Restaurant owners and managers rely on forecasting to drive profit margins. Sales forecasting in particular is a crucial aspect of managing a successful business.
Restaurant sales forecasting is the process of predicting future sales in a restaurant over a specified period, such as a week, month, or quarter. This predictive analysis relies on examining historical sales data, considering factors like seasonal trends, holidays, local events, and any changes in the market or consumer behavior. Advanced sales forecasting methods may also incorporate data analytics and machine learning algorithms to improve accuracy.
The objective of sales forecasting is to provide restaurant owners and managers with insights that enable them to make informed decisions regarding inventory management, staffing levels, budget allocations, and marketing strategies.
Accurate sales forecasts help optimize operational efficiency, reduce costs, and enhance customer satisfaction by ensuring that the restaurant can meet demand without overextending resources.
Key components of restaurant sales forecasting include:
- Historical sales data: Analyzing past sales to identify trends and patterns.
- Seasonality: Adjusting forecasts based on seasonal variations in customer behavior.
- Market trends: Considering broader market trends that could impact sales, such as economic conditions or changes in consumer preferences.
- Promotions and marketing efforts: Estimating the impact of marketing campaigns and promotions on future sales.
- External factors: Accounting for external events like holidays, local events, or weather conditions that can significantly affect sales.
In this in-depth, actionable guide, we will walk you through a step-by-step process for creating a restaurant sales prediction for both existing and new restaurants. You'll be able to apply these steps and estimate a restaurant sales tailored to your specific needs that grows along with your business.
Step 1: Conduct Market Research
(Existing and New Restaurants): Before diving into sales forecasting, it's essential for both existing and new restaurants to conduct thorough market research. The fact that there are over 1 million restaurant locations in the US employing 15.6 million workers signifies a highly competitive market where differentiation and understanding consumer preferences become crucial for success.
Market research will provide you with valuable insights into your competition, local events and promotions, and relevant economic trends that may impact your restaurant's sales.
- Competitive analysis: Analyze your local competitors, their offerings, menu items, pricing, and customer reviews to understand their strengths and weaknesses. Identify the factors that set your restaurant apart and use this information to develop unique selling points and potential growth opportunities.
- Identifying local events and promotions: Stay informed about local events, festivals, and promotions that could drive foot traffic to your restaurant. Adjust your sales forecast to account for potential increases or decreases in sales during these periods. If similar events have taken place in the past, check sales numbers for those days to get an idea of what to expect.
- Monitoring economic factors and trends: Keep track of economic indicators such as consumer spending, inflation, and tourism trends in your area. These factors can influence your restaurant's sales and should be considered when creating your sales forecast.
Step 2: Gather Historical Sales Data
(Existing Restaurants): Historical sales data is the foundation of an accurate sales estimation in a restaurant. While new restaurants don’t have past data and will have to rely on other metrics, existing restaurants can collect sales data from sources such as:
- Point of Sale (POS) systems: Your POS data can provide you with detailed reports on daily, weekly, monthly, and any other given period of sales.
- Sales reports and invoices: Review past sales reports and invoices to gather information on sales trends and patterns.
Step 3: Analyze Historical Sales Data
(Existing Restaurants): Now that you’ve gathered your data, it’s time to put it to use. Analyze the information to identify trends and patterns that will inform your sales forecast.
- Collect and analyze historical sales data on a weekly to monthly basis to identify trends and patterns from the last year or two that will inform your sales forecast.
- Calculate your average sales by day, week, and month. These figures will serve as a starting point for your sales forecast.
- Break down your sales data by the period of time to gain insights into daily, weekly, and monthly trends. Look for patterns in your sales data, such as peak days, seasonal fluctuations, and the impact of specific events or promotions on sales volume.
- Use this information to adjust your sales forecast accordingly. You can even use it to avoid over-ordering ingredients and supplies, create more efficient employee scheduling, and more.
Step 4: Establish a Baseline Sales Forecast
Now that you have gathered the necessary data, it's time to establish a baseline sales forecast. Whether you’re a brand-new restaurant or you’ve been in location for 50 years, a baseline forecast is a great fallback to have in case you’re unsure of how certain events with impact actual sales. Educated guesses are always better than nothing.
Existing restaurants
Use your historical sales data to estimate future sales, factoring in any identified trends and patterns.
For example, say you own a restaurant and have noticed the following trends in your historical sales data:
- Your average daily sales are $1,000.
- Fridays and Saturdays consistently generate 50% higher sales than the daily average..
- Tuesdays are the slowest days, with sales averaging 40% lower than the daily average.
- During the summer months (June to August), your sales increase by 20% compared to the rest of the year.To project your baseline sales for the upcoming month of June, you could start by estimating your daily sales:
- Monday, Wednesday, and Thursday: $1,000 per day (average daily sales)
- Friday and Saturday: $1,500 per day (50% higher than average daily sales)
- Tuesday: $600 per day (40% lower than average daily sales)
Factor in the seasonal increase for the summer months by adding 20% to each daily sales figure:
- Monday, Wednesday, and Thursday: $1,200 per day
- Friday and Saturday: $1,800 per day
- Tuesday: $720 per day
Finally, calculate the total sales for June by multiplying the daily sales by the number of days each day occurs in the month:
- Monday, Wednesday, and Thursday: $1,200 x 4 weeks x 3 days = $14,400
- Friday and Saturday: $1,800 x 4 weeks x 2 days = $14,400
- Tuesday: $720 x 4 weeks = $2,880
The projected baseline sales for June would be $14,400 + $14,400 + $2,880 = $31,680.
