Calculating Your Restaurant’s Customer Lifetime Value

Customers are what make your restaurant thrive. But, do you have an idea of the path your customers take to arrive at your restaurant?  Every business owner understands that a successful business starts with driving sales and revenue.  Occupied restaurant seats lead to full cash registers.  But how much are your customers really worth? Let’s explore the concept of Customer Lifetime Value (CLV) and what it means for your business.

One particular metric that many business owners consider is their Customer Lifetime Value.  Simply put, this is the dollar amount that a customer spends with you over a period of time.  Not all customers can be considered equivalent when it comes to a monetary value; there’s a significant difference between a fickle explorer and a loyal regular.  Ideally, you’d like to turn those first-time diners into repeat customers.

To calculate the Customer Lifetime Value for your restaurant, start by identifying the average order amount. To do this, divide your total revenue by the total number of orders over a set period of time (ideally a full year to account for any seasonal fluctuation). This figure is a good benchmark to refer to when considering not only CLV, but how to increase the typical order amount as well.

Next, you’ll need to determine how frequently your customers visit.  Divide the total number of orders by the tally of unique customers.  This will give you a figure for your average customer’s purchasing frequency.

** Note that this can be an inexact science. Some customers pay in cash, and not all point of sale systems log your customer names in a sortable format.  Try using some rules of thumb to estimate.  Restaurants in tourist-friendly areas will have more unique guests, whereas more rural locales will have a smaller customer base and naturally more recurring customers.  Can you estimate what percentage of your customers have eaten with you before?

To finish calculating Customer Lifetime Value, just multiply the purchasing frequency by the average order value.  This is the customer’s value over the course of the year.  We have one more variable to consider: how many years are in a ‘lifetime?’  Longstanding restaurants and brands can last generations.  Starbucks uses 20 years as an expectation for its repeat customers.  If you’re less established or on a shorter timeline, consider using five years as the window you can expect to make money from your typical customer.

Here is an example calculation of a Customer Lifetime Value:

When it comes to Customer Lifetime Value, the location of your business should be taken into consideration.  If your business is in a densely populated area or features a fair amount of tourism traffic, you will enjoy some first-time customer traffic naturally.  Your CLV may trend a bit lower, but you have the opportunity to win over that many more people.  The opposite is true for those restaurants in more rural or secluded areas. These locations rely on loyalty and repeat business, meaning the CLV figures must be higher by necessity. The good news is that a positive first impression goes that much farther in terms of driving tangible future sales. Need advice on how to attract first-time customers to your restaurant? We’ll dive into that next. We also discuss this in our 9 Simple Restaurant Marketing Ideas blog.

Customer Lifetime Value can give crucial insight into how much money your customers are worth beyond just today’s order. You can also get a picture of how much you should be spending on acquiring new customers in the first place. The goal of any marketing or advertising campaign is to generate a positive return on investment. So how do you ensure you’re maximizing these returns and getting the most out of your marketing efforts?

Let’s go back to a customer’s decision making path resulting in eating at your restaurant.  This funnel chart by SEO company Moz outlines the decision-making process:

To win new business, customers must first discover you.  Everything from the sign on your front door, to word-of-mouth, to search results on popular search engines play a part in enticing first-time customers to come in for a visit.  Every avenue counts, although restaurants in more populated areas have a natural advantage.

Once your name is out there, potential customers can begin their consideration process. Some questions they may ask themselves: do you serve what they’re in the mood for?  Is your price range within what they’re willing to spend? Are you in close enough proximity to their home? In the era of smartphones, even hungry people right outside your door may pause to qualify your restaurant before giving you a shot. They have access to photos, reviews, and business information right at their fingertips. This is why your online presence is crucial. Is there enough positive and accurate information about your business online to inspire a customer to pay you a visit?

The conversion aspect of funnel comes into play when a customer finally decides to dine with you. Ideally, the experience is in line with the customer’s expectations.  Are the most popular menu items available?  Was the customer greeted promptly by a friendly staff?  Did the food itself win them over?  If your restaurant provides consistency in these respects, your first-time customers have experienced a positive representation of your business, and your regulars can rest assured that they’ll be pleased the next time they come back.

