PEAMISED TULEMUSNÄITAJAD JA NENDE ESINEMINE TŠEHHI VABARIIGI RESTORANIDE SEAS KEY PERFORMANCE INDICATORS AND ITS OCCURRENCE AMONG RESTAURANTS IN THE CZECH REPUBLIC PDF Free Download
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ESTONIAN UNIVERSITY OF LIFE SCIENCES
Institute of Agricultural and Environmental Sciences
Tamara Tripska
PEAMISED TULEMUSNÄITAJAD JA NENDE ESINEMINE
TŠEHHI VABARIIGI RESTORANIDE SEAS
KEY PERFORMANCE INDICATORS AND ITS OCCURRENCE
AMONG RESTAURANTS IN THE CZECH REPUBLIC
Master’s thesis
Curriculum in Agri-Food Business Management
Supervisor: Henrik G.S. Arvidsson
Tartu 2023
Estonian University of Life Sciences
Kreutzwaldi 1, Tartu 51014
Abstract of Master’s Thesis
Author: Tamara Tripska Curriculum: Agri-Food Business Management
Title: Key performance indicators and its occurrence among restaurants in the Czech Republic
Pages: 69 Figures: 5 Tables: 0 Appendixes: 1
Department / Chair: Institute of Agricultural and Environmental Sciences/ Chair of Rural
Economics
Field of research and (CERC S) code: S180
Supervisors: Henrik G.S. Arvidsson
Place and date: Tartu 2023
People today expect much more from gastronomy than before - the so-called gastronomic
experience. With the new customer perspective on HORECA (Hotels, Restaurants, Cafe), the
view of restaurants and their owners has changed over time. KPIs are commonly used to
measure the success of an organization’s activities in any sector. The reporting of KPIs varies
considerably from business to business in different sectors. The current situation shows that the
future and prospects for small and medium-sized entrepreneurs, in this case, restaurateurs, are
not very positive and there is reason to be concerned about inflation and the worsening energy
crisis. The method of measuring key performance indicators is very new to the HORECA sector
and is just emerging. The aim of this paper is to determine to what extent KPIs have penetrated
the food service industry in the Czech Republic in comparison to economic performance
indicators. The paper should answer the question of whether KPIs are known among Czech
entrepreneurs in the restaurant industry and which KPIs are most used. Every company strives
to be on top of the competition. Critical success factors are the factors that become the basis for
creating key performance indicators. A key performance indicator is unique to each organization
but can be characterized by several common elements.
Keywords: Key Performance Indicators, Economic Performance, HORECA, Restaurants,
Business, Customers
Eesti Maaülikool
Kreutzwaldi 1, Tartu 51014
Magistritöö
Autor: Tamara Tripska Õppekava Põllumajanduse ja toiduainete
tootmise ärijuhtimine
Pealkiri : Peamised tulemusnaitajad ja nende esinemine Tšehhi vabariigi restoranide seas
Lehekülgi: 69 Jooniseid: 5 Tabeleid: 0 Lisasid: 1
Osakond / Õppetool: Põllumajandus- ja keskkonnainstituut
ETIS-e teadusvaldkond ja CERC S-i kood: S180
Juhendaja(d): Henrik G.S. Arvidsson
Kaitsmiskoht ja -aasta: Tartu 2023
Tänapäeval ootavad inimesed gastronoomialt palju rohkem kui varem - nn gastronoomilist
elamust. Seoses uue kliendiperspektiiviga HORECA (hotellid, restoranid, kohvikud) on
restoranide ja nende omanike vaade aja jooksul muutunud. KPId kasutatakse tavaliselt
organisatsiooni tegevuse edukuse mõõtmiseks mis tahes sektoris. Peamiste tulemusnäitajate
aruandlus erineb märkimisväärselt eri sektorite ettevõtetes. Praegune olukord näitab, et väikeste
ja keskmise suurusega ettevõtjate, antud juhul restoranipidajate tulevik ja väljavaated ei ole väga
positiivsed ning inflatsiooni ja süveneva energiakriisi tõttu on põhjust muretsemiseks. Peamiste
tulemusnäitajate mõõtmise meetod on HORECA sektoris väga uus ja alles kujunemas.
Käesoleva töö eesmärk on kindlaks teha, millisel määral on põhinäitajad võrreldes
majandusnäitajatega jõudnud Tšehhi Vabariigi toitlustussektorisse. Töö peaks vastama
küsimusele, kas Tšehhi restoranisektori ettevõtjad tunnevad põhinäitajaid ja milliseid
põhinäitajaid kasutatakse kõige rohkem. Iga ettevõte püüab olla konkurentsis esikohal.
Kriitilised edutegurid on tegurid, mis saavad aluseks tulemuslikkuse põhinäitajate loomisel.
Võtmetulemusindikaator on iga organisatsiooni jaoks ainulaadne, kuid seda võib iseloomustada
mitu ühist elementi.
Märksõnad: Peamised tulemusnäitajad, majandustulemused, HORECA, restoranid, Äri,
kliendid
4
TABLE OF CONTENTS
List of abbreviations ....................................................................................................................... 6
INTRODUCTION .......................................................................................................................... 7
ACKNOWLEDGMENT............................................................................................................... 12
1. The general concept of gastronomy in the Czech republic ................................................... 13
2. Small and medium enterprises ............................................................................................... 14
2.1 The concept of small and medium enterprises ............................................................... 16
2.2 How innovation differs in SMEs vs large enterprises .................................................... 16
3. Economic performance .......................................................................................................... 17
3.1 Economic performance indicators .................................................................................. 18
3.1.1 Profitability ratios ................................................................................................... 19
3.1.2 Liquidity indicators ................................................................................................. 20
3.1.3 Activity indicators ................................................................................................... 21
3.1.4 Debt indicators ........................................................................................................ 22
4. Key performance indicators ................................................................................................... 23
4.1 KPIs must be measurable ............................................................................................... 26
4.2 KPIs and the importance of up-to-date data ................................................................... 26
4.3 Clarity of KPIs ............................................................................................................... 26
4.4 The number of KPIs ....................................................................................................... 27
4.5 The KPIs system should match the company’s corporate culture ................................. 27
5. Key performance indicators in gastronomy ........................................................................... 28
5.1 KPI scorecard ................................................................................................................. 29
5.2 Quantitative KPIs ........................................................................................................... 30
5.2.1 Kitchen management KPIs ..................................................................................... 31
5.2.2 Front of house management KPIs ........................................................................... 33
5.3 Quantitative KPIs ........................................................................................................... 36
5.3.1 Customer experience ............................................................................................... 36
5
5.3.2 People management ................................................................................................ 38
6. Methodology .......................................................................................................................... 40
6.1 Study area ....................................................................................................................... 40
6.2 Research methods ........................................................................................................... 40
6.3 Research type ................................................................................................................. 41
6.3.1 Research type according to the type used of data used ........................................... 41
6.4 Questionnaire ................................................................................................................. 42
6.5 Data analysis methods .................................................................................................... 43
6.6 Sample size ..................................................................................................................... 45
7. Results ................................................................................................................................... 46
8. Discussion .............................................................................................................................. 54
9. Limitations ............................................................................................................................. 56
10. Conclusion ............................................................................................................................. 57
SUMMARY .................................................................................................................................. 58
REFERENCES ............................................................................................................................. 61
APPENDIXES .............................................................................................................................. 65
6
LIST OF ABBREVIATIONS
HORECA Hotels, Restaurants, Café
KPI Key Performance Indicators
SME Small and Medium Enterprise
TFP Total Factor productivity
EFQM European Foundation for Quality Management
OI Open innovation
ROA Return on total assets
ROE Return on equity
ROS Return on sales
KPI Key Performance Indicators
LE Large Enterprises
AHP Analytical Hierarchy Process
BSC Balance Scorecard
COGS Cost of Goods Sold
FC Food Cost
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INTRODUCTION
Needs are a basic motivational force important for human life and development. Needs are states
of scarcity – such as security, safety, help, love, trust, success, and freedom and lead to behavioral
change. As early as 1943, psychologist Abraham Harold Maslow defined Maslow’s pyramid of the
hierarchy of human needs. According to this theory, humans have five basic needs. He ranked these
needs according to how they have evolved over time and whether they are higher or lower in terms
of their value. At the same time, he believed that the satisfaction of the lower needs was a
prerequisite for the higher needs to take over (Duncan and Blulgis, 2011). After the physiological
and safety needs are met, the third layer is social needs. Belonging refers to the human emotional
need for interpersonal relationships, affiliation, connection, and group relationships. A need that
makes people maintain kindship, partnership and friendship relationships. The desire for intimacy,
the need to belong somewhere, to love and be loved. This also includes living in a community of
people we are with not just for the sense of security, but just for a sense of belonging. This middle
need protects one from loneliness, depression and anxiety (Duncan and Bulgis, 2011).
Figure 1. Maslow's Hierarchy of needs Source: Maslow (1987)
It was during 2020 and 2021 that people most often hungered for belonging and socialization. A
lot of places where people could spend time together were closed, and one of those places was
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restaurants. In recent years of rapidly growing commercialism, restaurants became places where
people only consumed food. During the pandemic in many countries, many socializing
establishments and among them restaurants had to close. This was happening due to restrictions
from the government to protect people and the health system (Sedov, 2022). Dues to this shortage
people started to realize that the entire HORECA (Hotels, Restaurants, Café) was no longer only a
service, but become much more. A place, where people could socialize, meet, celebrate, feel
connection and friendship and thus fulfilled the 3rd level of needs according to Maslow’s hierarchy
(Santich, 2004). People today expect much more from gastronomy than ever before – the so-called
gastronomic experience. This fact goes hand in hand with inflation, which many countries are
struggling with, and prices increase rapidly, so people no longer can afford to go to restaurants as
much as they were used to (Wiener-Bronner, 2022). These days’ people visit restaurants much less
and with this exceptionality, the expectation and desire for experience arise.
HORECA is nowadays much more than just food and drink. Today, it already creates a space to
meet, keeps traditions alive and helps but also supports the health of the planet and the economy of
a country. Thanks to HORECA, people not only have enjoyment but also work. In the past,
HORECA was described primarily as the understanding of everything related to food and its
preparation, serving and tasting. Today it is given much more importance than “mere” hospitality.
Gastronomy and HORECA are an integral part of our society and go far beyond restaurant plates
(Santich, 2004). Over the last few years, gastronomy has become a sensation, contributing to social,
cultural and climate change. The role of today’s chefs is also evolving. Earlier, their domain was
cooking, whereas today they focus on the overall guest experience and concentrate on a better
future for gastronomy as a whole (Gillespie and Cousins, 2012). The Basque Culinary World Prize
highlights the potential of the sector and its positive impact in areas such as health, education and
access to quality food (“Basque Culinary World Prize”). The finalists of the last edition were
recognised for their response to the pandemic - motivating them to help even more intensively the
sick, the homeless and health workers, as well as children in developing countries and employees
in the catering industry.
With the new view of HORECA from people – the consumers, the view from the other side – the
restaurants and their owners has also changed over time (Madeira et al., 2020). If guests expect an
experience from the visit to a restaurant, some of the owners are forced to change or adjust their
previously existing practices and start looking at the restaurant business from a new perspective.
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The rising cost of food, meals and drinks is caused by increasing input costs such as energy, gas,
water, staff wages, food and many others. Once upon a time, during “golden” times and rapid
economic growth, it was enough for businesses to keep track of basic economic indicators to keep
track of their financial situation. Today, when the world situation is more complex and, in contrast,
an economic recession is occurring, entrepreneurs are forced to look at the economy of the business
as a whole and often look at things from a different perspective (“Predictions That Global Economy
Is Heading for a Recession Are Premature | Jeffrey Frankel, 2022”).
