A high ITR usually indicates that sales are healthy and you’re using your inventory efficiently.Ī low ITR can either indicate that you’re holding too much inventory or that sales are low.Ī low turnover rate doesn’t always mean that a restaurant is having issues. To lower food waste and avoid spoilage, you’ll want to make sure your turnover rate is high. A quick-service restaurant like McDonald’s will have a very different ITR than say, a single-unit barbecue joint. Now that you know how to calculate inventory turnover, you’re probably wondering what is the average turnover ratio for restaurants?Īccording to CSIMarket, the average turnover rate for restaurants in Q1 of 2023 was:Īlthough the average ITR for restaurants was 9.19, rates will vary based on the concept(s) you own. Inventory days = 365 / Inventory Turnover Ratio.How long does it take you to turn over inventory? Is there a risk of restaurant food waste or food getting stockpiled?Ĭalculate your inventory days as follows: Knowing your average days on hand for inventory allows you to understand the turnover rate for your restaurant in terms of length of time. Now you have your inventory turn rate, this can be used to compare your restaurant to other similar concepts in your market.īut you can also use your inventory turnover rate to calculate the average days on hand for your inventory. Related post: How To Calculate Your Restaurant Inventory Par Levels How Do You Calculate Average Days in Inventory? No matter which ratio you decide to use, it’s important that when comparing your rate to others, you specify whether it’s COS or Total Sales. Total annual sales include the company’s markup and this can often make it look like your restaurant is turning inventory faster than you really are. Most restaurateurs prefer the COGS turnover formula because it does not include markups. Why is the COGS (COS) Inventory Turnover Formula preferred? The alternative inventory turnover formula for calculating turnover uses the total annual sales of your restaurant and divides it by your average inventory. Average Inventory = (Beginning Inventory + Ending Inventory)/2.
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