The average daily rate is one of the key performance indicators in the Restaurant and Hospitality Industry. In the Hotel Industry, it is the computation of the revenue that is made per room in the average. A good ADR shows that the business is generating good revenue. For restaurants, your ADR is calculated by the number of tables and how many times it has been occupied to figure the average revenue.
Presenting a good ADR does not just help your overall restaurant business health, but it also increases the value of your restaurant to investors because of its great potential in profitability.
As a restaurateur, one of your business goals should be to keep your ADR at a good level and make sure that it will continue to increase as your restaurant grows. This feature aims to be a guide for restaurateurs, like you, on increasing their ADR and how to keep it that way.
How to Calculate ADR for Restaurant
While ADR is usually utilized by hoteliers, you can also measure your average customer spend for your restaurant to keep your overall business health in check. Here are the indicators you’ll need to complete the calculation.
Number of Guests Per Shift
This is the number of guests that were served during a shift, per day. POS systems can produce a detailed database for this metric. If you’re just new to the Restaurant Industry, you can come up with your average guests per shift using the metrics from a comparable restaurant. The figure should be no more than the seventy-five percent peak occupancy for your first-year operations.
Determine the table turnover rate of your restaurant by using the details from your POS system as well.
Total Sales per Customer Served
After which you can now divide the total sales amount per shift by the number of the customers served. You can calculate your ADR daily, weekly, monthly, or annually, depending on your requirement.
Tips to Increase Your ADR for your Restaurant
Though it is in your nature to implement effective ways in increasing the average spend of your customers on your restaurant, here’s a list of practical ways you can use to continuously grow your numbers.
Market and Industry Analysis
Restaurant management is a trial and error process, but that doesn’t mean that you have to try every concept blindly. To make sure that your restaurant is still protected why you try out a new concept to improve your operations, you must base your decisions on data that you can gather by conducting a market and industry analysis.
Through this, you’ll have a better comprehension of your current standing on the market and the competition. A good insight into your competitors can serve as your guide to improve every part of your restaurant management.
It can also help you control your operational cost and see what are adjustments you can make to contribute to the increase of your ADR. Another good reason why conducting a market and industry analysis is a must, is because it helps you understand your customers better.
The more you can connect with your customers, the more opportunities you can create for them to go back to your restaurant and ceaselessly contribute to the increase and growth of your restaurant’s ADR. It is also a great way to start working on awareness, retention, and loyalty for your brand.
Your menu is one of the most powerful and useful tools you have for your restaurant. It can help you with your sales, marketing, and even influence customer experience for your restaurant. Your menu management must be on point to make the most out of its potential.
You can use your menu to increase your ADR by offering pairings of your menu item. You may want to pair your most popular menu items with the ones that are not generating much income for you to maximize your inventory. Offering combinations and pairings is a great opportunity to encourage your customers to increase their average spend on your restaurant.
Another way to maximize your menu is to highlight the special add ons and alcohol of your restaurant. It’s like pushing your customers to buy more of your product by presenting it in a manner where your customers will feel like they need it. Ordering a steak? Encourage your customers that it will taste better with your blue cheese dressing. It may not be too much, but if your customers will order the additional blue cheese dressing on an entire shift, it’s a great way to increase your restaurant’s ADR.
A takeaway menu is also effective in increasing the average spend on your restaurant. Giving your customers the convenience of enjoying your specials in the comfort and safety of their homes is a huge plus for your restaurant. It provides additional customer satisfaction and a source of revenue for your restaurant.
Lastly, if you’re familiar with Menu Engineering, then it’s time to consider you do it for your restaurant menu. Menu Engineering is the study of how profitable and popular a menu item is. It focuses on how the profitability and popularity of menu items affect their placement on a menu. This study aims to increase the profitability of each guest.
It is known that Professor Donald Smith of Michigan State University introduced this method to the Restaurant Industry. With the help of menu engineering, it is easier to identify what’s not working in a restaurant menu. You’ll learn what’s the effect of the profit contribution of your menu items on your overall sales and profits.
Menu engineering helps you with your food costs as it removes the menu items that are not working for you. It designs your restaurant menu to be more profitable as it constructs a system that provides easier regular analysis of your menu.
This is the method of optimizing your restaurant menu for it to be a better fit for your daily operations.
Another brilliant way to help your restaurant increase its ADR is to continuously train and educate your restaurant staff about the different ways they can contribute to the overall growth of your restaurant. Your staff plays a huge role in increasing your revenue and your customer spend. They can influence the buying decision of the customer, that’s why they must know how to effectively do it.
One simple yet effective way to do this is to conduct a pre-shift meeting daily. Through this, you’re able to connect to your staff, and at the same time, you have the opportunity to boost their morale. A high-spirited staff is a good asset for a restaurant as they have the potential to positively sway your customers into increasing their average daily spend.
For your front-of-the-house team, you must ensure that they will provide a good first impression to your customers. Giving your customers a warm welcoming ambiance is an important gesture to set their mood into a positive mode. Once the customers are all seated, the positive impression that they left to your customer can lead your customer to patronize your brand that could lead them to increase their average spend on your restaurant.
It’s also helpful to train them to upsell and cross-sell without putting pressure on the customers is also a good way to secure a boost in sales and ADR. Applying proper techniques, upselling contributes about twenty-five percent of a restaurant’s daily sales. It is the most ethical and accepted way of upselling in the industry. Ensure that your entire staff is equipped with complete knowledge about what they’re selling, they can only effectively sell a menu item if they can sell it with confidence.