For entrepreneurs in the gastronomy industry – HORECA sector, mainly in the restaurant industry,
the situation during the pandemic was no easier, quite the opposite. Restrictions on footfall, week
after week new government regulations, closing down establishments and leaving only the
takeaway window. Many businesses struggled to survive during this pandemic period. Some
opened outdoor gardens later, but the number of visitors did not increase significantly. Even though
people lacked socialization, the fear of illness, the unstable economic situation and the loss of habit
remained in them (Madeira et al., 2020). In the first three months of 2022, sales were up less than
half from the previous year (“How the Pandemic Altered the Restaurant Industry Forever”). This
tragically low attendance number did not reassure business owners at all, and instead of the
expected return of guests, the fears for their businesses were only prolonged.
People in the Czech Republic are less and less willing to spend money on restaurant services. They
have stopped going to pubs during the coronavirus epidemic and they are going out of business. In
addition to the decline in the number of guests, restaurants are also suffering from rising operating
costs, especially rising energy costs (Pultar, 2022). The significant increase in commodity prices is
leading many people to substitute boxed lunches and play the game at home with their loved ones
instead of going out to dinner with their families. Many restaurateurs are very worried about the
future situation as their sales continue to fall and the situation is not going to improve. Some popular
establishments are even expected to close this winter due to low customer orders and skyrocketing
costs (Wiener-Bronner). And that's not the only problem Czech food service entrepreneurs have to
contend with. Gastronomy was already suffering from a shortage of workers before the crisis.
Moreover, the coronavirus pandemic has made the situation many times worse. Those who did not
receive notice had to settle for significantly lower wages than they were used to. And if the staff,
who are one of the main pillars of a restaurant, are absent, it is very difficult for entrepreneurs to
find the motivation not to close their businesses.
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Due to the changing world economy and social situation, new theories and methods are also
emerging on how to monitor, measure and evaluate business economics. One relatively new
method is the measurement of key performance indicators. Key performance indicators are
commonly used to measure the success of an organization's activities in any industry. In recent
years, companies have been using them more and more because they should or can directly
influence the success of the organization's vision. For example, UK-listed companies have been
required since 2006 to analyse their performance using Key Performance Indicators (KPIs) in
specific sections of their annual reports. Thanks to the published KPIs in the UK, they were able to
observe and examine the potential economic consequence between the observed societies for the
period 2006-2010. Under the 2006 Bridge Act, KPIs are defined as: “factors against which the
development, performance or position of a company's business can be effectively measured”
(Elzahar et al., 2015). The publication of key performance indicators is essential to encourage
companies to communicate with their shareholders in support of a better understanding of their
financial performance and their progress towards achieving their goals. The study - Economic
consequences of Key Performance Indicators' disclosure quality is one of the first studies to address
the issue of KPIs. Taking into account the gap in the literature, the authors themselves developed a
research instrument for measurement.
The reporting of key performance indicators varies considerably between companies in different
sectors. Although the quantity of published KPIs is improving over time, the quality of reporting
is poor. These low scores suggest that although companies disclose some information on financial
and non-financial KPIs, they do not follow all best practice guidelines. Further tests also show that
the quantity of reported KPIs has no economic implications, confirming the regulatory
recommendation that the quality of KPI reporting matters (Elzahar et al., 2015). Only the quality
of financial KPIs has a strong negative effect on ICC and a weak positive relationship with
enterprise value. The quantity of reported KPIs does not affect the cost of capital or market value.
Policymakers may take comfort from the evidence that reporting financial KPIs has an impact, but
they might also wonder why the quality of non-financial KPIs is relatively low and does not lead
to any economic consequences (Elzahar et al., 2015).
The current situation shows that the future and outlook for small and medium-sized entrepreneurs,
in this case, restaurateurs, is not very favourable and there is a reason for concern. The method of
measuring key performance indicators is very new for the HORECA sector and is just entering.
11
This thesis aims to find how much KPIs entered the restaurant industry in the Czech Republic
compared to economic performance indicators. This thesis should answer whether KPIs are well
known among Czech restaurant entrepreneurs and which KPIs are most used. Since this method is
new and fresh, this thesis leaves the open question if there are any new methods used to measure
the performance of restaurants.
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ACKNOWLEDGMENT
I would like to express my gratitude to all Latvia, Lithuania and Estonia professors who
accompanied me during my master's studies. Over the past two years, they have imparted their
knowledge and experience to me with professionalism and sincerity. My thanks also go to my
supervisor Henrik G.S. Arvidsson, without whom this work would not have been possible. His
helpful comments and suggestions enabled me to secure the support to complete this work.
I would also like to thank my parents, without whom I would not have been able to start, let alone
finish, this study journey. Studying abroad is still not a standard and cheap thing nowadays, which
makes me appreciate this opportunity even more. My big thanks also go to my boyfriend Jakub,
who even during the writing of this thesis was mainly mental support and kept me on my toes so
that I could finish this thesis. Combining work and study has not been an easy journey, and I
appreciate all those who motivated me and gave me strength till the end. May that strength come
back to them when they need it.
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1. THE GENERAL CONCEPT OF GASTRONOMY IN THE
CZECH REPUBLIC
Gastronomy in the Czech Republic has always been at a very high level. In the period before World
War II, in Czechoslovakia and even earlier in Austria-Hungary, Czech cuisine flourished thanks to
free movement and entrepreneurship, which proved to be a good basis for development.
Unfortunately, this development was interrupted after 1948, when the diversity, structure and
openness of business were suppressed. International contacts of people from all fields, not only
gastronomy, disappeared and the Czech promising cuisine started to stagnate. But after 40 years,
the borders opened and with them new possibilities (TURNEROVÁ et al., 2019).
However, the development was thorny, because, after 1998 (the Velvet Revolution and the
liberation of Czechoslovakia from the Soviet Union), people who had neither the experience nor
the expertise to run a restaurant started to work in the industry. The open borders brought a lot of
enthusiasm and the growth of new businesses was very fast. The fluctuation was incredibly
dynamic - on the one hand, high numbers of newcomers to the industry and at the same time high
numbers leaving the industry, the application of new techniques and new raw materials, the arrival
of large global catering companies and, last but not least, franchising (Zábrodská, 2017). In the new
millennium, after the restaurant boom, especially in terms of numbers, gastronomy (since 1993
only in the Czech Republic) started to concentrate on quality again. Purchasing power grew and
with it, the demands of customers changed, even in the lower categories. Czechs visit restaurants
and pubs more than is typical in other countries. At least that is how it used to be until 2020. This
is mainly due to the most popular golden drink – beer.
Beer culture is a phenomenon of Czech folk culture and according to the Czech Association of
Breweries and Maltings, it should be included in the UNESCO World Heritage List of the Pilsen
Region. (The Union of Breweries has submitted a proposal for the Czech beer culture to be
inscribed on the UNESCO list, 2022) Here are a few facts and interesting facts that confirm the
uniqueness of Czech beer culture (Olšovská et al., 2014):
Liquid gold has been brewed in Bohemia for over a thousand years. It used to be brewed in
almost every town, but today it is a matter of experts and state-of-the-art technology.
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The Czech Republic boasts great diversity, with breweries of various sizes, from the
smallest craft breweries to the largest.
90% of the production in the Czech Republic consists of Pilsner (Pils) beer.
Pilsner-type beer is the prototype of the world category of light lager.
The Czech Republic has the highest beer consumption in the world - over 140 l/person/year.
Beer is an important part of Czech history and strengthens the good reputation of the Czech
Republic around the world.
In 2008, 'České pivo' (“Czech beer”) was registered as a Protected Geographical
Indication in the EU - In 2010, Czech beer was voted one of the seven wonders of the Czech
Republic in a national poll (České Pivo, 2022)
Good beer and good food go hand in hand. Different beers go well with different dishes and can
provide an unusual gastronomic experience. The situation in the beer market is currently changing
dramatically due to several circumstances (Olšovská et al., 2014). One of them is smaller regional
breweries, which are in fierce competition with large, capital-intensive breweries. This is bringing
unprecedented diversity to the Czech gastronomy market. Small restaurant microbreweries, whose
total number in the Czech Republic has already exceeded the number of industrial ones, are further
expanding the range of beers by offering unique and original beers that can usually only be tasted
on-site or in very limited numbers. The opening up to the world and the massive travelling of
Czechs to foreign countries, from where they bring back experiences of other types of beer, together
with the rising standard of living, are creating a demand for the widest possible selection of beers.
Consumers are willing to pay amounts unthinkable in the recent past for choice and quality.
Moreover, with the arrival of new 'vintages' of adult beer drinkers each year, the once rigorous beer
conservatism and prejudices of older generations are fading (Olšovská et al., 2014).
2. SMALL AND MEDIUM ENTERPRISES
The Czech Republic is the record holder in the number of pubs per population, while in the UK
there is one pub for every 780 inhabitants, in the Czech Republic there is one pub for only 265
inhabitants. Yet 2018 saw the most pubs opened in the last five years. The pandemic has put this
rapid growth on hold and many businesses have closed. The fact that the hospitality industry in the
Czech Republic is a long-standing tradition is evidenced by the fact that dozens of new restaurants
have already been established in 2022, the so-called post-pandemic year. The Association of Small
15
and Medium-sized Enterprises and Tradesmen of the Czech Republic is presenting a survey and
analysis of the small restaurant business in 2018. The hospitality industry occupies a significant
place in the Czech Republic's business environment. It employs a large number of people,
contributes considerable resources to the state budget and has historically been part of the social
life of the Czechs. The total number of restaurants, pubs and other catering establishments in the
Czech Republic is approximately 40 000. Since this thesis focuses on restaurants, which according
to a survey by the Association of Small and Medium Enterprises and Tradesmen of the Czech
Republic are predominantly SMEs, it is important to understand this issue. (“Asociace Malých a
Středních Podniků a Živnostníků ČR | Malé Restaurace a Hospody Bez Personálu”).
Small and medium-sized enterprises (SMEs) are a category of enterprises with a low number of
employees. Different countries and institutions use different criteria to define this category - for
example, the European Union considers 250 employees as the threshold, while in the United States,
the threshold is 500 employees (“Single-Market-Economy.ec.europa.eu”). The main advantage of
SMEs includes flexibility to respond to change, innovation, creation of new jobs, resilience to
economic recession, and speed in making business decisions. Flexibility is one of the main
competitive advantages of SMEs via multinationals and large corporations, enabling them to react
more quickly to market changes. Direct contact with management brings a relationship of trust
based on knowledge of the personal problems of the workers. Anonymity is lost and workers feel
more strongly about the importance of their work performance. Many workers are prepared to trade
high incomes and a comfortable working environment for greater job flexibility and job
satisfaction, and a small-group atmosphere. Both the company and its employees benefit from the
application of new trends in this area (Karel Havlíček and Kašík, 2005).
Despite the continuous growth of small and medium-sized enterprises, unemployment rates have
been rising and living standards falling in recent years since the pandemic crisis. The critical role
of SMEs in both developing and developed countries in achieving their growth aspirations has long
been acknowledged. SMEs represent potential employment and income for many countries. Small
enterprises that provide employment are more likely to succeed in smaller urban cities, where they
can contribute to a greater distribution of economic activity in the area and can also help reduce the
flow of migration to large cities. Small and medium-sized enterprises usually have insufficient
resources to compete with foreign corporations. The unique advantage of most SMEs is that they
are relatively easy to set up, as the capital and technology required are not as demanding as for
16
large enterprises. They also play an important part in economic growth and are also significant for
employment generation in many other developing countries (Afriyie et al., 2019).
2.1 The concept of small and medium enterprises
World Bank considers it crucial to support the SME sector because it increases economic growth
and employment and, in turn, prevents the growth of poverty. SMEs are more sustainable for the
regional economy and also represent a kind of revival. While the number of SMEs is low in many
stable transitioning countries, SMEs cover almost the majority of the private sector in developing
countries (Ayyagari et al., 2007). Innovation is many times more common, even necessary for
them. Technological advances, including, in particular, the increased use of digital technologies,
are increasingly forcing businesses to take a fresh look at innovation and also suggest the need for
a change in approach to the strategy adopted to become and remain innovative and competitive
(Singh et al., 2022) Today, digitalisation is one of the main factors influencing the implementation
of innovation processes. Therefore, SMEs in the service sector should also be aware that the digital
environment can affect their environment.
