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.