How to Use Restaurant Data Analytics to Maximize Profitability

Boris Mustapic
Boris MustapicJanuary 27, 2023
How to Maximize Profitability With Restaurant Data Analytics
In this article

You’ve heard the saying — data doesn’t lie. In the case of restaurant data analytics, there’s a lot of truth in that statement. Leaders in the restaurant industry can’t afford to rely on guesswork and gut feelings to make decisions, so good data analytics are crucial.

Your restaurant data is unbiased. Those data points can tell you exactly what’s going on and indicate where your business needs the most attention.

At the same time, gathering your restaurant analytics, then using that data to draw insights and make business decisions can be harder than it sounds. There’s so much data available, and it’s not always obvious what it means.

For example, imagine you look in your POS system today and discover that sales are quickly dropping for one of your top menu items. It used to be popular, but now it’s barely moving. Is that a pricing issue? Has quality dropped? Are your marketing campaigns driving people towards a different option?

In this example, that single data point isn’t enough to diagnose the root cause. You need other information, likely from customer feedback, to figure out what’s going on.

Once you spot the deeper issue, though, that knowledge is definitely power. You can leverage those insights to make better business decisions, optimize your operations, and ultimately make more money.

Let’s explore what it means to implement a data analytics strategy and how it can positively impact your restaurant business.

What are restaurant analytics?

Your analytics are data points that correlate to things like sales, food waste, ratings of guest experience, frequency of repeat business, and how much of your revenue gets to your bottom line. Basically, any pieces of verifiable information about your business are viable metrics to use in your data analytics strategy.

Most of the time, your personal observations (and the observations of your staff members) are not considered analytics.

The difference between a real metric and a false data point is that metrics can be measured.

Let’s assume that you want a metric that tells you about the customer experience in your restaurant. Asking your team how they think customers feel is not a good data point. Intentional or not, unconscious biases and predispositions will play a role in what your team members notice.

A better way to measure customer experience is to use satisfaction surveys, look at online reviews, and compare those metrics to your rate of repeat business, average wait times, and table turnover.

Each of those pieces of information can be measured in a concrete way. They might not be perfect — surveys can easily be skewed by the way questions are asked or who you invite to respond — but even so, these methods give you a measurable benchmark to start with.

Plus, when you compare the more subjective metrics like ratings and reviews to your concrete data points like point of sale data, you can begin to see a clearer picture of how your restaurant operations are working.

In most businesses, we call these KPIs or key performance indicators. They are insights that tell us how business is doing and help us make better business decisions.

How you collect restaurant data

The sources of your restaurant analytics matter.

Just like any other statistic, your methods can skew your outcomes. Some metrics are easier to find, like sales volume, labor costs, and overall spend. You can look in your POS system or expense tracking software to find real, accurate numbers.

Other things aren’t as easy to measure, like the percentage of tables that come from repeat business, customer satisfaction ratings, quality of your dining experience, and average wait times during peak hours.

A loyalty program can help you get much of this information in a less subjective way. As people scan their loyalty cards, you’ll have a better idea of the frequency and profitability of repeat business.

Plus, you can leverage the program for other types of data collection to find out the impact of social media promotions, how many of your customers prefer online ordering, and more.

For metrics around satisfaction, check ratings on sites like Yelp and Google. You might notice that your ratings vary quite a bit from site to site. That’s normal. Make sure to look at multiple sources instead of focusing on just the most negative or only the most positive ratings.

The data you need depends on the question you’re trying to answer. If you want to increase revenue, for instance, you need to look at your financial data (like profit margins on menu items) plus metrics that tell you about how customers interact with your restaurant. Start broad, then narrow it down to the pieces of information that give you the most actionable insights.

There are multiple ways to get some of the trickier data points, but look for solutions that can give you the most objective and complete information possible.

How to use your restaurant analytics to increase profitability

Restaurant reporting isn’t just for short-term measurement. Your data dashboards can tell you about restaurant performance, give you valuable business intelligence, and help with wise decision-making at every level.

Here’s how to take an in-depth look at all that data to make informed decisions.

1. Forecast better

Data-driven restaurant forecasting is the most accurate way to make predictions about your staffing and supply needs.

Your forecast is one of the most important pieces of business intelligence because you use it to make expensive decisions like ordering inventory, staffing, and marketing. Restaurant owners rely on accurate forecasting to stay in business.