The financial crisis is having a much bigger impact on SMEs and is hampering the growth of total
factor productivity (TFP). Europe is currently experiencing a general slowdown in productivity
after the coronavirus crisis. Before the crisis, SMEs were predominant, and it is SMEs that have
the most during the crisis. This downturn is crucial to foster business dynamism in an inclusive
economy, as a slow-growing sector can lead to increased market concentration.
2.2 How innovation differs in SMEs vs large enterprises
An innovation is the introduction of a new product into production or a modification of a product
that is already in production. Furthermore, innovation is also a new technological or design solution
for production, the use of new materials and a change in the management of the enterprise. A
successful business should be open to new technologies, and new ideas and management should
take into account the reservations and opinions of their employees who only work manually in the
company. Management should be able to go from designing an innovation to its physical
implementation. But at the same time, they should not wait too long to introduce the innovation
because the company could lose the advantage for which it is introducing the innovation (van de
Vrande et al., 2009).
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Open innovation (OI) has so far been studied mainly in multinational companies with a focus on
technical sectors and mainly with high technology. SMEs are engaged in many open innovation
practices and have been increasingly adopting these practices in recent years. Interestingly, there
are no major differences between the manufacturing and service sectors, although the innovation
rates are very similar. Medium-sized enterprises engage in open innovation on a larger scale and
more frequently than others, especially micro and small enterprises (van de Vrande et al., 2009).
“We furthermore find that SMEs pursue open innovation primarily for market-related motives such
as meeting customer demands or keeping up with competitors. Their most important challenges
related to organizational and cultural issues as a consequence of dealing with increased external
contacts (van de Vrande et al., 2009, page 423).”
The effects of open innovation processes in small and medium-sized enterprises often differ from
those in large enterprises. SMEs are more successful in using different OI practices simultaneously
when launching new products, whereas this is less common in large enterprises. In this case,
turnover from new products in SMEs is driven by intellectual property protection mechanisms,
while large enterprises benefit more from their search strategies. However, based on a comparison
of marginal effects, the impact is not significantly higher for large firms, which refutes the idea that
large firms have a better absorptive capacity for integrating external knowledge. Based on marginal
effects, SMEs benefit relatively more from the use of protective mechanisms than large firms,
which makes the issue of the adaptability of innovations particularly important for SMEs
(Spithoven et al., 2012).
“Companies based in larger countries can experiment in their domestic markets and improve their
products before they face international competition. Firms in small countries have to enter these
international markets more or less from the onset of product/service development. Serving
international markets has a strong impact on both large firms. Nonetheless, large companies (not
surprisingly) are more rewarded for working in international markets than SMEs (Spithoven et al.,
2012, page 557).
3. ECONOMIC PERFORMANCE
Economic performance is nowadays becoming more and more common not only in the enterprise
sphere but also in day-to-day life. Economists or other experts are nowadays concerned with
assessing the performance of businesses. Most often, they focus on determining whether the
18
business can appreciate in value and thus provide a reasonable return on investment. The main
objective of most businesses is to maximize profit and increase market value over a long period,
the economic performance of a business needs to be further analysed and evaluated (Thomsen and
Pedersen, 2000). Profit and loss ratios, cash flow ratios and profitability ratios are some of the main
indicators that are used to measure and evaluate the economic performance of a firm. Thus,
financial ratios report the performance of a business which is usually expressed in monetary units.
However, if more and more emphasis is placed on other activities that take place in the context of
other activities of the enterprise and that can have a significant impact on its functioning, non-
financial indicators should also be monitored.
Economic performance translates as the ability of a company to get the best value for the investment
made in its operations. This interpretation suggests that only those enterprises that show good
economic performance are considered to be entrepreneurially efficient. Although this statement
may seem complete, it is not. Moreover, entrepreneurial performance is evaluated from different
perspectives by different market actors (Šulák and Vacík 89: 1st, 2005). Currently, there are several
approaches and tools for measuring and managing economic performance. Businesses use more
than one management approach. Consulting agencies are coming up with new devices and different
methods and approaches all the time, which are guaranteed to enhance the performance of the
company.
3.1 Economic performance indicators
As defined by the European Foundation for Quality Management (EFQM), performance is a
measure of the results achieved by individuals, groups, organisations and their processes. The
performance of a company's activities depends to a large extent on the exploitation of competitive
advantage. Only those entities that respond to changing business conditions, monitor and
continuously evaluate their performance levels and strive for continuous improvement can develop
successfully. A business should meet the expectations and wishes of the people who are connected
with the business, called stakeholders. The owner evaluates the performance by meeting
expectations regarding the return on the resources they have invested in the business. The customer,
on the other hand, evaluates performance according to the satisfaction of their requirements for a
product or service, suppliers and banks by the ability of the business to repay its debts, employees
by the level of wages and working conditions, the state by its ability to pay taxes, etc. (Knápková
and Drahomíra Pavelková, 2010).
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Nowadays, management practices based on stakeholder heuristics are being used to guide managers
to effectively manage multi-stakeholder relationships. Current approaches include an identification
of stakeholder roles, an analysis of stakeholder interests, and an assessment of the type and level
of stakeholder power. This approach has the potential to enhance current practice. To current
techniques that emphasize power and interests, the model proposed by Mitchell adds the critical
dimensions of legitimacy and urgency. Stakeholder theory is the key to more effective management
and a more useful, comprehensive theory of the firm in society (Mitchell et al., 1997). Stakeholder
theory must account for power and its manifestations, as well as urgency and legitimacy, no matter
how uncomfortable or troubling they are outcomes. Managers need to be aware of the actors in
their environment who hold power and intend to impose their will on the firm. Power and urgency
must be taken into account if managers are to serve the legal and moral interests of legitimate
stakeholders in society (Mitchell et al., 1997).
The hospitality industry is a large service sector that includes smaller areas such as hotels and event
planning, transportation, and other areas of tourism. Because of the hospitality industry in general,
it is very important to define a set of financial ratios that can be used to analyze firms across the
industry, regardless of operations. The hospitality industry is heavy in fixed and tangible assets and
therefore requires a very specific set of financial ratios to accurately analyze the industry and come
to conclusions based on the performance of individual companies. Below are key financial ratios
that stakeholders can use to analyze companies within the hospitality industry.
3.1.1 Profitability ratios
Profitability has a privileged position among other groups of ratios. The microeconomic theory
says that the main motive of a firm entering an industry is profit and the main objective is profit
maximization. In practice, of course, it is no different, and therefore the assessment of profitability
is an important measure of the efficiency of the use of capital employed. Profitability measures the
efficiency of capital invested in a company and the ability to create new resources. It is used to
assess profitability relative to key indicators such as sales, assets and equity (Slavík, 2013).
ROA - Return on total assets
The return on assets indicator expresses the return on assets from the perspective of assets, or how
much profit was generated from the invested capital (efficiency of the use of invested capital) or
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total assets. The higher the value of the ROA ratio, the better for assessing the profitability of the
firm. Return on assets measures, from the perspective of liabilities, the profitability of the business
obtained from owners' and creditors' money, as opposed to returning on equity, which measures
the profitability obtained from owners' money only (Slavík, 2013).
ROE - Return on equity
ROE is one of the basic economic indicators. It indicates the return on equity, namely how much
net profit is earned per one crown of invested capital. In practice, it is a calculation that shows how
a company performs relative to its equity (money invested). It is good to have ROE calculated in
the company - when it rises, it means that the money invested is making a profit; conversely, when
it falls, it is an indication that you need to be careful (Slavík, 2013).
ROS - Return on sales
This is an indicator of the profitability of sales. The profit used here is profit relative to sales. The
value of sales and profit is used for the calculation. Sales here represent the performance of the
business over some time. Not only do sales affect the operation of the business, but also the various
pricing strategies of the business, marketing strategies, advertising, and public influence all
intervene. Return on sales can also be characterized by how many euros of net profit per euro of
sales (Slavík, 2013).
3.1.2 Liquidity indicators
These ratios give us an indication of the extent to which the company can cover and repay its
liabilities. In other words, it describes the rate at which the company can turn assets into cash.
Liquidity ratios measure liquid and readily magnetisable assets - current assets and current
liabilities. We recognize three liquidity ratios: current, quick and prompt (cash). The relationship
between these liquidity ratios is as follows: current ratio ≥ quick ratio ≥ cash liquidity (Slavík,
2013).
Current ratio
This indicator provides information on how many times the current assets in a company cover its
current liabilities. Its purpose is to determine whether current liabilities are covered by those asset
21
items intended to finance them. It can also be seen as an indicator indicating how many times the
enterprise would be able to satisfy its creditors if it were to convert all of its current assets into cash
(Slavík, 2013).
Quick ratio
If the resulting values are within the recommended range, it means that the company is able to pay
all its liabilities without having to sell its stock. A higher value would be favourable from the point
of view of creditors, as higher values indicate better solvency of the firm. However, from the point
of view of owners and investors, higher values are not acceptable as too high current assets, which
include too much ready cash, only generate little or no interest and thus render the overall business
operation inefficient (Slavík, 2013).
Cash ratio
Only the most liquid items, such as cash on hand and in bank accounts, cheques and securities, are
included in this liquidity. In other words, it includes total financial assets (Slavík, 2013).
3.1.3 Activity indicators
Activity indicators provide an overview of how the enterprise can use its assets or assets at its
disposal. They also measure how these assets are tied up in the various components of assets. The
analysis of activity indicators mainly answers how the assets and their components are managed in
the enterprise. Every enterprise should strive to achieve the highest possible turnover and,
conversely, the lowest possible turnover time (Slavík, 2013).
Asset turnover
Asset turnover measures the revenue generated per monetary unit of assets invested and is a
measure of capital intensity or overall production efficiency. In other words, this indicator shows
how many times the assets in an enterprise are turned over in a given time interval. If the result
shows a deteriorating trend or comes out below the usual industry average, the enterprise should
either increase sales or consider divesting some assets (Slavík, 2013).
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Stock turnover
Inventory turnover measures the number of times each item of inventory is sold and restocked in a
year. This indicator has a major impact on the liquidity of the firm. When inventory turnover is
low, a business can be said to hold its inventory for a long time before selling or otherwise
consuming it. In the case of product inventories, this indicator can also be indicative of other things
about the company's liquidity (Slavík, 2013).
Accounts receivable turnover
The indicator expresses the number of days between sales and sales, i.e. the time when money is
held as receivables. During this time, the company is effectively providing trade credit to its
customers. The average amount of receivables is taken for greater indicative value. This indicator
helps in better cash flow planning as it reflects the actual period for which the company finances
customers, not the theoretical one (Slavík, 2013).
3.1.4 Debt indicators
Debt ratios are based primarily on the fact that the enterprise uses external resources for financing.
The analysis of the firm's indebtedness compares individual items on the balance sheet and then
distinguishes how much of the firm's assets are financed from external sources. The most used
indicators of debt analysis include, for example, the ratio of equity to total liabilities, the interest
coverage ratio, and others (Slavík, 2013). For this paper, it is sufficient to describe indebtedness
and long-term indebtedness.
Indebtedness
Indebtedness in general does not have to be a negative characteristic of a company. Its growth in a
stable firm contributes to increasing profitability. However, as indebtedness increases, the risk of
the company having problems paying interest and being in an unfavourable financial situation
increases. Sometimes referred to as creditor risk, it characterizes the level of the firm. It indicates
the degree to which the firm's assets are covered by external resources (Slavík, 2013).
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Long-term indebtedness
Calculated as long-term foreign capital/total capital. This indicator is suitable for trading companies
that consider only long-term foreign funds in the calculation. The optimal value is less than 25%.
If the value is too high and creditors are sufficiently protected, the company may run into problems
when issuing and selling shares (Slavík, 2013).