After the bill is paid, the customer still has more to offer your business. This part is all about retention. A memorable dining experience, whether positive or negative, can result in an online review.  All business owners should be conscious of their feedback and manage accordingly, as this content becomes part of the consideration process for the next round of customers.  An equivalent method of receiving feedback can be in the form of a simple survey card with the check, which gives the opportunity for the customer to leave contact information for future communication.  This is absolutely an invitation for follow-up business, so act on it! Start by putting together a list with all of your gathered customer information. Then, you can create a monthly newsletter for your customer base to keep them in the know and keep your restaurant top of mind. Do you have rotating specials that might catch their interest? Do you host live events? Even consider offering coupons or promotions to inspire them to return as well.

If you work potential diners through the marketing funnel effectively, retention should come easily. It starts with making people aware of your restaurant through non-invasive methods and ends with putting in the effort to retain them as loyal customers through meaningful communication.

The Customer Lifetime Value figure is influenced by each of these individual steps.  Being cognizant of the decision-making process help you as a restaurant owner maximize the money that each individual customer is willing to spend over time. To improve your restaurant’s own CLV, try making small, but effective refinements to the customer experience. There’s plenty of room for creativity and improvement!

Restaurant Inventory: Tips & Terms

Inventory is the hardwiring of your restaurant. Your food inventory plan keeps everything in place, organized, and connected – and one tiny oversight can result in a drastic change for your business.

Keeping track of your kitchen inventory leads to more informed planning and decision-making. If you don’t track inventory effectively, your forecasting could be off, causing your supply orders to be inaccurate, which will waste a great deal of time, resources, and money.
The long answer to the question of how to do inventory in your restaurant gives a bit more insight on why inventory tracking is so important. It plays a part in all aspects of your restaurant – from the supply orders that you make to the customer orders that you take. Because this is ever-present in your job, dedicating the time to understand how to do inventory and adopting inventory management software is an investment that is well-worth it for your restaurant.

Let’s start with restaurant food inventory 101 – what it is, what terms are important, and some quick tips to help you easily track inventory in your restaurant.

What Is Food Inventory Management?

At its core, restaurant inventory tracking is a loss prevention tool and a measure of profitability for your restaurant.

Here is the fact about tracking your restaurant’s inventory: If you don’t know what you lose, you don’t know what you earn.

Inventory tracking means knowing exactly (a.) what supplies come into your restaurant, (b.) what goes out of your kitchen, and (c.) what’s left over in the back of the house. Without knowing these exact numbers, you won’t be able to firmly understand where your supplies are going.

It’s one thing to notice that your recent shipment of cheese depleted quite quickly, but it’s another thing know exactly why. Was all of this sold to satisfied customers? If so, great! You should easily be able to attribute every ounce to a price point. However, did you take into account areas of loss like spillage, employee mistakes, remedying customer complaints, staff meals, theft, or anything else that could cause product to go into the trash can or onto someone’s plate for no charge?

All of these are areas of loss for your business – loss of inventory and profit. Knowing about these areas of loss and accounting for them in your planning are part of owning and managing a restaurant. Accidents happen, customers complain, and not every ounce of food makes it onto a plate. As you know by now, these are inevitable truths of the restaurant world.

However, not knowing what supplies have been wasted – for whatever reason – means you don’t know exactly how much inventory (or how many dollars worth of inventory) has been unused, and that means you cannot determine your true earnings for a shift, day, week, month, or year.

Words To Live By: Restaurant Inventory Terminology

If you want to become a master of inventory, you can’t just walk the walk – you have to talk the talk. Here are four inventory terms you should be familiar with.

1) Sitting Inventory
The amount of product (or dollars worth of product) in-house. Depending on your business, you should refer to sitting inventory as either dollars worth or amount – but make sure to consistently stick to one.

2) Depletion
The amount of product (or dollars worth of product) used in a set period of time. Depletion can based on daily, weekly, or monthly sales and is often calculated using the sales reporting data from your POS.

3) Usage
The amount (or dollars worth) of sitting inventory divided by the average depletion in a set period. For example, if you have 4 gallons of mayo – and you plan to use 1 gallon a week – you have 4 weeks of usage.

4) Variance
The difference between your product cost and the usage amount cost. For example, let’s say your inventory is down $100 worth of chicken at the end of the day, but your POS says you only sold $95 worth of chicken. This makes your variance -$5, meaning $5 worth of chicken is unaccounted for. Variance can also be a percentage to help you make easier comparisons. In this scenario, -$5 (the variance amount)/$100 (the usage amount cost) = -5% variance.

Now that you know why inventory tracking is important and understand the fundamentals of the practice, here are some inventory best practices you can implement in your restaurant.

