Understanding REMS Market Share: The Beginning

Performance benchmarking is paramount in the hospitality industry (STR says that). 2022 is the year for restaurants to start looking at their competitors closer.

The tool can collect data in only 30 seconds a day. Soon, it will be done automatically.

With the most tedious part of the process reduced to only half a minute, the rest becomes easy and fun. Restaurants only need to follow a short tutorial to become familiar with the key performance indicators and what to do in different cases. 

REMS Hospitality is the only company in the world prepared to teach the power of benchmarking to every restaurant that wishes to learn and grow their results with fewer efforts.

What is market share?

Market share is a key performance indicator enabling you to understand your performance against your competitors. This data allows you to measure the success of your chosen strategies and business decisions.

Market share is the most important metric that companies can use to grow their revenue and invest wisely.

If you run your business without paying too much attention to your market, this concept might not be relevant to you at this moment. However, if the ultimate goal of your restaurant is to make more money and be profitable long term, then you are working daily to capture more market share.

3 key performance indicators (KPIs)

Restaurant benchmarking involves three key top-line performance metrics: Occupancy (Turn), Spend per head (SPH) and Revenue per available seat per hour (RevPASH).

Occupancy refers to how many times the restaurant turns its capacity in one day. This indicator shows the capability of a restaurant to capture demand in the market.Having a higher turn than your competitors means your space is used more efficiently than your competition.

However, this is not the only indicator to consider when looking at the results, as more covers involve higher running expenses.

Spend per Head refers to how much money each cover spends. Having a higher spend than your competitors means your restaurant gets more revenue from each guest available. Higher spend is usually a less costly strategy to follow.

RevPASH is the top performance, as it factors both Turn and SPH. This indicator is not very popular in restaurants yet, despite helping to measure performance success across the Marketplace —are you bringing in the right number of customers and are you pricing correctly? Is your restaurant open the right hours a day? RevPash is the most accurate indicator of profitability directly related to gross profit or other financial margins.

How do we explain market share for restaurants?

Let’s imagine that Mr Panfried opens an international food restaurant with 98 covers in an upcoming neighbourhood in London. The average price of the menu is £25. With innovative concepts and small competition, the restaurant is likely to succeed. The demand in the market is high, so over a thousand customers look for a place to eat daily. Mr Panfried’s restaurant turns the tables 4.5 times a day on average. On the other hand, many people cannot get into the restaurant.

Due to the success of Mr Panfried’ restaurant, Miss Tupperware decides to open a restaurant next door. This restaurant offers Mediterranean food at a very similar price point. The restaurant has 130 covers. The demand in the market is now over 500 customers looking for a place to eat. There is still enough demand in the market to fill both restaurants, nevertheless with more options in the area, they now need to increase their focus on quality and guest satisfaction.

The area is prosperous, bringing new investors to open more restaurants. Three more restaurants open in the area: Ms ApplePie, 102 covers, Mr Cook, 150 covers and Mr Fish: a chain of 110 seats.

The new competitors increase the offer making the market short of customers (saturated). Restaurants now compete against each other to get their part of what is available. They implement promotions, new menus, live music, raffles, etc. However, they cannot understand if their efforts are working well.

We start adding their data to the benchmarking tool. Each restaurant is submitting its data in the tool in only 30 seconds.

This table shows covers and opening hours.

We select Mr Panfried as the subject restaurant and compare it against the other restaurants in the example. Each restaurant can see its results.

Using financial information, this is how we can explain market share results:

Cash Value: -£30.870

 Turn (Occupancy)         

 Subject    Competitors                 

  2.5            3.2        Index      78.1                                           

 Spend per Head (SPH) 

  Subject   Competitors 

  £32.2        £27      Index       118.5       

  RevPash

  Subject   Competitors

   £5.3         £6.8      Index       77.9

Mr Panfried’s restaurant is getting its fair share of the market only in spend per head which is great! However, the restaurant is losing share in covers and revpash which means that the competitors are “stealing” clients from Mr Panfried´s restaurant and further actions need to be put in place.

If we remember, Mr Panfried´s business started with an average selling price of £25. Due to its early success, he increased the menu pricing resulting in fewer clients visiting his restaurant midweek. In this case, creating a set menu or decreasing the pricing midweek will help Mr Panfried to get aligned with the market and generate more market share and sales.

For more information about how market share can help your restaurant, contact us at hello@remshospitality.com