4. KEY PERFORMANCE INDICATORS
The criticism of the economic indicators stems mainly from the focus on accounting data and, in
particular, on accounting results. These results do not take into account risk, the impact of inflation,
the time value of money or other factors (Pavelková and Knápková, 2009). The criticism of the
shortcomings of traditional performance indicators has led to the introduction of more modern
measures of evaluation in the enterprise. These new, more modern indicators already take into
account the impact of risk and management. The benchmarks should provide an assessment of
performance and, at the same time, a valuation of companies and make the identification of
indicators clear and transparent. To propose an indicator that would meet However, it is very
difficult to identify an indicator that meets all the criteria listed. For this reason, different
combinations of performance management indicators are used (Pavelková and Knápková, 2009).
Key Performance Indicators are indicators, indicators or performance metrics assigned to a process,
service, unit or entire organization that express the desired performance in terms of quality,
efficiency or cost-effectiveness. It is a measurable value that shows how effectively a company is
achieving key business objectives (Marr, 2012). Organizations use these indicators at several levels
to evaluate the extent of their success in achieving their goals. At the most basic level, KPIs can be
used to evaluate processes in individual departments such as sales, marketing, or even the human
resources department. At higher levels of the business, KPIs then measure the overall performance
of the business as a whole. KPIs are important indicators of the effectiveness and prosperity of a
project, department, organization, and even the company as a whole (Marr, 2012).
It often happens that companies blindly adopt industry-oriented KPIs and then wonder if these
indicators do not work for their business and if their use does not bring any positive change. One
important aspect of these indicators that is often overlooked is that these indicators are a form of
communication. As such, they follow the same rules and best practices as any other form of
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communication. Concise, clear and relevant information is much easier to absorb and handle.
Defining key performance indicators can be tricky. Every single indicator should relate to a specific
measurable outcome for your business. KPIs are often confused with business metrics. Although
KPIs are often used in the same vein, they need to be defined by critical or key business objectives
(Marr, 2012).
In any service industry, it is important to identify a set of common indicators that managers can use
to measure service performance at the project level. KPI is an effective method used by many
company executives today to evaluate the performance of employees in completing a particular
assignment. These evaluations typically compare actual and estimated performance in terms of
effectiveness, efficiency, and quality, both in terms of execution and product. Generalized models
exist for performing and monitoring construction activities, but they do not specify which indicators
will accurately reflect changes in performance (Cox et al., 2003).
For more transparent reporting of information, a simplified method is used that directly predicts
performance and summarises the data for the task being measured. To track performance or
calculate the impact of any process modification, it is necessary to determine the applicable KPIs
to focus on first to measure its performance impact. Performance indicators can be defined by either
quantitative outcomes of the construction process, i.e. $/unit, or qualitative measures such as the
behaviour of workers on site. Accurate analysis of construction performance can only be achieved
if key indicators are identified and monitored (Cox, 2003).
The attention of entrepreneurs most often leans towards performance indicators that can be
physically measured in monetary units or man-hours, and they first focus on areas that show a
change in the amount of revenue generated. Managers consider indicators to be unsuccessful if the
results are without measurable improvement in terms of cost reduction or quantifiable productivity
increase. “Qualitative performance indicators are not commonly accepted as reliable tools for
assessing performance and productivity because of their perceived difficulty and/or impossibility
to measure. Unlike quantitative performance indicators, qualitative indicators are not in the cost
estimating/accounting system used by most countries. construction films (Cox, 2003).”
There are several justifications for the prioritisation of KPIs. For example, an organisation's scale
and complexity may impact the type and number of KPIs selected. In Large Enterprises (LE), the
performance measurement team may be dealing with a large number of KPIs. Investing in
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analysing and improving all KPIs may not be prudent from a cost-effectiveness perspective and
therefore selecting the most important and relevant ones becomes necessary by integrating the
analytical hierarchy process (AHP) and setting SMART targets can take into account both
quantitative and qualitative factors. It is important to note that performance indicators can be
arbitrary and subjective, yet still be SMART. Complex evaluation criteria can be displayed in
simple hierarchy representations and these can be easily reviewed and accepted by senior
management. KPIs and their corresponding weights may vary from one organization/department
to another. One of the advantages of AHP is its ability and flexibility to change the weights in
different circumstances; therefore, the new approach is easily adaptable to different application
areas (Shahin and Mahbod, 2007).
For hotels and the hospitality industry, in general, to survive to thrive today, they must create
adequate competitive environments and strategies. Competitiveness especially in developing
economies is challenging in that each stakeholder demands more. Critical performance indicators
are therefore absolutely critical to business success and always reliable. Today's demands are
dynamic and therefore a comprehensive framework needs to be adopted (Kala and Bagri, 2014).
The KPI is intended to provide decision-makers in the organisation with quantifiable indicators to
evaluate the performance of the hotel and to measure the organisation's achievement of its
objectives. Achieving the ultimate goal of maximizing profit through stakeholder satisfaction is the
KPI that can help hotel managers in their efforts to ensure effective and efficient resource
management. The decision-making process is a series of action steps that an individual takes to
identify the best possible option or approach to meet a person’s needs. In a business context, it is
the set of action steps that managers in a business take to establish a planned path for business
initiatives and set specific actions in motion (Coudounaris and Arvidsson). The study by Devkant
Kala suggests that financial dimensions dominate the perception of key performance indicators by
hotel managers, with little or no attention paid to non-financial indicators. This shows that
performance measurement in the hospitality industry is not balanced. They need to include both
financial and non-financial performance measures in their performance measurement systems. The
bottom line is that whatever is happening in an organization is the result of several different causes
that are triggered by customers, employees and other stakeholders. Financial and non-financial
KPIs provide the organisation with important information to monitor and predict the performance
26
of the business against strategic objectives in a way that complements financial indicators (Kala
and Bagri, 2014).
4.1 KPIs must be measurable
To be correctly evaluated and explained, the indicators should have the same measurement system.
The company must be able to measure each key performance indicator. The only way to solve this
problem is through a general agreement between the heads of the different structural divisions. In
addition, uniform standards and methods should be developed, for example for bonus systems or
salary distribution. These standards can be included in the appendices of the regulatory
documentation for the implementation of KPIs so that all employees of the company can work
based on them. Without properly analysing and understanding the KPI data that are collected over
some time, the company will not be able to achieve the main goal of measuring the success of the
company (Parmenter, 2011).
4.2 KPIs and the importance of up-to-date data
Even if the company manager designs the KPIs well enough, they will not be able to show the
correct values if no information is needed to determine them. Company management often
mistakenly thinks that databases contain all the data needed to use this or that indicator. However,
it is necessary to be guaranteed that the indicator will be monitored based on reliable information
showing the true state of affairs and, above all, based on observation of the factor in question. Even
if a KPI is strategically important, it is unmeasurable and it is impossible to get a complete picture
of reliable information about it. In this regard, the company should review this indicator. An
alternative may be to address the problem of data collection and its quality and correct processing.
This is clearly one of the most important tasks when dealing with KPIs (Parmenter, 2011).
4.3 Clarity of KPIs
If an employee cannot remember, let alone be aware of, key indicators, he or she may not be able
to perform them. In this case, motivation risks being replaced by demotivation and performance
effectiveness declines. If KPIs are impossible, management cannot expect quality work that will
lead to the achievement of strategic objectives and the company's strategic priorities if the KPIs are
unmeasurable. This is because management is unable to assess the measurement and
implementation of certain indicators. A system of indicators can be used to not only be effective
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for the company but also capable of causing some damage, which may result in new (Parmenter,
2011).
4.4 The number of KPIs
The number of indicators should not be finite, but also limited and small. Too much of everything
is harmful. If a company has too many KPIs, management can get lost in the indicators because of
the many chaotic results. Individual KPIs may also contradict each other and the result will be
negative and the KPIs will become a complication for the company. This makes it difficult to define
strategic and regulatory KPIs. In some companies, more than a dozen KPIs are set for a single
position and all are linked to an incentive system. As a result, the time spent gathering and
processing information increases. In addition, employees can focus their efforts on metrics that are
easy to perform and don't require tremendous effort, and they can focus on other activities that are
in their job description. With this evolution of events, the system requires optimization. First of all,
the number of key performance indicators should be clearly defined at the beginning and should
have a given number (Parmenter, 2011). It is very difficult to determine which number is just the
right one. The number of KPIs is related to the size of the company, the number of employees in
the company, the company's breath and many other factors.
4.5 The KPIs system should match the company’s corporate culture
Company culture is also an important factor in creating and implementing KPIs. Building an
effective KPI system must be based on the company's corporate culture, its values. Each company
has its own vision of success, based on which the management then develops a set of goals to
achieve this vision. A clear understanding of corporate culture can help managers define the right
values and culture for their company (Arvidsson et al., 2020). This means that it is necessary to
develop a uniform terminology that is clearly understood by all employees and does not cause
controversy or misunderstanding, e.g. a code of standards of conduct and certainly links it to
remuneration. In this spirit, it should be immediately emphasised that to develop an effective KPI
system, it is necessary to improve information channels of communication between management
and company employees, improve communication processes between employees, develop
corporate standards, train employees for feedback and communicate effectively (Parmenter, 2011).
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5. KEY PERFORMANCE INDICATORS IN GASTRONOMY
Tracking KPIs is an essential part of a restaurateur's daily operations and a key process for
accelerating success. Without KPIs, it is very difficult for a restaurateur today to evaluate how
effectively their business is performing, and they will not be able to accurately identify and
eliminate challenges and potential business issues when they arise. Regardless of the style of the
restaurant, it is important to develop and track a set of KPIs that highlight opportunities and
successes or failures. Tracking KPIs is important for a restaurant to be able to keep the energy of
all employees focused on the areas that need it most (Křovák, “100proGastro).
KPIs have been studied academically for quite a long time, as reflected in the sources in the
previous chapters. However, gastronomy and HORECA, is a rather specific industry, for example,
only in that it provides both a product (e.g. a portion of food) and a service. Although the catering
sector went through a difficult period during the Covid-19 pandemic and many countries were hit
hardest and many businesses had to close down, its rapid development has not stopped. On the
other hand, the coronavirus crisis has brought many opportunities for new types of restaurants, and
many innovations, in some countries the digitisation of businesses and the use of online services
through restaurants has increased enormously, but also those who have 'survived' and are still in
business are improving their processes, educating themselves to avoid another possible crisis
(Křovák, “100proGastro).
There are many key performance indicators. Certainly, as mentioned above, a restaurant does not
need to track all of them. Each restaurant is different and specific, each employs a different number
of staff and has a different target group. Therefore, it is not possible to determine which KPIs are
the most appropriate. The result is a unique mix, a so-called cocktail, which contains a combination
of all indicators tailored specifically to the establishment. Determining this "cocktail" requires a
certain amount of patience on the part of the restaurant owner and is not stable. It can change over
time as the situation demands. Restaurants are very often seasonal businesses and have varying
performances at different times. The KPIs monitored should also reflect this fact (Křovák,
“100proGastro).
KPI in gastronomy is a relatively new and not so much studied yet topic. There are very few
academic papers dealing with this issue. Fact that this topic has flourished in recent years and is
29
still evolving, it has no precise rules and principles. The whole chapter on KPIs in gastronomy was
consulted with the Czech agency 100pro Gastro, which carries out advisory, consulting and training
activities for gastronomic entities (Křovák, “100proGastro).
5.1 KPI scorecard
The KPI Scorecard is a performance management tool that enables businesses to monitor and
improve their performance by aligning their activities with strategic objectives. The idea behind
the KPI Scorecard is that businesses should not only focus on financial performance indicators but
also on other aspects essential to their success, such as customer satisfaction, employee engagement
and operational efficiency. The KPI scorecard approach has been adopted by organisations of all
sizes in different sectors. It is particularly popular in service-based businesses, such as the
HORECA sector, where intangible factors such as service and customer satisfaction are difficult to
measure (Křovák, “100proGastro).
Picture 2 - KPI scorecard template, Source:www.slideegg.com/kpi-scorecard-template
The basic KPI scorecard includes four perspectives: financial, customer, internal processes,
learning, and growth. Each perspective is represented by a set of measurable goals or targets. The
financial perspective focuses on measures such as profitability, return on investment and cash flow.