Quick Tips for Managing Your Restaurant Food Inventory

1) Train Your Staff on Inventory
Inventory management cannot fall entirely on one person – especially in enterprise restaurants or businesses with multiple locations. Managers and shift leaders should be delivering detailed inventory reports whenever they clock out and alerting the team of any major outage or issues.

This responsibility also falls on your line cooks and back-of-house staff, who should be making notes of spillage, errors, and rotten food whenever they come across it. Teaching your staff to become inventory experts or dedicated mathematicians might be tough, but it’s easier if you incorporate an easy-to-use inventory system for your employees.

2) Track Your Sales Daily
Even if it’s just a daily five-minute review leading up to a weekly deep dive into your data, the best practice is to track restaurant sales every day. When you check sales daily instead of weekly, bi-weekly, or monthly, you stay in tune with the immediate changes in your restaurant so you can make quick and timely adjustments to your restaurant’s inventory planning and your provision deliveries.

For example, if you have a seasonal item that you plan on removing from your menu, you can easily see when it’s phasing out in the eyes of your customers day-by-day instead of taking it off your menu too early or too soon.

We won’t lie – sales tracking and data analysis can be a huge pain if you don’t have the right technology. Instead of computing everything yourself by hand from an inventory sheet or shrugging your shoulders and guessing by intuition, make sure you can access data right from your point of sale system. This way, you can pick up on variances and try to figure out the source of loss.

3) Carry Some “Just In Case” Inventory
A few years ago, while I was working at a local pizzeria and sub shop, a huge snowstorm took out the power across our state. Because of this, our bread supplier was not able to meet the needs of the pizzeria. That day, we had to tell all of our customers looking for a sandwich that we were out of sub rolls, and could only give them something on a wrap or in a pocket. This might not have happened if we were carrying “just in case” inventory.

Your restaurant should keep an extra supply of provisions that tend to go fast. In the event of an emergency, you can use these extra provisions to fulfill orders and satisfy customers. Just be sure to switch out this just in case inventory regularly so that it hasn’t gone bad by the time you get around to using it.

This post originally appeared on [The Toast Restaurant Management Blog] & has been reprinted with permission. Email our partners at Toast at to learn more!


4 Ideas for Small Business Team Building

It happens at some point in every workplace. Sometimes, the individual components of a team you hired are doing wonderful work, but together, they just don’t work at all. Even if your team functions harmoniously most of the time, tensions and disputes are bound to arise. Rather than waiting for conflicts to come to a head, a better way to manage your team is to start building a cohesive unit from day one. Here are 4 team-building ideas that will help your employees form stronger relationships and work through issues more productively together:

1. Host a Themed Event

An offsite event organized to specifically address an area of conflict in your business can often help ease strained relations. For example, if your team struggles with following directions, a scavenger hunt might be a good exercise to work on deciphering instructions as a unit.

2. Volunteer Together

Working together as a team for the benefit of others is often a good way to remove tension and competitiveness from the equation. A change of scenery can also eliminate judgmental behaviors—if everyone is doing something out of his or her comfort zone, no one can claim to be the expert.

3. Celebrate Group Successes

Rather than focusing on individual achievements, team building should celebrate successes that the entire group has contributed to. Make sure to plan separate incentives or events for group performance in addition to individual work.

4. Start a Team or Club

Extracurricular activities can often promote camaraderie among employees, even those who don’t ordinarily get along. Think about what common interests your team shares and how you could start a team or club that brings everyone together. For example, if you know your staff members like to read novels, you might start an after-hours book club.

The Bottom Line

The stronger your team’s foundation is, the more stable it will be when storms come. Laying the groundwork from day one won’t prevent disputes from happening, but it will help you resolve them more efficiently when they do.

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4 Important Signs Your Business is Ready to Open a Second Location

Opening a second location is a significant step for any owner looking to grow their business, but, like most milestones, timing is everything. Here are five signs that your business might be ready to expand:

1. Your First Location is Running Seamlessly

Having a rock-solid foundation for your company is key. It will allow your attention to move elsewhere without fearing repercussions. If your sales are not only consistent but on the rise, your employees are well-trained, happy, and capable, your customer satisfaction is outstanding, and all of the operational kinks are worked out—it just might be time to start considering.

2. Market Trends and Demand Are High

It sounds obvious, but it’s important to have your thumb on the pulse of market trends. If you’re unable to keep up with the demand at your current location, that’s one really great sign. Do some research to see just how much demand is out there for what you’re offering—and where. Opening up a second location nearby might be an option if your product is trending and competition is low, but if you find that you’ve tapped into the majority of customers in your area, look to see if there are any neighboring towns or cities where your business could fill a need. If your research comes back positive, it might be time to start looking for a broker.

