Controlling Your Restaurants RevPASH

There are so many tactical elements to operating a restaurant business, and today we are going to discuss RRM, “Restaurant Revenue Management” – an important KPI, “Key Performance Indicator”.

Restaurant Revenue Management can be defined as simply selling the right seat, to the right customer, at the right price, and for the right duration of time.

When measuring revenue potential within the restaurant sector, the primary analysis needs to be done by measuring “revenue per available seat hour” and understanding “average seat duration”.  A secondary analysis needs to be done by measuring “average check” size and by maintaining specific “labor and food cost percentages”.

It is possible, that a restaurant could run at 75% capacity or more, and still not be profitable. This is why combining the primary and secondary analysis is extremely important. You must analyze and control (not cut) your price points, menu offerings, food costs, and labor costs continuously.

By measuring RevPASH, “Revenue Per Available Seat Hour”, you are tracking the rate at which revenue is generated and captures the trade-off between average check and restaurant usage. The best way to calculate this is to divide revenue for a desired time period by the number of seat-hours available during that time interval.

For example, a restaurant uses 75 seats and makes $1,575 on Thursday between 6 and 7pm. The RevPASH would be $21 (1,575 divided by 75) per seat per hour. This should be analyzed for each period of the day/night to get achieve your true seating efficiency.

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This is very much related to a restaurants number of turns and the length of the average meal cycle. As a restaurants number of turns increases and meal length decreases, the RevPASH increases. For example, a one minute reduction in meal time can increase RevPASH by approximately two percent.

Once you know the average meal length, you can determine many other aspects of the restaurant such as your full evening potential for each day of the week which will also help with break-even points, scheduling staff, purchasing food, and more.

The goal, to reduce the average meal length while continuing to over exceed the customer experience, which will increase revenue, decrease cost ratio percentages, and maximize your revenue per seat per hour.

Other ways to maximize your RevPASH; up-selling (menu training), table optimization, time-of-day management (lunch menus, late night menus), or running targeted promotions to fill seats during non-peak hours, like shown above. If you would like an analysis of your restaurants optimization, contact Key Restaurant Group today for a free strategy session.