Part 1 of 2

As a restaurant operator, you know it’s difficult to run a business in this market. But while the economy’s certainly gotten tougher over the last couple of years, the challenges facing restaurant owners are hardly unprecedented. Long before our friends on Wall Street started dusting off their resumes and updating their LinkedIn profiles, foodservice operators were working hard to keep their restaurants from joining the failed start-up club. At first glance, the odds seem to be stacked against you.

According to a recent study of Dallas-based start-ups, 23% of new restaurants shut down within the first year of business, 14% closed in the second and 7% failed in the third. As hospitality expert Richard Williams points out in a 2008 article, “Why Restaurants Fail”, these figures translate to a 61% failure rate for independent restaurants by the third year in business. (Franchise restaurants don’t fare much better, with a 57% failure rate by year three.) Williams also cites a 2003 Ohio State University study that revealed a 59% failure rate by start-up restaurants’ third year in business. These figures hardly inspire confidence in budding restaurateurs.

So what does it take to keep your restaurant from becoming another unhappy statistic?  It all comes down to maximizing your foodservice sales by understanding the way seating, table turns and per person averages combine to determine your restaurant’s hourly sales. In other words, before you can increase your customer count and improve your operation’s efficiency, you need to know your throughput. Our two-part look at throughput will help you through both steps.

Let’s start by defining what “throughput” is.

Hospitality expert Kim Zimmerman Florence describes throughput as “a ‘sales-building’ concept measured by sales per hour”. Florence explains that before restaurant owners and operators can effectively increase their profits, they need to better measure the sales they are making.

So how do you measure throughput? Florence offers a formula that any restaurant can use to gauge its current sales and quantify target profits:

Throughput Target = Seating Capacity x Seating Efficiency x Table Turn Times x Per Person Average

To illustrate just how simple the throughput formula is, she plugs in a sample restaurant’s numbers to calculate its target throughput:

For example, if you have 125 seats in your restaurants and your seating efficiency is 90%, the table turn time is 1 hour on average and your per person average sales is $15.00, you are generating $1,687 per hour.

Throughput Target: 125 x .90 x 1 x $15.00 = $1,687 per hour

Put Florence’s formula to the test and calculate your own restaurant’s throughput! It’s an easy and accurate way to measure your current foodservice sales and identify target profits.

In our next post, we’ll help show you how to use your throughput figures to improve your operations, from the moment guests walk through your door to the last course of the meal!

Tags | fail, Operations, per person average, profits, restaurant, sales, seating capacity, seating efficiency, success, table turn time, throughput, throughput target