The customer perspective measures factors such as customer satisfaction, retention, and market
share. The internal process perspective focuses on quality, efficiency and cycle time indicators.
30
And the learning and growth perspective focuses on indicators such as employee satisfaction,
training and innovation. The basic KPI scorecard includes four perspectives: financial, customer,
internal processes, learning, and growth. Each perspective is represented by a set of measurable
goals or targets. The financial perspective focuses on measures such as profitability, return on
investment and cash flow. The customer perspective measures factors such as customer
satisfaction, retention, and market share. The internal process perspective focuses on quality,
efficiency and cycle time indicators. And the learning and growth perspective focuses on indicators
such as employee satisfaction, training and innovation (Křovák, “100proGastro)
The KPI Scorecard is sometimes confused with the Balanced Scorecard (BSC), which is a similar
performance management tool. Both scorecards include multiple aspects and metrics, and both are
used to track progress and identify areas for improvement. However, there are some important
differences between the two approaches. First, the KPI Scorecard focuses on key performance
indicators, whereas the BSC focuses on a balanced set of measures including both financial and
non-financial indicators. Second, the KPI Scorecard is typically used by businesses to monitor and
improve their performance, whereas the BSC is often used by governments and non-profit
organisations to assess and compare the performance of multiple organisations. Finally, the KPI
Scorecard is typically used to monitor progress over a shorter period (e.g. one year), while the BSC
is intended to be used over a longer time horizon (e.g. three to five years) (Křovák, “100proGastro).
5.2 Quantitative KPIs
Quantitative indicators are the simplest KPIs. They are measured by numbers only. It is natural for
business owners to focus on quantitative KPIs when evaluating business practices and making
decisions. Quantitative indicators are measurable values that show whether an organization is
achieving its goals and mission. Financial managers can collect, analyse and present these numbers
in a variety of visual forms, including graphs, charts and tables. Focusing solely on quantitative
KPIs that determine when and how the organization (in this case restaurant) will reach its end-of-
track goal ignores a lot of quantitative data that can derail restaurant managers. Both types of
performance indicators are essential to provide a complete picture and allow for course corrections
along the way (Křovák, “100proGastro).
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5.2.1 Kitchen management KPIs
The kitchen is one of the most important places in the restaurant. It is the place where the service -
the food - takes shape. It is also the main place that draws the most energy (due to appliances,
cooking, refrigerators, kettles, ingredients, human labour, etc.) and also where the owner can reduce
costs and increase output the most. If the owner, or restaurant operator, has visibility into what is
coming into and going out of the kitchen, he/she will be able to focus on ways to reduce waste and
costs. Here are some of the KPIs for kitchen management that this thesis recommends (Křovák,
“100proGastro):
Cost of goods sold
Cost of goods sold, also abbreviated COGS, represents the direct costs incurred in the production
of products sold in a particular period. This management calculation determines how much the
company spent on materials, labour, and overhead to purchase or produce those products that were
sold during the year. However, the cost of goods sold does not include costs incurred in the
production of products or services that have not yet been sold - only costs that have been
successfully sold are taken into account. The reason why these costs are not taken into account is
that the company calculating them wants to determine the so-called actual costs; specifically, only
items that have been purchased are included in these actual costs (Křovák, “100proGastro).
COGS helps managers analyse the control of labour costs and the purchase of certain products. In
addition, this variable is not only used by executives; investors and creditors also use it to calculate
a company's gross margin and determine the exact percentage of revenue available to cover
operating expenses. Gross margin is calculated by subtracting the cost of goods sold from total
revenue (Křovák, “100proGastro).
Food Cost
Food cost - FC is the cost of raw materials spent to create the meals that were sold in the restaurant
in a given accounting period. It informs the owner of the establishment what percentage of our
revenue determines the cost of the product. Ideally, a restaurant should calculate raw material costs
at least once a month. However, the frequency of calculations varies depending on the type of
restaurant and other factors. Restaurants and food service units should strive to keep their total food
32
cost between 25-30%. (Křovák, “100proGastro). If they stick to this, they can expect to make a
good profit. However, in today's era of rising costs and ignorance of restaurateurs, the real FC is
between 35 - 45%. The percentage also varies with the product being sold. For example:
- Food: 25 – 30%
- Beer: 30 – 35%
- Alcohol: 10 – 20%
However, the ideal FC percentage is not set. For fast food establishments it may be around 20%,
whereas, in expensive upmarket fine dining restaurants that use expensive food, an FC of 50% is
not unusual and is not an expression of poor management. Both types of establishments can still be
profitable (Křovák, “100proGastro).
Menu item profit and popularity
Pricing of items is the most sensitive item for customers. There are often debates about how much
of a factor just the price of food plays in the menu's role in repeat visits to a restaurant. From an
establishment's perspective, the impact on the profitability of the business is being looked at. There
is no clear answer. This factor is influenced by many other external factors such as the type of
establishment, the location of the establishment, the target group of diners and others (Křovák,
“100proGastro).
However, independent of these factors, the operator needs to know which food or beverage items
bring in the most revenue and how well these items sell. Highly profitable menu items are great -
but not if they bring in a statistically insignificant percentage of sales. The menu needs the right
balance between the most profitable, most popular and most expensive dishes. Items with higher
sales velocity but lower profit margins can be the main source of all revenue. Therefore, it is
essential to track the dishes, while this indicator can change over time – seasonality (Křovák,
“100proGastro).
Cross-selling and up-selling
Cross-selling is a business or marketing tactic that allows you to sell more goods or services to
customers. In practice, it may seem like selling complementary products (dessert) to the main
product the customer buys (main course). This method will only work if the restaurant offers the
33
customer complementary goods that are closely related to the main product. Cross-selling is about
increasing the customer's benefit from the product, not just blindly selling it (Křovák,
“100proGastro).
Up-selling is a sales and marketing tactic that is similar to cross-selling. It involves a business
offering slightly more expensive and better goods to a customer. As with cross-selling, up-selling
is all about making the purchase profitable for customers. The business should therefore offer goods
that are just a little more expensive but a lot better. A good up-sell will increase both profit and
customer utility. By doing so, the business will achieve something more important than increased
sales - customer satisfaction. The latter is many times more profitable in the long run than a one-
time sale or a one-time visit.
Example:
- Cross-sell: The restaurant sells the customer a chocolate cake, a vanilla cake and a coffee.
- Up-sell: The restaurant sells a premium chocolate dessert for 3,60€.
5.2.2 Front of house management KPIs
The kitchen may be the most important room in a restaurant, but a restaurant without staff/waiters
and waitresses would be meaningless. They, on the other hand, are the most important part of the
restaurant. Taking care of customers is the most complex activity of a restaurant and the most
important. Every little thing can make a difference in a customer's return and the outcome is down
to all the staff. That's why it's important to note what makes customers happy and why they return
to the establishment. This information can be extremely valuable when determining what to change,
maintain or improve. The ability to control personnel costs and maintain low employee turnover
will affect service standards (Křovák, “100proGastro).
Food and beverage menu
The beverage and menu are powerful sales tools and at the same time a kind of business card of the
restaurant, whose image it significantly co-creates. Depending on how the menu is designed, a
particular establishment distinguishes itself from others - either positively or negatively. Of course,
it's not just about being one step ahead of the competition in terms of graphics and printing, but the
design of the menu plays a significant role in the decision-making process of the guests. Creating
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a drinks and food menu is certainly no easy task, let alone a cheap affair. The opposite would be
true if a restaurateur created menus long in advance and drove by them for months and months,
maybe even years. Such a menu will soon become stale, just as customer interest in the pub will
wane. The ticket should be constantly updated and in most items (Křovák, “100proGastro).
Just like the food menu, the drinks menu has its laws. Many suppliers already offer a bespoke
beverage and food menu creation service and most of the time this service is free of charge.
Plzeňský Prazdroj a.s. even offers menu creation, through the Prazdroj Menu application
(https://menu.prazdroj.cz/), which helps to create a professional menu for the visual aspect, but also
includes basic recommendations for the key customers (“Plzeňský Prazdroj, A.s.”). The customer-
restaurateur thus gets the possibility to create menus in a few easy steps and has a regular update
daily. This application includes an emphasis on food and beer pairing, as well as highlighting the
strengths of a particular restaurant. Not forgetting the graphics, where a clear approach to pricing
must also be taken. It has been proven that people are willing to spend more when the price is
displayed without indicating the relevant currency (Křovák, “100proGastro).
Food and beverage sales and menu item profitability
If the restaurant already has a properly designed food and beverage menu, it's time to observe. The
manager should observe which menu items appeal most to guests and whether these dishes or drinks
have an impact on the overall spend, time or day. Tracking this metric will just allow restaurants
to make adjustments to the menu - for example, removing underperforming dishes that may be
negatively impacting kitchen productivity while generating little profit, or raising prices on popular
and hot items to increase your margins. Food and beverage sales can be measured for various
indicators such as: per guest, per hour, per day, during lunch, per table, per occupied room, per
square floor space and many more. However, the most common measurement is per guest (Křovák,
“100proGastro).
To effectively design a menu, it is essential to determine the profitability of individual items.
Restaurateurs should know the most popular dishes that make them the most money in real-time.
A fairly helpful metric is also a percentage of cost per meal will show you the most profitable
dishes, allowing you to compare dishes and make informed decisions about pricing, specials and
availability (Křovák, “100proGastro).
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Labour cost
A company’s payroll percentage represents its total payroll as a percentage of gross sales. Wages
and salaries are a significant cost for most businesses, predominantly for catering businesses, where
they are among the highest costs. Regardless of the industry, labour costs are rising due to, among
other things, new minimum wage and overtime pay laws, parental leave expectations, and other
benefits depending on the state in which the restaurant or business operates. The problem with
labour costs is that there are no universal standards. Percentages vary by industry, company size,
and revenue. It is also common in the hospitality industry for each employee to work under a
different contract and be paid differently. Temporary workers - students who work seasonally and
most often in the summer months - are often dominant. Some restaurant owners pay their
employees by the hour, others on a fixed basis. In some states, such as the Czech Republic, waiters
are dependent on tips, while in other states they are an insult (Křovák, “100proGastro).
Average table occupancy
One of the other indicators is average table occupancy, which looks at the average number of guests
who visit a restaurant during a certain period. Restaurant owners can use this measure to see if they
are effectively using their seating capacity. In other words, they monitor footfall. With this data,
they can then change opening hours or decide which days to stay open or close. Larger restaurants
that have multiple rooms or a garden, for example, can regulate which part of the establishment
they keep open, or regulate the kitchen. It is also possible to change the menu with this information,
for example, to emphasize favourite dishes at a certain time, while lunch dishes will be different
from those in the evening. Anyway, the average table occupancy can provide a lot of information.
You can find the value by dividing the number of occupied tables by the total number of tables
(Křovák, “100proGastro).
Table turnover rate
The tables in the restaurant are like real estate. The longer they're occupied, the higher your sales.
Therefore, the table turnover rate is another important indicator. It's important and extremely
challenging to find the ideal combination between turning tables and providing a good guest
experience. This indicator depends on the efficiency and effectiveness of the overall operation of
your restaurant - from the kitchen processes to the last job of handing over the check. Any
36
inefficiency in operations will create a bottleneck that will ultimately lead to slower table turnover.
Calculating your restaurant's turnover rate will help restaurant owners better understand the current
situation and compare it to industry benchmarks to determine what strategies need to be put in place
(Křovák, “100proGastro).
5.3 Quantitative KPIs
While quantitative KPIs measure an important part of overall business success, they provide an
incomplete picture of the CEO's performance and leadership abilities. Qualitative performance
indicators fill in the rest of the picture and some cases may be a more reliable source of information.
