I’m on the Cornell Center for Hospitality Research email list and while they rarely send updates, the news they do send is useful and trustworthy; it’s backed up by lots of facts and figures, and their most recent installment is no exception.

Until I read the email abstract, I had never heard of “RevPASH.”  Turns out that RevPASH means “revenue per available seat-hour,” and it’s a way of figuring out how profitable a restaurant is.  Calculating your restaurant’s profitability doesn’t require an investment of capital so much as an investment of time to understand the basic mathematics behind the idea.  RevPASH is a good tool for coming up with ways to make an eatery more profitable with an adjustment here or there.  As the article notes, “By calculating revenue per available seat-hour, or RevPASH, restaurant managers can implement revenue management approaches to build their restaurant’s profitability.”

Test your ideas and then run the numbers again—then you’ll have empirical evidence of what does (and doesn’t) work for your restaurant or bar.  Note, though, that there is more than one way to calculate RevPASH.  This YouTube video shows how to use a very basic spreadsheet for calculations, but Cornell’s Center for Hospitality Research has added an important element to the equation: length of time a patron occupies a seat.  Their explanation and updated spreadsheet model can be found by creating a free login for the Cornell site.  Bonus: if you sign up, you’ll get their email updates (and no spam).

Note, too, that the Cornell paper goes to great lengths to stress that RevPASH only works when looking at a decent chunk of time (like an entire daypart); one hour is not representative enough to make an accurate calculation.

I’d love to hear about other profit calculators, tools, and methods employed by restaurateurs, bar owners, or other foodservice management.  Email me or comment if you have ideas to share with fellow entrepreneurs!