3. You’re Confident in Maintaining Quality

A new and unique business plan is necessary to cater to whatever population and area that you choose for your second location, but having trust in the staff for your new location will be essential to maintaining quality—especially if someone else is running it. You’ve already set the standards for quality at your first location so it’s important to have those standards upheld by people who believe in them and are driven enough to make the second location as successful as the first. If you’ve got driven professionals who you can trust on your team, the next steps for your business might be closer than you thought.

4. You Have Sufficient Cash Flow

There’s no harm in seeking outside funding, especially from investors who are more focused on growing your business than seeing immediate returns, but taking on debt with high rates of return is always risky and something to avoid—especially when your new location likely won’t be turning a profit for the first couple months to a year. If you have enough cash flow to be able to fund a second location without having to look elsewhere, you’re likely prepared to open a second location.

If your business meets all of these credentials—congratulations! It might be time for a new and exciting chapter for you and your business. If not—don’t worry. There are plenty of other ways to grow your business without expanding. Learn more about how SinglePlatform can help that happen by improving your business’ presence online!

4 Ways to Increase Your Staff’s Productivity

Each member of a small business’s staff has an important role to play, and if an individual isn’t working at full capacity, it can quickly have a negative impact on day-to-day operations. Short of firing someone who isn’t pulling his or her weight, what can you do as a business owner to boost productivity? These 4 tips will help you help your employees work smarter and harder.

1. Huddle up

A brief huddle in the morning or at the start of each shift is a great way to help employees focus on their most important tasks and get energized. Have each staff member identify their top goal for the day, and let them know how you’ll be there to support them in reaching those goals.

2. Encourage Breaks

It may seem counterintuitive, but encouraging employees to take breaks and facilitating company-wide outings, celebrations, and happy hours can actually help your staff be more productive. The happier your employees are, the harder they’ll want to work when they’re on duty. Consider what makes sense based on your budget, hours, and staff size before adding regular events to the calendar.

3. Help Prioritize

Sometimes, employees can become overwhelmed when they have too many to-dos on their list. When possible, help prioritize which items are most important each day, week, and month. Breaking down tasks into more manageable chunks will help keep the wheels turning and boost productivity.

4. Stop Micromanaging

As the business owner, it’s your responsibility to define goals, help troubleshoot problems, and give guidance when asked for. However, it’s not your job to micromanage. Once you’ve clearly established your expectations, sit back and let your staff do their jobs the way that works best for them. They’ll ultimately be more productive, even if they might not do things exactly the same way you would.

The Bottom Line

Clearly setting goals each day, providing the proper amount of support, giving employees breaks together to team-build, and trusting your staff to do the jobs you hired them to do are all great ways to boost productivity. If none of these strategies make an impact, then it may be time to reevaluate the responsibilities you’ve assigned to individual employees or consider letting go of staff members with chronic performance issues.

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5 Ways to Help Employees Cope with Change

Often people are uncomfortable with change. Routines are comforting. It doesn’t matter if the change is for the better or for the worse—the unknown is scary. Changes, however, are a natural part of a business’s lifecycle, and big changes can often lead to disgruntled staff members. While you may not be able to impact your staff’s first reaction, you can control how you prepare them for the transition. Here are 5 ways to help your employees cope with a major change.

1. Explain the Why, When, and How

When introducing a change, give as much detail as possible about why the change is happening, when the change will go into effect, and what the process will look like. Eliminating as many unknowns as you can will give people fewer details to worry about.

2. Focus on the Positive

Most changes have both a positive and a negative side, but when presenting to your staff, focus as much as you can on the positive. If you remain upbeat and optimistic, your employees are more likely to take a similar attitude.

3. Listen Openly to Concerns

Even after a clear rundown of what’s happening and why, your staff may raise concerns. Listen to them with an open ear and provide any additional information and reassurance your staff needs to accept the coming change. Your employees are a resource and may provide insights that you haven’t considered before.

4. Address Issues within Your Control

If there are factors causing concerns among your staff that you can control, do what you can to address them. Even if you can’t fix everything, showing that you’re listening to your employees’ concerns and taking them seriously will instill trust with your team.

5. Provide Adequate Training and Support

If your business change involves new processes or procedures, make sure to provide ample training and support to set your staff up for success. Part of the stress from change is felling unprepared for new tasks. Reassuring your employees that you will support them through this transition will ease some tension.