If you have extra time, resources, and your staff agrees to it, cross-training can also contribute to the growth of your restaurant’s ADR.
Aside from training them, it is important as a restaurant owner that you know how to properly delegate tasks to your entire staff. This helps you prevent working out your entire staff into burnout. Allowing them to have a proper work-life balance has positive impacts on your operational procedures.
Create a marketing plan that can reach out to wider and greater demographics. It is a great thing that you have your customer base, but don’t be afraid to reach out to more. Your market plan should consist of different types of marketing campaigns and strategies that appeal to different types of customers that are within the range of your target market.
Tap the potential of your customers through social media marketing. Growing your customer base by reaching out to them through different social media platforms is one of the most efficient ways of marketing. It is cheap and proven to be effective as modern diners are now dependent on social media regarding their buying decisions.
Engage with your customers by conducting different promotions on your social media platforms. It can be a simple giveaway trivia quiz or other interesting contests where you can promote your brand. Increasing brand awareness to your target audience is like creating an opportunity to convert them into customers, and soon repeat customers. You just have to be consistent in your marketing efforts.
Promoting on your restaurant website is also a great way to improve your marketing strategies. Your website is a powerful marketing tool that can help strengthen your online and digital presence. In the current situation of the Restaurant Industry, digital presence is something you should not take lightly. It can make or break your business if you don’t consider following through with your online marketing campaigns.
Push notifications, newsletters, and other types of alerts and marketing can also be useful on your campaigns in boosting the ADR of your restaurant. Everything that can influence your customers is all considered useful, just be careful and avoid trying to manipulate them. Modern diners dislike the impression of them feeling manipulated, they want control over their decisions. It is a piece of very thin ice to cross, but once you get there, there’s no turning back and all your efforts will surely bear a positive outcome.
A restaurant is a customer-centric business. All your efforts won’t matter if your customers decided not to do business with your restaurant. This is the main reason why working on your customer service to improve customer experience is just as important as increasing your ADR. No development will happen if your customer is not well taken care of.
There are different ways where you can effectively improve the customer experience delivered by your restaurant. Launching loyalty programs, reward points, and even gift cards can help on increasing the interest of customers in your brand. Encourage them to increase their average spend by offering them exclusive promotions and special discounts that they can only avail of with a minimum purchase. Make sure that they will be rewarded with something of value to make them feel that their additional purchase is worth it.
Offering free delivery also lures customers into increasing their average spend to a restaurant. If you offer them free delivery with a minimum spends, they would most likely focus on the value that they’ll be saving rather than the additional amount that they need to meet the minimum amount for the free delivery service.
Optimized restaurant operations attract customers. Modern diners are open to supporting businesses that are capable of providing a secured, safer, faster, and more convenient service. Automation and the use of different types of restaurant technologies create an impression that you’re a reliable and trustworthy business that can stand firm on its own.
POS systems, self-service kiosks, and other types of restaurant software are sought to be functional and operative solutions in increasing the ADR of your restaurants.
Having a great analysis of your data helps you create and make better business decisions. If you use the data about your customers, the frequency of their visit, their daily ordered menu item, the average spend and stay on your restaurant, you can create different marketing campaigns that can target their preferences according to the data that you have on them.
You can also have a comprehension of your sales if you use the data that you can get through your POS system. Modern POS systems can produce accurate and insightful reports that allow you to pivot your operational procedures into a more productive and profitable way.
It is also a practical way to reduce your restaurant cost drastically because you’re able to produce targeted marketing campaigns and more accurate sales forecasts as you now have your hands on the data that can back up your campaigns and reports.
Increasing the price of your menu items must be the simplest and easiest way to increase your restaurant’s average daily rate. But you have to be careful if you’re going to adopt this type of method. Make sure that the increase will be reasonable and your customer will see the value and worth of the additional dollar that they will spend on your restaurant.
Especially if your competitors are not doing the same method, you have to find a way on how you will justify your price increase for your customers to continue patronizing your restaurant. Take into consideration your customer’s demand, current market, and your customer’s capacity to pay for your price increase.
Tip: It is best to conduct a survey before, during, and after the implementation of your price change to know how your customers feel about this business decision. The satisfaction of your customer with this change measures the success of your initiative.
A free cup of coffee, dessert, or even a free upgrade of their drinks can encourage your customers to increase their average spend on your restaurant. The psychology of free explains that giving away free samples or free items to customers increases conversion up to thirty percent. It stimulates the act of reciprocity that strongly affects every buying decision of a consumer.
Giving your customers a bit of everything can lead them on making something back for your favor. So if you offer them a free taste of your new dessert, they’ll have a strong urge to purchase one to give back to your free taste. It is simple human psychology, but it is too much of an opportunity to miss.
Reach out to local businesses and local influencers in your community. Grow your customer base by partnering up with these businesses that are related to your product and services. Local influencers have a certain number of following that can create business opportunities for your restaurant.
While parenting with local businesses also helps expose your brand to a different set of audiences which can also open new doors of increasing your restaurant’s ADR. There are different ways to widen your network without risking too much on your end.
Support local charities, local businesses, and socializing events in your community. If there are no events for you to attend, you can organize your networking event. Growing your customer base is a proven way to increase the ADR of your restaurant.