Qualitative indicators are not measured by numbers. Qualitative KPIs are usually a characteristic
of a process or business decision. Qualitative key performance indicators will not be measured by
a number. For this reason, they are often perceived as more complex to collect. However, many
people are more than willing to share their thoughts and experiences if asked. The ideal
management strategy for collecting these measurements is to be active in the organization - a
restaurant, chatting informally with employees to take an active interest and be present in work
processes. Additionally, qualitative KPIs include customer anecdotes or stories, comments,
feedback or answers to, often open-ended, questions. It is true that when combined with
quantitative data, a restaurant is likely to get a more complete picture of any business situation
(Křovák, “100proGastro).
5.3.1 Customer experience
Customer experience is a topic that requires a lot of attention because of the period of great
competition when many companies are trying to establish themselves. It is important to remember
that the main goal of almost every business is profit, which is an indispensable measure of success
in a particular market. And it is profit that comes from customers and therefore must be taken into
account. Customer experience comes from well-executed customer service, and every company
has its processes for creating it. Companies implement customer service with a single goal in mind
and that is, a satisfied customer for whom the experience is the added value (Křovák,
“100proGastro).
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Online reviews
Online reviews are more than just free marketing. They provide feedback and insights from
customers that restaurants and managers should take into account. By tracking reviews vertically,
a restaurant owner can pinpoint the areas of their business that need the most attention and measure
whether the efforts they're making to progress are working. Unfortunately, most customers won't
leave an online review without being prompted unless they have something to complain about.
Businesses that do not actively solicit reviews will naturally experience a higher percentage of
negative feedback (Křovák, “100proGastro).
Customer retention
Customer retention includes all activities aimed at keeping or retaining departing customers.
Retention measures aim to reduce the outflow of existing customers. It, therefore, focuses on
improving customer loyalty and eliminating the causes of customer dissatisfaction. Customer
retention processes are particularly typical of companies that offer services of a regular nature. In
the case of restaurants, this may include loyalty programmes, possibly with discounts for repeat
visits. Every restaurant, even the best, has a certain percentage of customers who leave. So every
business must ensure that the number of new customers is higher than the outflow of old ones. In
industries where there is a lot of competition and market saturation, there is naturally a higher
probability that customers will leave. In any case, it is important to try to minimize the churn rate
because the cost of acquiring a new customer is higher than the cost of retaining a customer in the
vast majority of businesses (Křovák, “100proGastro).
Digital platforms and social media
Over the past few years, social media has become increasingly popular and visible, thanks to the
ability to easily share all sorts of information. By using social media, companies can gain a huge
advantage by implementing adequate activities on these media. For example, companies can
achieve a positive impact on their business future by spreading awareness of their name, attracting
new and retaining existing customers, and even recruiting new employees. Not only that but social
media are also a grateful platform to stay in touch with customers on daily basis. Very popular is
posting daily menus, specials, and possibly events. Very effective is reposting or sharing posts of
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the restaurants’ customers, so they can feel more connected to the restaurants. Now are very popular
different competitions, or online voting, all of these activities are effective and not only focus on
existing customers, but they also interfere with possibly new ones (Křovák, “100proGastro).
5.3.2 People management
Leadership is one of the important functions of a manager, which consists in persuading and
activating the executive staff by the manager so that the set/planned goals, objectives, and tasks are
met, so basically, we can consider this term as a synonym for the concept of influencing, directing
workers. On the other hand, one can encounter approaches that distinguish people management
from classical management practices. They emphasise both the aspect of a long-term vision and
the activation of all workers to achieve it. Traditional management is based on planning,
organizing, selecting personnel and controlling, as well as monitoring results, where the purpose
of management activities is to create some order in the course of the organization's activities to
achieve desired, usually short-term results. In contrast, leadership approaches are based on setting
a purpose, and a vision for the future, and involving people to communicate, motivate and inspire
all stakeholders to get people on board with change and the long-term needs of the organisation.
Executives cannot know all the details of work activities and respond flexibly to all the problems
that arise in operational activities. Equally, executives represent a valuable potential for minor and
often major improvements. The purpose of people management today is therefore to stimulate
activity and to initiate a creative and entrepreneurial spirit, i.e. to induce activity in the workforce
that goes beyond the disciplined performance of set tasks (Křovák, “100proGastro).
Service training
As mentioned above, the gastronomy industry is very dynamic and rapidly evolving. The customer
is changing with it as well. For restaurants to be able to reflect these dynamic changes, staff must
receive regular training to keep up with the pace and not lose customers. Training should be given
to kitchen staff, waiters and general staff who are most visible, but also to staff in managerial
positions who are important, not restaurant owners. The range of training can be endless. Ideally,
each employee should be primarily educated in the activities that belong to their job description,
but if they expand their knowledge to other areas, they may be able to cover other competencies
and be approachable with their colleagues. Representativeness is extremely important in catering
due to the dynamic environment (Křovák, “100proGastro).
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Even though gastronomy is slowly getting back to normal after the pandemic, restaurants, at least
in the Czech Republic, are gripped by uncertainty. This is due to the inflationary, economic and
energy crises. One per cent of businesses have decided to close down, while one in three is unsure
of their continued existence. That is why Plzeňský Prazdroj a.s. has come up with the widest
consulting and education programme to date, called First at the Source. This programme offers
restaurants assistance in all their activities. "It's a newly created digital platform where pub
operators and other industry professionals can find free simple tips, advice and training on how to
take their business forward, attract new guests and succeed in these challenging times. It's not just
for pub owners, we appeal to virtually all staff, from chefs to bartenders and waitresses to those
who look after the economics of the operation. We are thus providing pubs and restaurants with a
truly comprehensive tool for growing their business," says Tomáš Mráz, Sales Director of Plzeňský
Prazdroj (Plzeňský Prazdroj).
Motivational program
The motivation programme is a comprehensive guide to working with employees to positively
influence work motivation. A specific incentive programme is always a set of rules, procedures and
measures that have a single objective, namely to increase work motivation in employees to best
meet the company's needs. The strategy of the management of the enterprise should be such an
approach on the part of the managers towards the employees that the result is the achievement of
an optimum level of motivation in all employees of the enterprise (Křovák, “100proGastro).
The incentive programme aims to provide conditions in the organisation that will promote the
optimum level of employee motivation. To achieve this main objective in a particular enterprise, it
must be preceded by an analysis aimed at identifying the enterprise and its weaknesses and
strengths of the enterprise. The incentive programme is always based on the current needs of the
company. This means that the implementation is not the final work. It needs to be followed up,
evaluated and effectively, if necessary, implement adjustments so that it always meets
management's expectations of the company (Křovák, “100proGastro).
Retention of talent
Talent retention is closely related to turnover rates. However, rather than the number of employees
who have left, this key performance indicator measures the number of employees who have stayed
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or been retained by the organisation. If you are already calculating turnover rates, you may find
calculating retention rates unnecessary (Křovák, “100proGastro”).
6. METHODOLOGY
6.1 Study area
This master’s thesis focuses on the Czech market, specifically on the HORECA sector, mainly
restaurants. The Czech Republic is a central European landlocked country located in the middle of
the temperate zone of the northern hemisphere. Czech beer and brewing have a long tradition and
are one of the most famous beers in the world. Czech beer is a protected geographical indication of
the European Union, the purpose of which is to preserve the reputation and quality of the beer
(Olšovská et al., 2014). Thanks to its diversity, beer has great potential in gastronomy. Firstly, it
can be used as part of a recipe in the preparation of dishes on its own, but the best option is to enjoy
beer as a drink. The combination of beer and food offers many possibilities and by choosing the
right beer, every gourmet can indulge in new gastronomic experiences.
Beer influences not only Czech culture but also Czech gastronomy. Due to the geographical
location and all the facts mentioned so far, this thesis deals with a traditional Czech restaurant
serving traditional Czech food with beer. This sample was chosen because of its uniqueness and
even though gastronomy in the Czech Republic is developing dynamically, following the latest
trends. The traditional Czech restaurants, which, due to the maintenance of traditions, are
developing much more slowly than other types of gastropubs. Development has been slower in
terms of interior and exterior upgrades, digitalisation, menu variety, and much more. There is no
substantiated data for this fact and the author of the article is based on personal experience only
(Wiedermannová, 2014).
6.2 Research methods
The scientific procedure means the procedure by which we sequentially perform a given activity
related to the research and the realization of the research objective. A scientific procedure is based
on a certain methodology. It is based on it in terms of its focus and content. The purpose of the
scientific procedure is to successfully implement the research objective. The scientific procedure
is also an implementation procedure for the application of research methods. The qualification of
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scientific methods that prevail is the division into qualitative and quantitative research. The
quantitative approach tests the formulated hypotheses, formulates them qualitatively, creates new
ones, and creates a theory. For this research, the qualitative method seems to be the most
appropriate one, specifically the questionnaire (Williams, 2007).
6.3 Research type
A scientific procedure, or research method, is a procedure in which a given action related to
research and the realization of the research objective is carried out sequentially. The research
method is based on a particular methodology and its purpose is to successfully implement the
research objective. Classification of scientific procedures or procedures according to the criterion
of the method is divided into empirical and theoretical research (McNeill, 1990).
Theoretical research works with purely theoretical methods (analysis, synthesis, induction,
deduction, modelling) and usually does not work with concrete data. Theoretical scientific
knowledge is a sophisticated thought process that seeks to create a coherent system affecting a
certain area of reality in a system of concepts, propositions, regularities, and laws, i.e. as a theory.
The methods of this theoretical scientific knowledge are most often mentioned as abstraction,
idealization, generalization, classification, induction and deduction, analysis and synthesis
(McNeill, 1990).
Empirical research always works with specific data and uses exact methods to arrive at concrete
findings. Its main subject is living subjects or inanimate objects. It is part of the inductive path of
knowledge, in contrast to theoretical research, which is based mainly on deduction and uses
methods of analysis and comparison of concepts, categories, statements and laws. Among the
methods of empirical knowledge, the following three can be classified, namely observation,
measurement and experiment (McNeill, 1990).
6.3.1 Research type according to the type used of data used
Qualitative and quantitative approaches to research differ in many ways, and different methods are
typical of each approach. The principle of the qualitative approach is to investigate a particular
element, process, or phenomenon. In natural conditions, to try to understand it and to create, if
possible, its comprehensive picture. Information is obtained through deeper and longer contact with
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the participants and therefore tends to be less than in quantitative research. The quantitative
approach uses statistical methods, seeks to test the validity of hypotheses and does not explore the
issue in great depth (Yilmaz, 2013).
Qualitative research focuses on understanding the problem. Rather, quantitative research answers
the question of why. Qualitative research is used when the topic needs to be understood in depth,
when motivations or barriers to behaviour need to be described, or when the researcher needs to
ask questions of the respondent. One of the typical methods used in qualitative research is the
interview, which can help to get to know the user's perspective in more detail. There are several
types of interviews. For example, there is an in-depth interview. For this type of interview, a
scenario with questions needs to be set up. However, these do not need to be strictly adhered to,
but the interviewer can directly respond to the respondent's answers (Yilmaz, 2013).
Quantitative research focuses on describing a specific phenomenon in society. It aims to answer
questions such as how much, how often, or how often to rate on a scale. Probably the most
frequently used method in quantitative research is questionnaires. Thanks to them it is possible to
obtain a large number of answers in a short time. In addition, questionnaires can also be created
online, which allows for easier dissemination. Creating a questionnaire may look easy, but there
are also some rules for creating questionnaires if we want them to have the right telling value. These
include, for example, the wording of the questions and their order (Yilmaz, 2013).
6.4 Questionnaire
For university theses (bachelor's and master's theses), the questionnaire is one of the most used
methods of primary research - data collection in quantitative research, especially in this day and
age of modern technology. Its advantage is to a large extent the considerable anonymity of the
respondents and the respondent does not have to worry about misuse of his/her name. On the other
hand, the popularity of questionnaire surveys may lead to reluctance on the part of respondents to
complete another questionnaire. The use of a standardized questionnaire is appropriate for mass
information research in terms of service quality. For example, a questionnaire can be used to
compare the satisfaction of respondents in a particular area. In quantitative research and
questionnaires, questions such as why? It does not make much sense to ask questions about the
distant past or the future in a questionnaire. Also, a questionnaire never contains suggestive
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questions (implying any possibility), hypothetical questions, or concerning someone else's opinion
(Roopa and Rani, 2012).
