Food and Beverage Spend Per Head

The measure of revenue from an average customer is a popular performance metric in most industries, although it does have different names depending on what field you’re working in. Retail businesses talk about the Average Basket Value (ABV), hotels Revenue Per Available Room (RevPAR) and subscription services tend to track Average Revenue per User (ARU). In Hospitality and Leisure businesses which provide activities or entertainment, and therefore have trackable footfall, we tend to use Spend per Head (SpH). 

Bowling Vision’s Centre Support Team Manager, Matt Barnwell, has written a series of posts exploring the concept of F&B SpH and looks a variety of ways to positively influence it. Here is his first installment …

How is it measured?

SpH can be tracked across the whole business, or just in individual areas of focus. It’s usually most useful to split down your SpH tracking into different revenue streams where possible, as it makes the modelling of change most effective. In this series of articles, we’ll be looking at measuring how much F&B revenue is spent by each of your customers, on average – as well as ways to improve this of course.

Calculating F&B SpH is quite simple – we just need to divide the total F&B revenue by the number of people using the venue in the period being analysed – which we call Footfall. Let’s take an example of an Adventure Golf course. 

Gross or Net (of VAT)?

While we would normally only use figures that are Net of VAT, one of the major benefits of knowing your SpH figure is working out how to make small changes which will improve it. Given that these changes tend to relate to the purchase of individual items (e.g. Coffees, pints of beer, paninis), it tends to work best to keep your SpH calculation as a Gross Figure.

That way, if we offer an extra shot of Espresso for £1.00, we know that this should make a direct £1.00 impact on our SpH. It’s then really easy to explain this to the staff who are doing the selling, and demonstrate it in reports – both absolutely key to the success of any SpH driving activity.

What if I have multiple activities?

It’s quite common to have venues with multiple activities – for example, Tenpin Bowling and Laser Tag together. In this circumstance, what about the people who do both activities? The measure of Footfall would usually use players of Tenpin Bowling and players of Laser Tag – potentially someone may do both, so we risk counting them twice. 

We could work out some sort of complex method of adjusting for this, however, it doesn’t really matter. What we tend to use SpH figures for is benchmarking – effectively we will have a start point, and then we try a variety of things to improve from there, measured by whether the SpH goes up or down. With that in mind, it doesn’t particularly matter if there’s a small element of inaccuracy in the Footfall calculation, as long as that inaccuracy is consistent. If you always count each Bowler as 0.9 and Laser Tag player as 0.8 in an attempt to adjust for people doing both activities, that’s fine – as long as you do that each and every time you run the calculation. Equally, if we just treat every activity player as an individual Footfall count, then that’s fine too – as long as it’s consistent.

What if some people don't pay to use the activity?

There are a couple of different circumstances where this commonly applies.

A) The additional people are accompanying paying users – for example a Soft Play.

In this situation, we take the same view as above. Potentially we could apply some sort of calculation – when we’re creating financial models for new business for example, we assume that every Soft Play using child (who pays, and we can track) is accompanied by an average of 1 adult (who doesn’t pay, so we can’t track) – so, each child is counted as 1.5 Footfall. Alternatively, just count the Footfall straight from the paying entries – as long as this is consistent, it will provide the same benefit.

B) The activity is something where footfall isn’t measured by paying entries – for example a bar (with no door charge), a restaurant or a free exhibition.

In most of these circumstances we have other key metrics that can be used – such as Average Transaction Value, and SpH probably isn’t the right choice. 

Now that we have an understanding of how to measure F&B SpH, the next step is to explore how it can be used to add value to your business. There are three broad use cases for SpH. While the first is by far the most useful to owners and operators, the other two are included as a useful insight into the consultancy process.

1. Benchmarking within your own business to drive improvement
2. Benchmarking to assess the performance of a business against others
3. The creation of financial models for budgeting, investment and/or business planning

Benchmarking to drive improvement

Being able to accurately measure change to an F&B SpH benchmark enables you to break down ‘big numbers’ into manageable chunks. Many people, particularly junior staff, find it very hard to relate to large numbers so it’s essential to demonstrate these in a way that is more meaningful to them.

For example, let’s take a climbing centre which has 104,000 climbers per year, and also achieves £104,000 F&B revenue per year. If the owner is seeking to increase the F&B revenue by £26,000 per annum, this is not an unrealistic expectation for the business. However, for the staff the owner is asking to achieve this, it is a really ‘big number’ – possibly more than any individual working in the centre earns in a year. Because of this, it’s difficult for them to relate that number to the performance of their every day duties. However, if we break it down to a SpH increase – it works out as an extra £0.25 from each customer on average. This is far easier to explain to the team in the first place, and much simpler to demonstrate progress towards in reports that everyone can understand.

Benchmarking to assess the performance of your own business

Obviously, comparing revenue figures from one business to another is possible, but it’s usually not going to be that useful. The location of the venue, as well as the resource/activity profile is going to greatly affect incomes – a small FEC in a small town of 150,000 people is never going to compete in terms of sheer revenue with a much larger centre in a major city. 

However, interestingly, there are still clear similarities in SpH in these circumstances, which makes it a useful tool for comparing businesses and gaining some really useful insights. Of course, it’s important to remember that item pricing will likely be different. This is fine though, as it’s easy to complete a quick exercise to create what we call a ‘scaling factor’, which can then be used to allow for meaningful comparison. 

1. Take some representative items which are sold at your venue and the site being compared to.
2. Work out the ‘basket price’ of all the items.
3. Calculate the % difference between them.

This scaling factor can then be applied to the comparison venue SpH.

So, in order to compare SpH representatively between the two venues, we need to apply the % scaling factor to your site’s SpH. In this case, we would multiply your SpH figure by 1.21.

Obviously this isn’t an exact science – the eventual price scaling will, in reality, depend heavily upon the sales mix. However, the more items you add to this comparison, the more accurate your eventual scaling factor will be. Equally, most businesses don’t report readily available SpH figures (although many of the larger companies do as part of their Annual Reports), so you may need to approach suppliers or a consultant to obtain some representative data. 

When we’re confident we have a viable comparison, we can assess any difference between the two. If the adjusted SpH figure is lower, then this tells you there’s something to learn from the other venue. The best way to see what they’re doing of course, is to visit the site as a customer and experience the whole process. 

The creation of financial models

Whether we’re assisting with the opening of a new venue, the refurbishment of an existing one, or simply completing budgets for an existing site based on industry data rather than like for like performance, SpH is one of the essential elements we use to do this as accurately as possible. Obviously it’s difficult to get revenue and profitability predictions for a completely new venture exactly correct, however, it’s possible to be highly accurate with sufficient information.

SpH can be used to model the F&B revenues with a high degree of accuracy if footfall figures can be determined. This normally comes from a highly detailed model of resource utilisation which will result in being able to predict the number of customers using each resource at every trading hour, which then leads to being able to predict the volume of customers in the venue – after taking into account factors such as wait times and multiple resource utilisation leading to waits in between activities. Simply multiply this footfall figure with the SpH figure to reach projected F&B revenues by week, and therefore month and year. Once this figure is settled upon, phasing adjustments due to events, school holidays etc can be applied to reallocate the revenue within the year.

Clearly this is a highly complex area, and one that we work in regularly, giving us a huge range of available comparison data – these few paragraphs barely scratch the surface.

If you’d like to explore how we can work with you to analyse your data then get in touch via: support@bowlingvision.com