The National Business Research Institute best defines benchmarking as an educational tool that “enables you to learn where you are, where you need to go, and illuminates the path for getting there.” It helps a business to become “best in class” by not only understanding their inner workings but their customers and competitors as well.
What Does Benchmarking Mean?
Benchmarking is a process that enables you to compare your business’s performance and success against others through industry standards. This data-based information gives you a bird’s eye view of just how your restaurant stacks up against your competitors. Ultimately, it allows you to incorporate processes that have enabled other restaurants to obtain a high mark of success, increasing efficiency, and improving performance. It is an ongoing process that will help you determine areas that you’re excelling in and others that need improvement.
Some businesses confuse Key Performance Indicators (KPIs) and Benchmarks. While benchmarks help businesses understand their performance in relation to the whole market, KPIs monitor a business’s performance and enable operators to act quickly should they fail to meet specified targets. These two devices are often used in conjunction with each other, with benchmarking identifying areas for improvements and KPIs tracking the steps as you progress towards your goal.
In today’s data-rich world, just about everything can be benchmarked from financial performance to sales forecasting, operational execution, customer satisfaction, employee performance, and even social media engagement. In 2018, Starbucks launched its “Green Benchmarking System.” This approach looked to set a standard for green retail, measuring specific standards such as energy efficiency and water stewardship, renewable energy, healthy environment, responsible materials, waste diversion, and engagement.
Benchmarking as an Integral Part of a Company’s Success
Benchmarking has become an integral part of many businesses, some of which have developed departments whose sole function is to assess the company’s performance against competitors.
The 1980’s saw large companies such as AT&T embrace benchmarking as a standard operating procedure, and they have continued this practice through today. They have described themselves as “firmly committed to benchmarking,” employing internal benchmarking experts and conducting benchmarking forums. In order to find suitable companies to benchmark against, they typically look for companies that are best in class, have received awards, or are financially ahead. Today, AT&T is the largest telecommunications company in the world with a net worth of $266 billion.
If you haven’t implemented this important process in your restaurant yet, you’re not alone. Ours is a business that has been slow to integrate data-driven analytics and benchmarking, in part due to the complexities and intricacies of the diverse foodservice industry.
Restaurants Catching Up
There are several reasons for the slow incorporation of benchmarks into restaurant management, one of which is lack of consistency in classifying restaurants and their attributes. Restaurants are, after all, unique in concept, menus, size, type of service, average check, ambiance, and even employee type and skill set. What has been needed is a comprehensive system that can consistently categorize restaurants across segments based on a number of common elements, before comparing.
Little is accomplished, after all, if one is comparing apples to oranges.
The other factor that leaves operators on the sidelines when it comes to benchmarking is time. While some companies may have whole departments dedicated to benchmarking, few restaurants have that type of resource available. In order to truly implement, restaurants need a process that easily integrates into their system, is direct, clear, and concise.
The Power of Benchmarking
Benchmarks serve as a restaurant’s compass, driven by concrete data analysis that allows a business to establish goals and performance measures. Once gaps are identified, whether based on industry-standard benchmarks or their own historic measurements, corrective action can be implemented.
Data leads to an early understanding. If an establishment is faced with competitive disadvantages, proactive rather than reactive decisions can be made and implemented. These goals can then be measured as the operational changes are put in place to ensure the business is moving in the appropriate direction.
Data collected from 116 restaurateurs revealed that one-third had never implemented benchmarking, while at least two-thirds rated benchmarking as very to extremely important. What was ranked as the most likely outcome of benchmarking? Maintaining a competitive advantage.
Developing one’s own system for internal and external benchmarking can seem daunting, to say the least. That is why RestauranTrak was developed—to help restauranteurs take advantage of this important tool for success. This tool enables restaurants to easily assess sales and overall performance against the local market, enabling operators to make better decisions about sales, pricing, and promotional strategies. And, best of all? It’s free.