At Syft Analytics, we have access to the information of thousands of businesses that use our software to assess their operations and make long-term plans. Even if many companies use Syft only for reports or consolidations, the Benchmark feature is a great way to compare your operations to those of competitors in your area or industry and gain valuable insights.

Benchmarking is a tool used by top companies worldwide to improve performance. By observing how other comparable firms are performing, business leaders can start formulating plans to boost productivity and achieve new heights of success.

In this article, we'll focus on one industry with significant data on Syft, the restaurant industry, to see the trends across South African restaurants in Q2 2024. Read on for our key takeaways from aggregated data on Syft.

With Syft's Benchmark feature, companies from various industries provide data to compare trends across different regions. The data is comprised of an aggregation of anonymized data from Syft entities.

Now that we've considered where the data comes from, let's examine it and see what it says.

The restaurant industry focuses primarily on sales and production costs (in the form of meals). Notably, sales only occur after you've spent money on the necessary ingredients, equipment, and staff salaries. In other words, you spend a lot of money on working capital upfront, hoping customers will start coming through.

There are many moving parts in a restaurant and various KPIs you can consider. So, where should you begin?

When analyzing restaurant data from Syft, we focused on the Gross Profit Margin and Current Ratio. Let's look at these and how they can help restaurant owners improve their performance.

Given their usually thin profit margins, restaurants must compare expenditures to income. Therefore, knowing the Gross Profit Margin is essential to understanding how well a restaurant controls its cost of items sold (food and drink) in relation to its income.

A higher gross profit margin indicates a more profitable and efficient restaurant. However, it's worth noting that this metric doesn't account for other overheads restaurants may have, such as electricity, wages, rent, rates, insurance, and utilities. As such, in a hospitality business, it's recommended that you aim to achieve a minimum of 70% gross profit across your sales mix.

Our benchmarking data found that, across the board, all regions reviewed stayed relatively consistent over the quarter, with the upper quartiles mostly achieving that desired 70%, except for this region - South Africa - where it peaked at 64%.

However, the middle 50% and lower quartiles mostly dropped below the mark, suggesting that they may need to reconsider their pricing or other business aspects that could be made more efficient.

As a restaurant, you should aim for a current ratio of more than 1, as this would put you in a better liquidity position. Having short-term liquidity is essential for running a sustainable restaurant business. Illiquid restaurants may have difficulty paying suppliers or staff.

Syft’s data shows that the US is the only region where there are restaurants in both the top 25% and middle 50% that are able to cover their short-term debts with short-term assets if needed. In the other regions, only those in the top 25% are able to do so. Thus, although their Gross Profit Margins may be high, these businesses are not very liquid. This data is concerning because it means that these businesses may be unable to handle unexpected emergencies, surprise expenses, or a change in demand and could face bankruptcy.

It may also be worth noting that demand in South Africa may be lower this quarter because it is winter, and eating out is more prevalent in summer.

Judging by the data, while many restaurants may manage their gross profit margins well, they are not well poised to cover their short-term debts. So, there are potential risks they must prepare for.

As Chay says, "There's a lot of optimization you can do to optimize your working capital." The first step is to analyze the data you already have.

Benchmarking is a vital tool for businesses. It empowers them to identify areas where they lag behind the industry, develop strategies to catch up, recognize areas of strength, and enhance their processes further. Analyzing the past quarter's data on Syft reveals a diverse landscape: while some restaurants are thriving, many others could benefit from reevaluating their processes and pricing strategies. By leveraging these insights, restaurant owners can make informed decisions to drive improvement and sustain growth.