6.5 Data analysis methods
For the questionnaire method of data collection, as a first step and evaluation, it is best to start by
editing the data into a format suitable for statistical analysis. Online questionnaire tools are very
suitable as they perform this editing automatically. The standard that is used is to record each
questionnaire in rows, with each column representing each question and the row recording the
response of a particular respondent. A different recording format is needed for each question. For
example, for a closed-ended question with one option, there is a need for a single column in the
table. If the respondent can select any number of answers, for example, 3, then there is a need to
have just three columns, ideally recorded in binary: 0 for not selected and 1 for selected. You need
to work similarly with other types of questions (Chambers, 2018).
Figure 3 - Histogram, Source: www.tibco.com/reference-center/what-is-a-histogram-chart
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Figure 4 - Pie chart, Source: https://www.geeksforgeeks.org/pie-charts/
The statistical analysis begins by counting individual responses, which in statistical terminology
are frequencies. Traditionally, absolute (a specific number) and relative frequencies are used, which
express the representation of a specific value in the total and are expressed as a percentage. Further
analysis should certainly continue with the basic statistics used for quantitative traits. It is not
always possible or appropriate to use these characteristics. Under these constraints, you can use the
following (Chambers, 2018):
- modus - the most common value;
- median - the value in the middle of a ranked series of values, dividing it into two groups of
equal frequency;
- arithmetic mean (or other averages, e.g. weighted arithmetic mean);
- the variance and the standard deviation derived from it are indicators of variability, in other
words, how dispersed or concentrated the set of responses is (Chambers, 2018).
Another very typical analysis, which is often used in marketing, is the contingency analysis or
contingency table. It is used to clearly display the relationship between two pieces of data. The
rows correspond to one of the characteristics and the columns to the other (Chambers, 2018).
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Figure 5 - Contingency table, Source: www.mathandstatistics.com
6.6 Sample size
The data for this study was obtained from a sample survey of restaurants in the Czech Republic.
Data collection was done through an online link to a Google document created by the researcher
and sent to restaurants in the region. Addresses were obtained from public sources, websites, etc.
A total of 157 responses were obtained from the google doc link, a 78% success rate. Such a number
is sufficient to evaluate the survey and draw a conclusion.
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7. RESULTS
The design of the questionnaire was structured to make it as simple as possible for HORECA sector
owners to complete, but at the same time to make the questionnaire as meaningful as possible.
Therefore, a total of 10 questions were chosen, some of which were open-ended for written
responses, some in the form of a single choice and some in the form of one or more options. At the
outset, respondents were given basic information about the questionnaire, its purpose and the
approximate time taken to complete it. In addition, respondents were offered the option in the last
section of the questionnaire to write their email addresses where any survey results would be sent.
Out of the 10 questions, the questionnaire had 4 open-ended responses for both clarifications of the
answer and an open-ended response with a better explanation from the respondent. The
questionnaire also used a question to clarify and explain the previous answer. 2 of the questions
were only yes or no questions, where the intention was to find out if the respondents knew the KPIs
and if they used them in their company. The second question included options on the effect of
seasonality in terms of profit, where 5 options were identified from which only one option could
be selected. for three questions, one or more options could be selected, in order to cover as wide a
range of respondents' answers as possible and to give them sufficient freedom in their answers.
These questions mainly targeted qualitative and quantitative economic performance indicators and
KPIs, of which there are many in use in the HORECA sector, so respondents could use multiple
options. The questionnaire was sent out and translated into Czech for the accuracy of answers and
due to the lack of English language skills of some restaurant owners.
47
1. Which part of the year is the most important for your business in terms of economic
performance (profit)?
This question is an open question and the aim was to find out what time of the year restaurant
owners consider to be the most important in terms of their economic performance. The majority of
responses were “summer” (52%), “holidays (25%), and “weekends” (15%). These answers indicate
that Czech restaurants rely on summer, in other words, when most people enjoy their holidays or
vacations. The weekends support the fact that restaurant is important for people’s leisure time. Few
restaurants answered “Christmas time” or “winter”. We may consider, that those restaurants focus
on Christmas parties or Christmas activities. Only 5 restaurants answered the whole year and some
of the remaining listed specific months. Overall, we can conclude that seasonality plays an
important role for restaurants and is clearly one of the factors that are often monitored. In the chart,
the word summer or the whole year is repeated due to bad spelling or case differences. To get the
correct result, these possibilities were added together.
2. How much does seasonality impacts the economic performance of your business?
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The previous fact is confirmed by the fact that 47.6% of respondents to the question "How much
impact does seasonality have on the profitability of your restaurant" answered that seasonality has
a high impact. Even a quarter of the respondents chose a very high impact. These percentages could
include answers from the previous question such as “summer”, “Christmas”, or “holidays”.
Conversely, the lowest number of respondents answered that seasonality has little or no impact on
the economic performance of their business. These results may reflect the responses from the
previous question as "all year".
3. Mark which indicators you use to measure the economic performance of your
business?
The next question was designed to show which economic performance indicators are the most used
among Czech restaurants. From the result, we can see that almost two-thirds of respondents use
profitability indicators such as ROA, ROE and ROS to measure their economic performance. The
least used indicator is indebtedness. An interesting fact is that liquidity and activity are equally
used among respondents. Only one respondent gave a different answer, namely sales. However,
sales are not an economic indicator of performance, so this answer may show either ignorance on
the part of the respondent or it may be a common error.
4. What other methods do you use to measure economic performance?
This question was open-ended and served to add additional methods that retailers use to measure
the performance of their businesses. Words like profit were often repeated, but they are not among
the indicators. This shows the ignorance of the pub owners about the basic economic indicators for
measuring economic performance. Paradoxically, the oft-repeated response, "we're struggling with
49
energy prices, there's no time to worry about metrics" is just the opposite of the premise and further
evidence of the owners' incompetence.
If other indicators appeared in the answers, they were most often cash flow, profit and loss
statement and income statement. Of these three, cash flow was the most frequently repeated. The
interesting thing was that a lot of pubs focus on yield at a certain periodicity. Annual comparisons,
monthly comparisons and in two cases even weekly comparisons were mentioned. These two cases
were mentioned during the summer season when restaurant traffic is incomparably higher
compared to other times.
5. Do you know what Key performance indicators are?
The second half of the questionnaire focused on key performance indicators. Specifically, this
question focused on knowledge of key performance indicators. As we can see, the result is rather
negative. Up to 61.9% of respondents have no idea what key performance indicators are. Only
38.1%per cent had heard of these indicators.
6. Do you use Key performance indicators in your business?
50
The next question was a logical follow-up to the previous one and its purpose was to find out
whether restaurant owners use key performance indicators in their businesses. The results show
that up to 80% of respondents do not use these indicators in their business. However, given the
previous response, this result is less surprising. The chart also shows that only half of the
respondents who answered yes to the previous question use KPIs in their business. However, this
amounts to just 20% of the total.
7. Why yes/not?
As many as 39 (61%) responses to this open-ended question were negative. Words such as I don't
know, I don't know what is going on, I don't use these indicators or I don't consider them important
were repeated. Again, these responses are evidence that KPIs are not yet used among Czech
restaurants. This figure agrees with question number 5, where the same percentage of respondents
answered negatively.
But among the answers were some interesting ones:
- “Key indicators give us the opportunity to look at the business from a different angle and
thanks to them we know how efficient our business is and how its efficiency changes over
time.”
- “We use key indicators as complementary to financial ones. We use key indicators more
on-site, so to speak. They show us, for example, the performance of employees.”
- “In my opinion, it is better to monitor more indicators to know what to improve, how to
proceed and how to motivate customers, for example”
These few answers are proof that awareness of key performance indicators among Czech
restaurateurs exists and is slowly coming to the fore, but unfortunately, ignorance persists.
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8. Which of these quantitative KPIs do you use/would you use?
The next question focused on specific performance indicators and its task was to find out which
are the most frequently used in Czech gastronomy, or which have the greatest potential. This
question focused on quantitative KPIs. The interpretation from the results is that cost of goods sold
is the best-known and most commonly used key performance indicator. It is used by more than half
of the respondents. In contrast, table rate turnover is the least used, closely followed by cross-
selling and up-selling. The three strongest indicators are the cost of goods sold, menu item profit
and popularity, and labor cost. From the results, it is clear that restaurants most often use those that
tell about finances, potential profit, or conversely costs. By the logic of this argument, the food cost
indicator should have many more percentages. However, it is clear from the result that restaurant
owners still have no such idea about this indicator and therefore only 27% use it.
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9. Which of these qualitative KPIs do you use/would you use?
The
next question, which is very similar to the previous one, this time focuses on qualitative key
performance indicators. From the answers of the respondents in this case, one indicator prevails,
namely customer retention, which reaches almost 50%. From this result, it is possible to deduce
that Czech restaurants value the customer’s contact and experience and especially personal
recommendations. It is also interesting to note that the indicator: of online reviews check-up and
digital platform and social media use is quite low. The figures are only 25.4% and 30.2%. While
not that low compared to other indicators, they are surprisingly low in this day and age of
digitalization and social media, which suggests that Czech restaurants do not present themselves
online that often and online feedback is not a priority for them.
Also, service training and motivational program show less than 25%. these indicators are closely
related to service. These results may reflect the fact that service, or hospitality employees, are the
least turnover occupation. Often restaurants only hire temporary staff for a season (a few
weeks/months) and therefore incentive programs and training are not a priority.
10. Which of the KPIs do you consider most important and why?
The last question was another open-ended question and focused on the reason for the use of KPIs
in a restaurant, specifically which KPIs restaurant owners consider most important. Answers to this
question were varied. Interestingly, all the answers were related to key performance indicators.
How is this possible? The list of KPIs used in gastronomy is not strictly determined. Therefore,
some indicators are very familiar and are not new to the owners. The respondents described the
individual indicators because they did not realize at that moment that they were using KPIs, but
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they perceived these indicators as a single element or additional information that they can further
use for different processes in the company. Here are some of the most interesting answers:
- “The most important thing is customer retention, profitability and popularity, and cost of
goods sold.”
- “Training, food cost and sales. These indicators show me most how my business is doing
and where it can go from here.”
- “We send both management, waiters and cooks for training once a year. Either the training
is of an introductory nature or repeated. Employees are then given the opportunity for
career growth in our restaurant.”
- “I think it's important to have a stable staff. We struggle with this a lot and that's why we
emphasized training during the off-season and motivational programs during the year.”
- “We often take advantage of table turnover or occupancy per square meter. Food cost is
valuable information for us when it comes to the kitchen.”
It is this last question that highlights the fact that restaurant owners are looking at their business in
a more sophisticated way, often using KPIs without knowing or realizing it. This does not mean
that they do not use any indicators, that they do not monitor their economic performance at all and
that they do not manage their business sufficiently.
54
8. DISCUSSION
Key performance indicators in a business environment for measuring the success of an
organization’s activities, processes, and services or the whole organization are nothing new. For
large companies they are now a commonly used method, as mentioned above, in some countries
such as the United Kingdom KPIs are required. Every company strives to be at the top of the
competition. Their goal is not only to survive but also to be among the best players in the market.
And every industry has its best players. In today's connected economy, some companies are pulling
out every inch of the screen, while SMEs are still struggling to adapt to common and uncommon
challenges. One important aspect is the performance achieved by the company. Critical success
factors are the factors that will form the basis for creating KPIs. Daily activities are linked to the
critical success factors of the organization. Every company is unique in its way and the critical
success factors depend on this uniqueness. A company needs to bring its people to the table to
determine what factors can lead to business success.
Businesses or restaurants need to know exactly what they are measuring, how they are measuring
it, and how they are using the measurement results to improve company performance. The key
performance indicator is unique to each organization but can be characterized by several common
elements. A key performance indicator is not just about the company's financial profit. It is also
about other measurements - the level of employee productivity, the level of motivation and
communication among employees, the interest in education by employees’ visibility on social
media, etc. KPIs should be regularly verified (weekly, monthly…). Monitoring can also be done
daily. Each period brings its settings and, as the questionnaire revealed, seasonality is of great
importance, and thus KPIs are adapted to it over time.
