainment expenses.
- Helps to assess the effectiveness of the entertainment activities in generating revenue and profits.
- Does not take into account other factors that may impact revenue and profits, such as the quality of the entertainment or the type of customers attracted.
- May not be relevant to pubs with low or no entertainment expenses.
KPI Industry Benchmarks for the KPI: '7. Entertainment cost as a percentage of total revenue'
The benchmark for entertainment cost as a percentage of total revenue varies depending on the type, location, and size of the pub. In general, an entertainment cost between 5-15% is considered reasonable for pubs.
Tips & Tricks
- Monitor this KPI regularly to ensure that you are investing the right amount of money into entertainment activities.
- Compare your entertainment cost as a percentage of total revenue to similar pubs in your industry to identify areas for improvement.
- Consider adjusting your entertainment budget based on customer feedback and the reaction to different entertainment activities to get the most out of your investment.
Tracking key performance indicators is crucial for running a successful pub. By consistently monitoring the right metrics, pub owners can gain valuable insights into their business, identify areas for improvement, and make strategic decisions that can ultimately increase revenue and improve customer satisfaction.
- Sales revenue per customer provides insight into how much money each customer spends on average. This KPI can help pub owners make informed decisions about pricing and menu offerings.
- Average length of stay per customer is another important KPI to track. Pub owners can use this information to identify ways to encourage customers to stay longer and order more drinks and food, ultimately increasing revenue.
Other important pub KPIs to consider include customer satisfaction score, number of repeat customers, upsell rate for cocktails and higher-priced beverages, food cost percentage, and entertainment cost as a percentage of total revenue. By regularly tracking these metrics, pub owners can make data-driven decisions and continually improve their business to meet the needs and expectations of their customers.
Overall, monitoring key performance indicators is crucial for running a successful pub business. By taking a strategic and data-driven approach to decision-making, pub owners can optimize their performance and stay ahead of the competition.
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