Par Level

What Is the Definition of Par Level?

Par level has nothing to do with golf for business – it’s a key metric that you need to be tracking if you’re in the restaurant business.

At its simplest, your par level is the amount of stock that you require to run your restaurant and meet customer demand. Your par level should also have a safety net of what is called unexpected demand, which is also known as safety stock.

You never want to be in a situation where you can’t provide the customer with what they want – but you have to be careful not to create unnecessary waste.

What Is the Par Level Formula?

The most commonly used formula for calculating par level is the following:

Par level = (weekly inventory use + Safety stock) / Deliveries per week

So to calculate your par level, you’ll need delivery schedules for every item. You’ll also need some sales reports to understand the customer demand for each of those items. Finally, you’re going to need your average inventory.

So how does this work in practice?

Let’s look at an example.

You know that your restaurant gets through 20 kegs of beer a week. You need to add a 20% safety buffer to the equation – your safety stock of 4 kegs. You’ll then need to divide that by how many deliveries you have a week. Two is a pretty standard number of deliveries, so we’ll use that.

So how does that look like as a formula?

(20 kegs used weekly + 4 kegs) / 2 deliveries per week = 12

So for this particular keg of beer, your par level would be 12 kegs of beer.

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See our full list of over 50 Small Business Terms here. 

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