Your restaurant data is the key. Take into account previous sales on similar days, weather predictions, local events, and any other relevant data you can access to come up with the most accurate forecasts.

One of the best ways to leverage this information is with AI-assisted tools. Forecasts take a lot of information to do well, and it’s difficult and time-consuming to collect all of that data into a spreadsheet to analyze.

Instead of trying to forecast manually, use a specialized tool like Lineup.ai that collects and analyzes that information for you to come up with more accurate forecasts based on real-time information.

restaurant forecasting dashboard

2. Order more accurately and reduce food waste

Data in your POS system can tell you a surprising amount of information such as what ingredients get added on the most and when, what dishes do best at specific times, and perhaps even which items have the most remakes and errors.

You might not need that level of detail, but you should be able to track what ingredients and menu items are contributing to the most spoilage and waste.

Your forecast will help you cut back on food waste as you do your regular ordering, but use your data to go deeper into the issue.

What menu items should you change? Are there any you should add?

Do different customer demographics tend to order different foods? Can you change your marketing strategy to attract more profitable customers?

There are layers of business intelligence here that can make a huge difference in monetary loss due to food waste. Use your restaurant analytics to help you find all the root causes of inventory loss and waste, then track how those metrics change as you implement new strategies to address them.

3. Encourage repeat business

Earlier, we talked about the data collection benefits of a loyalty program. Now, let’s look at some of the ways your loyalty program and the associated data can help you increase repeat business and improve your profit margins when those people come back.

Data in your loyalty program can tell you a lot about your most profitable restaurant guests. You can see some basic information about their demographics, the days and times they are most likely to visit, and what they order the most. Depending on the POS you use, you might also have a history of satisfaction ratings and other qualitative data for your loyal visitors.

One smart strategy is to identify your most profitable repeat business and create a customer profile from that data set.

Let’s say your most lucrative customers tend to be adults who usually order food for another adult and two children, making it likely that these are people coming in as a family. You notice that these tables tend to order appetizers and desserts more frequently than other visitors, and while they’re not the biggest drinkers, they often get a couple of drinks. They come in fairly early on weeknights, usually towards the end of the week, and they stay a little longer than other customers.

Knowing this, you can make a lot of strategic decisions. You might focus your marketing to appeal to families, or perhaps you expand your appetizer menu to include more kid-friendly finger foods with high-profit margins.

By tweaking your menu, your marketing, and even your service strategy or table layout, you can increase the percentage of these types of customers that come back again and again.

It’s also a good idea to target your most profitable customers with special offers directly through your loyalty program. This strategy can be tailored to work with individual data, too. For instance, you might send out an extended happy hour offer to people who usually come in for your weeknight specials.

4. Reduce staffing costs and hassle

Employees are expensive. Labor costs are a huge part of your overhead, and it’s in your best interest to staff wisely and reduce staffing costs.

Again, your data-driven forecast is one of the most valuable uses of restaurant analytics here. By accurately predicting business needs and scheduling the right people on the right shifts, you can drastically reduce problems with over- or understaffing.

That’s great for your service levels, plus it helps reduce internal conflict between staff members. When you can more easily manage who gets scheduled for the most profitable shifts, it’s easier to do the people management side of restaurant leadership.

How do you determine who the “right” person is for the most demanding shifts? You guessed it — restaurant data analytics.

Your POS can give you a lot of insight into who can handle the most tables at the same time, who is the best at upselling, and who might need a little more training before taking on the weekend dinner rush.

As an added benefit, this information can help dramatically reduce restaurant employee turnover. Since your best staff members will get the most profitable shifts regularly, they will make more money and be more likely to stay. Plus everyone will appreciate being more thoughtfully scheduled to reduce problems with under- and overstaffing.

The bottom line

These specific examples show you some of the most impactful ways that data can help you make more money in your restaurant.

But these are definitely not the only applications of your restaurant data analytics. There is no limit to the types of improvements you can make when you’re informed by real data. Consider using data to:

  • Improve your dining experience
  • Increase operational efficiencies to make your employees’ jobs easier
  • Optimize your budget
  • Implement or improve your carryout and delivery systems
  • Shift your marketing away from discounts without losing effectiveness
  • Speed table turnover
  • Make your menu more profitable
  • And more

Whenever you have a specific business goal, it’s good practice to consider how to use concrete data to inform those decisions. After all, making informed choices is always more likely to succeed.

Boris Mustapic
Boris MustapicAuthor
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