You can’t change human nature, but you can make it easier for your staff to move from fear to acceptance by providing clear information, listening to concerns, making adjustments to address those concerns, and creating a solid training plan for new processes. For more tips on running a successful local business, sign up for our newsletter below:

Six Simple but Effective POS Systems for Local Businesses

As a current or prospective local business owner, your top priority is sales. While the marketing strategy matters for getting customers in the door, it’s closing the deal that will make your business successful. Whether you‘ve been in business for years or you’re starting one today, the type of point-of-sale, or POS, system you use is crucial to running your day-to-day business operations smoothly.

If you’re simply looking to upgrade your system or implement an entirely new one, there are plenty on the market to choose from. Although finding the system that fits your local business’s every need may seem like a tiring task, it’s necessary for it to run properly.

To help you decide on the system best for your business, we’ve compiled a list of six of the best options available:

1. ShopKeep

Started by a small business owner who was unsatisfied with the way his POS system was working, he decided to ditch it and create his own. Specifically designed for quick-serve restaurants and bars as well as bakeries, juice bars, food trucks, and pet shops, ShopKeep provides an easy solution for local businesses looking to control business operations in one, central place.

With several features to make local business owners’ lives easier, like detailed reporting, custom modifying and offline transactions, as well as opening, updating, and closing multiple checks across multiple registers, ShopKeep is great for those looking for a simpler way to manage their growing businesses.

At $69 per month for a POS system, trained setup, and 24/7 customer support, ShopKeep is an inexpensive way to complete your daily operations.

2. Vend

Geared towards businesses in the food and beverage industry, coffee shops, computer shops, and bike shops, Vend allows you to oversee all day-to-day business functions from one dashboard. With the ability to manage inventory, automate restocking, view customer statistics like purchase history and account balances, as well as manage employees and view detailed reports, Vend provides you with in-depth insight to almost every facet of your business.

Offering three plans, Starter, Advanced, and Multi-Outlet, that aim to cater to every set of small business needs, each cost $39, $79, and $199 per month respectively. Get more detailed information on what each of these plans entail here.

3. Square

Founded in 2009, Square has been easing the payment process for small business owners ever since. Extending its capabilities beyond just mobile payments, Square now offers an all-inclusive dashboard that allows small business owners to control employee access and monitor their shifts, manage multiple locations with one account, filter reports, get customer feedback, sell gift cards, and use email marketing.

You can get started with a free mobile payment device, then build your full POS system from there. Priced between $1,126 and $1,326 depending on the iPad purchased, Square’s POS package includes a stand, cash drawer, receipt printer, and iPad. In addition, Square charges 2.75% per swipe and deposits money into your account within one to two business days. Learn more about Square here.

4. Clover

Another mobile payment processing product turned POS solution, Clover has four different systems to choose from. With Clover Go, Clover Mini, Clover Mobile, and Clover Station, each product offers features for every type of business. Offering clients the Clover App Marketplace, local businesses have access to a customized website for their business, security and encryption for each payment, rewards, gift cards, accounting, insights, and employee scheduling.

Charging 2.69% plus $.05 for every swipe, and an additional $19 per month for the customized website, Clover is another viable POS system for your small business to consider.

5. Bindo

Best for pet stores, salons, spas and restaurants, Bindo provides central customer management for your business through their online dashboard. Packed with features like invoicing, employee shift monitoring, inventory management, creating customer profiles, loyalty programs and reporting, Bindo provides businesses with insight into every part of their business.

Providing businesses with a customizable online storefront and integration with apps like QuickBooks, Xero, Powa, and API, Bindo covers all the bases at your business. Get a pricing quote for your business here.

6. TouchBistro

Designed specifically with restaurants in mind, TouchBistro is best for local businesses in the food and beverage industry. Streamlining the dining process, TouchBistro allows you to take orders (even complicated ones) with ease, automatically generate delivery routes for drivers, combine bar tabs, import your restaurant’s blueprint to control seating and add reservations, and split checks by seat.

Offering four plans, Solo, Dual, Team, and Unlimited, they’re priced at $60, $129, $249, and $399 per month, respectively. All plans include cloud reporting and analytics, 24/7 phone and email support, full tableside and quick service POS features, and unlimited users. To learn more about TouchBistro’s pricing and plans here.

Operating in a fast-paced world, our local business customers are always looking for ways to save time and money.  Choosing the right POS system can streamline your business and make your life easier.

Find out how SinglePlatform makes life easier for local business owners here.