KPIs are not as complicated as they may seem to be. It must be easy to understand and apply on a
solid basis. Employees need to know what performance is expected of them and how to achieve
that performance by carrying out their daily tasks professionally. In addition, the easiest way to
measure a certain element should be taken into account when creating KPIs. A KPI is created for
each specific activity. Even though restaurant owners are not aware of this fact, they include KPIs
in their performance measurement processes. It also depends on the type of company,
characteristics of regular customers, risk and innovation management, projects carried out by the
company, type of management, etc. However, the KPI should support the professional and proper
55
behavior of employees. They say you can't judge markets by their morals, but clean and
professional behavior is essential to building a trustworthy company. No one wants to buy a product
or service from a company that exploits its employees until they burn out.
It is often said: “Not everything that counts can be measured, and not everything that can be
measured counts.” In other words, there are types of performance that can be measured using
quantitative KPIs (cost of goods, food cost, number of visitors in the restaurant per company day,
average number of hours of training per employee, etc.) and there are also types of performance
that can be measured using qualitative methods (level of integration of new employees, level of
employee training, motivation programs, etc.). Sometimes it's important to have a lot of completed
tasks, while sometimes it is how you completed those tasks that matter. Sometimes it is important
to measure the number of customers per week, and sometimes it is much more important to connect
with potential customers, for example through digital platforms. Overall, KPIs represent a specific
cocktail for an individual company, and the questionnaire survey shows that even though awareness
of KPIs in gastronomy in the Czech Republic is still low, it is slowly infiltrating processes and
being used by restaurants.
56
9. LIMITATIONS
It is necessary to accept the fact that almost no theoretical work can do without deviations or
limitations. Despite many advantages, such as a large number of respondents in a short time, the
anonymity of respondents, easier evaluation of closed items, or the absence of a researcher,
questionnaire research can still have many disadvantages. For example, the threat of a lower return,
especially in the case of a questionnaire without the personal participation of the researcher, as well
as the lack of control, whether the questionnaire was filled in correctly by the respondent and
whether the questions were interpreted intelligibly. If in such a case the respondent does not
understand the question, he does not have the possibility to ask for further explanation of the given
question. Questionnaire research also does not provide any flexibility as the questions are
predetermined and cannot be changed during the research.
The questionnaire survey that was used in this work contained both open and closed questions. The
disadvantage of closed questions can be that the questions do not capture the opinions of the
respondents, they are more difficult to create, and respondents can fill in this type of question
randomly. On the contrary, with open-ended questions such as limitations, the processing of
answers and their diversity may appear more complex. Respondents are the so-called most
important part of the questionnaire, but several limitations can also appear here. For example, the
research sample may be chosen incorrectly, or the number of respondents may be wrong. The
researcher may receive an insufficient number of responses and thus the assessment will be
irrelevant. It reduces direct communication with respondents, and since a higher percentage of
communication is non-verbal, questionnaire surveys cannot replace it.
57
10. CONCLUSION
The thesis aimed to answer the question of whether KPIs are well known among Czech
entrepreneurs in the restaurant sector and which KPIs are mostly used. From the results, it can be
assessed that KPIs are emerging in the Czech restaurant environment and that restaurant owners
are also using them. Interestingly, however, owners use these indicators without theoretical
knowledge of them and, on the contrary, they answered negatively when asked whether they
consider KPIs important or whether they use them to measure performance. This fact confirms the
claim that the method of using key performance indicators is new to Czech gastronomy and
therefore restaurant owners do not use it actively, but only passively.
One of the other questions focused on whether any new methods are being used to measure
restaurant performance. From the results of the questionnaire survey, no new methods were found
that were not already known. On the contrary, it is clear from the results that restaurants in the
Czech Republic are much more likely to use those economic indicators that have been used in
society for decades. These included mainly profitability or liquidity and activity. Some restaurants
also use the income statement and profit and loss account and cash-flow tracking were often
repeated.
The aim of this paper was to determine to what extent KPIs have entered the restaurant industry in
the Czech Republic in comparison with economic performance indicators. After processing the
results of the thesis, it is visible that economic performance indicators clearly dominate in the Czech
industry compared to KPIs. At the same time, it should be added that the key performance
indicators are not sufficient and, on the contrary, in combination with the economic indicators they
complete a fuller picture of the economy of the enterprise. KPIs are so-called supplementary
indicators that only help to complete the whole picture of how a company, in this case, a restaurant,
is prospering, what its performance is and where the business is heading. While economic
performance indicators focus more on the current situation, key performance indicators are more
likely to show how and where the business should lead.
58
SUMMARY
Needs are a fundamental motivational force important for human life and development. During the
pandemic in many countries, many socializing facilities had to be closed, including restaurants, and
so people were starved of social needs. Because of this shortage, people began to realize that the
whole HORECA was no longer just a service but was becoming something much more. People
today expect much more from gastronomy than before - the so-called gastronomic experience. With
the new view of HORECA from customers, the view of restaurants and their owners has changed
over time. If diners expect an experience when they visit a restaurant, some owners are forced to
change or adjust their current practices and start looking at the restaurant business from a new
perspective. Given the changing global economy and societal landscape, new theories and methods
are also emerging on how to monitor, measure and evaluate business economics.
One relatively new method is the measurement of key performance indicators. Key performance
indicators are commonly used to measure the success of an organization's activities in any industry.
In recent years, businesses have been using them more and more frequently because they should or
can directly influence the success of the organization's vision. The reporting of KPIs varies
considerably between companies in different industries. The aim of this paper is to investigate to
what extent KPIs have entered the restaurant industry in the Czech Republic compared to economic
performance indicators. The thesis should answer the question of whether KPIs are well-known
among Czech entrepreneurs in the restaurant sector and which KPIs are most used. As this is a new
and novel method, this thesis leaves open the question of whether any new methods are used to
measure restaurant performance.
To understand the theoretical background this thesis includes a literature review which consists of
several chapters. First of all, it was necessary to introduce the reader to the issue of Czech
gastronomy so that he could then understand the results. The chapter describes the development of
gastronomy from the Second World War to the present. It also draws the reader's attention to the
fact that Czech gastronomy is closely linked to beer, and many restaurants base their concepts on
beer. since most restaurants in the Czech Republic fall under the category of small and medium-
sized enterprises, it was necessary to add a chapter that explains what a mixture is, what their
concept is and how it differs from large companies, for example.
59
Since this thesis focuses on business performance and the main objective was to compare economic
performance indicators and key performance indicators, it was necessary to explain what
performance is and what its economic indicators are. One of the last chapters in the theoretical part
of the thesis is devoted to key performance indicators and after consulting with a Czech agency
that is dedicated to KPIs, the indicators that are most often used within Czech gastronomy and that
describe the performance of the enterprise in more detail were selected. Furthermore, it was
necessary to explain and describe what methodology was used in this work. The study area was
described, then the research methods, research type, the differences between quantitative and
qualitative research and finally the thesis explained what a reflective inquiry is and the reason it
was used after the tears. Finally, within the methodology, the methods of data analysis, what are
the possibilities and their most common uses were presented.
After the theoretical and methodological part of the thesis, the results of the questionnaire survey
were evaluated. The structure of the questionnaire was designed to make it as simple as possible
for HORECA owners to complete, but at the same time to make the questionnaire as meaningful
as possible. Therefore, a total of 10 questions were chosen, some of which were open for written
responses, some in the form of a single option and some in the form of one or more options. Out of
the 10 questions, the questionnaire had 4 open-ended responses, which served both to clarify the
answer and to open-endedly answer with a better explanation from the respondent.
Every company strives to be at the top of the competition. Their goal is not only to survive but also
to be one of the best players in the market. And every industry has its best players. One important
aspect is the performance that a company achieves. Critical success factors are the factors that will
form the basis for creating key performance indicators. Everyday activities are linked to the critical
success factors of an organization. Each company is unique in its own way and the critical success
factors depend on this uniqueness. A key performance indicator is unique to each organization but
can be characterized by several common elements. Each period brings its own adjustments and, as
the questionnaire showed, seasonality is of great importance and therefore KPIs adapt to it over
time. Employees need to know what performance is expected of them and how to achieve that
performance by performing daily tasks professionally. In addition, the simplest possible way of
measuring a particular element must be taken into account when developing KPIs.
From the results, it can be evaluated that KPIs are present in the Czech restaurant environment and
that restaurant owners also use them. Interestingly, however, owners use these indicators without
60
having any theoretical knowledge about them and, on the contrary, they answered negatively when
asked whether they consider KPIs important or whether they use them to measure performance.
The results of the questionnaire survey did not reveal any new methods that were not already
known. On the contrary, the results show that restaurants in the Czech Republic are much more
likely to use economic indicators that have been used in society for decades. It is evident that
economic performance indicators clearly prevail over KPIs in the Czech industry. At the same time,
it should be added that KPIs are not sufficient and, on the contrary, in combination with economic
indicators they complete a more complete picture of the company's performance. KPIs are so-called
supplementary indicators that only help to complete the overall picture of how the business, in this
case, the restaurant, is doing, what its performance is and where the business is heading.
61
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65
APPENDIXES
Key performance indicators in
restaurants
This questionnaire is a part of the Master's thesis with the topic: "Key performance
indicators and its occurrence among restaurants in the Czech Republic."
The aim of this thesis is to find how much KPIs entered the restaurant industry in the Czech
Republic compared to economic performance indicators.
The questionnaire is anonymous and contains 10 questions that will take you a maximum
of 5 minutes.
* Mandatory
1.
Which part of the year is the most important for your business in terms of *
economic performance (profit)?
2.
How much does seasonality impacts the economic performance of your *
business?
Mandatory impact
High impact
Medium impact
Low impact
No impact
66
3.
Mark which indicators you use to measure the economic performance of your *
business?
Profitability (ROE, ROA, ROS)
Liquidity (Current, Quick, Cash)
Activity (Asset turnover, Stock turnover, Accounts receivable turnover) Debt
(Indebtedness, Lng-term indebtedness)
Others:
4.
What other methods do you use to measure economic performance? *
5.
Do you know what Key performance indicators are? *
Yes
No
6.
Do you use Key performance indicators in your business? *
Yes
No
7.
Why yes/not? *
67
8.
Which of these quantitative KPIs do you use/would you use? *
Cost of goods
sold Food cost
Menu item profit and
popularity Cross-selling and
up-selling Labour cost
Average table
occupancy Table rate
turnover
Others:
9.
Which of these qualitative KPIs do you use/would you use? *
Online reviews check-up
Customer retention
Digital platforms and social media use
Service training
Motivational program
Retention of talented staff
Others:
10.
Which of the KPIs do you consider most important and why? *
68
69
Appendix X. Non-exclusive licence for depositing the final thesis and opening it for the
public (restricted access) and the supervisor’s (supervisors’) confirmation for
allowing the thesis for the defence
Hereby I, Tamara Tripska (24/09/1997)
1. grant Eesti Maaülikool, the Estonian University of Life Sciences, a free-of-charge non-
exclusive licence to store the final thesis titled Write the title of your final thesis here.,
supervised by Henrik G.S. Arvidsson . for
1.1.preservation;
1.2. depositing a digital copy of the thesis in the archive of DSpace and
1.3. opening it for the public on the Web
until the validity of the term of protection of copyright.
2. I am aware that the author retains the same rights as listed in point 1;
3. I confirm that by being issued the CC licence no rights deriving from the Personal Data
Protection Act and the Intellectual Property Rights Act have been infringed.
Author of the final thesis ______________________________
signature
In Tartu 09.01.2023
___________________________________________________________
The core supervisor’s approval for the final thesis to be allowed for defence
This is to confirm that the final thesis is allowed for defence.
…………………………………………… ……………09.01.2023………….
Henrik G.S. Arvidsson Date
