The coffee shop industry has become very competitive, on the back of strong market demand, many coffee shops have flourished recently. In order to monitor your coffee shop performance and improve its profitability, make sure to track important Key Performance Indicators (KPIs).
Whether you want to better monitor your business’ performance, or you’re preparing a financial plan for your coffee shop, you must understand the most common KPIs for coffee shops.
This article discusses the 10 most important KPIs coffee shop owners should track and how they can calculate them. Let’s dive in!
1. Average revenue per table
This coffee shop KPI depends on the number of tables turned (or “covers” ie the number of tables you have served in a certain period of time).
As such, this metric is the amount of revenue you generate per table turned (also known as “cover”).
Of course, table turned can also be understood as customer orders (especially if you operate a takeaway coffee shop). In that case, the metric simply is the average revenue per order.
Average Revenue per table = Revenue / # tables turned
For example, if monthly revenue is $30,000 from 500 table turned, then the average revenue per table will be:
Average Revenue per table = $30,000 / 5,000 = $60
2. Employee turnover rate
The food and beverages sector faces high turnover rates, a big challenge for the industry. Usually, hourly staff will work for a short period of time (a few weeks or months typically). As a result, hiring staff is costly, and training takes considerable time.
Therefore, the employee turnover rate is an important KPI to track for coffee shop owners. This metric refers to the percentage of staff remaining in your business at the end of a given period.
To calculate employee turnover, you divide retained employees by the average number of employees:
Employee turnover rate (ETR) = Retained employees / Average employees
Retained employees = # starting employees – # employees at end of period
Average employees = (# starting employees + # employees at end of period ) / 2
For instance, if at the start of a year you had 20 employees and at the end of year you had 24 employees (of with 12 retained employees), your ETR will be:
ETR = 8 / 24 = 33%
Retained employees = 20 – 12 = 8
Average employees = (20 + 24) / 2
3. Customer retention rate
Your coffee shop business will thrive if you can maintain and lure new customers to your premises. The more loyal customers you have, the more consistent your sales will be.
This is where customer retention rate comes in handy: this KPI allows coffee shop owners to track how sticky their customer base is.
Yet, calculating customer retention rates can be challenging, but there are some solutions (such as CMS platforms) that you can use to track this KPI.
You can calculate customer retention as follows:
Customer retention rate (CRR) = Retained customers / # customers at start of period
Retained customers = # customers at end of period – # new customers
For example, if at the start of the year your customers were 1,200 and at the end, the customers were 1350 with 400 new customers, then CRR will be:
For instance, if at the start of a year you had 1,200 customers and at the end of year you had 1,350 customers (of with 400 new customers), your CRR will be:
ETR = 950 / 1,200 = 80%
Retained customers = 1,350 – 400 = 950
4. Revenue per available seat hour (RevPASH)
RevPASH is one of the most important KPIs for coffee shop owners. RevPASH is also an important metric for any business in the food & beverage industry like restaurants, bars, etc. It gives insight into how effective or efficient each seat generates revenue. The KPI is critical since it includes capacity and time besides revenue.
In other words, RevPASH helps you plan employee shifts and shop layout, purchase supplies, and enhance table turnover.
You can calculate RevPASH as follows:
RevPASH = Total revenue / # seat hours
# seat hours = # seats x opening hours
For example, if your coffee shop has a capacity of 40 seats and is open 12 hours a day, your seat hours will be 480. Therefore if you have Revenue of $5,600 per day, RevPASH will be:
RevPASH = $5,600 / 480 = $11.7
# seat hours = 40 x 12 = 480
5. Labor cost percentage
This metric is essential as it shows the percentage of your revenues that goes to paying your staff. In addition, labor cost percentages offer insight into staffing. This will help the business understand if it is understaffing or overstaffing during particular times of the day.
To calculate the labor cost percentage, you should take a period and track Revenue over that time compared to labor cost:
Labor cost percentage = Labor costs / Total revenue
For instance, if in a month you generate sales of $10,000 and the cost of labor is $4,000, then the labor cost percentage will be:
Labor cost percentage = $4,000 / $10,000 = 40%
6. Revenue per employee
Also referred to as “sales per head”, the revenue per employee is another important KPI for coffee shops. The metric can be tracked monthly or weekly for negative or positive trends.
For example, revenue per employee might drop during off-peak hours (late morning or late afternoon hours) when there are less customers.
Revenue per employee = Total revenue / # employees
For example, if you generate $1,000 of revenues in a day with 2 employees, the Revenue per employee will be
Revenue per employee = $1,000 / 2 = $500
7. Gross margin
Profit is every business’s aim. Therefore, it is essential to know your profit margin relative to sales.
Before calculating gross profit margin, you must calculate gross profit by subtracting all Cost of Goods Sold (COGS) from revenue. Then, gross margin is expressed as a percentage, calculated by dividing gross profit by Revenue.
Gross margin = Gross profit / Revenue
Gross profit = Revenue – COGS
For instance, if COGS are $15,000 and revenues are $50,000, then gross margin is 70%.
Gross margin = $35,000 / $50,000 = 70%
Gross profit = $50,000 – $15,000
8. Break-even point
Among the most crucial KPIs that your coffee shop should track is the breakeven point. This number is important in projecting how much revenue you must generate to make profits (to “break even”).
To calculate the break-even point:
Break-even point = Fixed costs / Gross profit per product
Gross profit per product = Selling price – COGS per product
For example, assuming:
- Fixed costs are $10,000 per month
- Each cup of coffee costs $0.8 each cup of coffee is sold at $2
The Gross margin per product (coffee cup) is $1.20, and the break-even point 8,300 cups of coffee:
Break-even point = $10,000 / $1.20 = 8,300 cups of coffee
Gross profit per product = $2.00 – $0.80 = $1.20
9. Net Promoter Score
Net promoter score is an essential indicator of success in a business. You determine the KPI by asking customers how likely they would recommend your business to others.
You then core their responses on a scale of 1-10, with 10 being most likely and 1 unlikely. Customers who score 9-10 are promoters, 7-8 are passives, and any score under 6 is categorized as a detractor.
NPS = ( # promoters – # detractors )
For example, if you have:
- 100 responses
- 80 promoters
- 10 passives
- 8 detractors
NPS = 80 – 8 = 72