New Restaurants
Now that you have conducted market research and analyzed your competition (as outlined in Step 1), it's time to calculate your daily capacity and use that information to establish a baseline sales forecast for your new restaurant.
Calculate your restaurant's daily capacity: Determine the number of customers you can serve per day based on full capacity, table turnover rates, and average meal duration.
For example, if your restaurant has 50 seats, and each table turns over three times per night with an average meal duration of 1.5 hours, your daily capacity would be 50 seats x 3 turnovers = 150 customers per day.
Estimate your market share: Use your competitive analysis to estimate your market share and potential sales based on your restaurant's unique selling points and target audience. For instance, if your research indicates that your restaurant's concept and offerings will appeal to 10% of the local market, use this percentage to estimate your potential sales.
Combine your daily capacity and market share estimates to create an initial sales projection: Multiply your daily capacity by your estimated market share to calculate your potential daily sales.
In our example, if you have a daily capacity of 150 customers and an estimated market share of 10%, your initial sales projection would be 150 customers x 10% = 15 customers per day.
With this information, you can now establish a baseline sales forecast for your new restaurant by projecting sales for the upcoming period, factoring in any identified trends and patterns.
Step 5: Adjust for External Factors
(Existing and New Restaurants): Identify external factors that may impact your sales, such as local events, economic trends, and competitor activities. Adjust your baseline sales forecast to account for these external factors, which can help you create a more accurate sales projection.
For example, if you know that a popular local festival will take place during the second week of the upcoming month and has historically increased your sales by 25%, adjust your baseline sales forecast accordingly for that week.
Step 6: Choose a Forecasting Method
(Existing and New Restaurants): Select a forecasting method that best suits your restaurant's needs. Some popular methods include:
- Time-series forecasting: This method uses historical sales data (Existing Restaurants) or initial sales projections (New Restaurants) to predict future sales. It works well for restaurants with consistent sales patterns and trends.
- Regression analysis: This method analyzes the relationship between your restaurant's sales and external factors such as economic indicators or competitor activities. It's suitable for restaurants with sales impacted by external factors.
- Moving averages: This method smooths out short-term fluctuations in sales data to reveal underlying trends. It's a simple forecasting method that works well for restaurants with stable sales patterns.
Step 7: Create a Sales Forecast Model
(Existing and New Restaurants)
Build a sales forecast model using the chosen forecasting method: Set up the model using appropriate tools or software, and input the necessary data.
Suppose an existing restaurant has the following weekly sales data for the last 12 weeks (in dollars): $5,000, $5,200, $4,800, $5,500, $4,700, $6,000, $5,300, $5,700, $4,900, $5,400, $5,100, and $6,200.
Using a 4-week moving average method, the restaurant calculates the average sales of the most recent four weeks ($4,900, $5,400, $5,100, and $6,200) which is equal to $21,600 in total sales. The moving average is $21,600 / 4 = $5,400.
Based on this calculation, the restaurant's sales forecast for the upcoming week is $5,400.
What Is an Example Of a Sales Projection For a Restaurant?
Let's assume a small restaurant typically serves an average of 100 customers on a regular weekday. During the holiday season, based on historical data and expected trends, the restaurant owner forecasts a 30% increase in customer traffic. Therefore, the projected sales for the upcoming holiday season would be approximately 130 customers per day.
Using the average spending per customer, which is $30, the projected daily sales during the holiday season would be $3,900.
This sales projection can help the restaurant estimate revenue and plan accordingly for inventory and staffing during the holiday period.
Check out our free restaurant sales forecasting template in Excel.
An Automated Way to Create Sales Forecasts for Your Restaurant
While the steps outlined in this article can help you create a decent sales forecast for your restaurant, there is an easier and more efficient way to do it.
Lineup.ai's sales forecasting software uses AI and machine learning to automatically generate sales predictions for your restaurant based on historical sales data and external factors that may impact your sales.
Using Lineup.ai's forecast software, you can generate sales, labor, and item-level forecasts and use these forecasts to schedule your restaurant staff, with just a few clicks, saving you time and driving efficiency.
The software is easy to use and customizable to your restaurant's specific needs and requirements. It’s as good as your best manager, but frees up their time so they can focus on other important areas of the busines.
FAQ
What is the difference between a sales forecast and a budget?
While a sales forecast predicts future sales based on historical data and external factors, a budget is a financial plan that outlines how you will allocate resources to achieve your business goals. A sales forecast is a key component of a budget as it helps you predict revenue and plan expenses accordingly. However, a budget takes into account other factors such as expenses, overhead costs, and capital investments.
What are the advantages of sales forecasting?
Sales forecasting has many advantages for restaurants, including:
- Better inventory management: By forecasting your sales, you can ensure that you have the right amount of ingredients and supplies on hand to meet demand without overstocking or wasting resources.
- Improved staff scheduling: By analyzing sales trends and patterns, you can determine when your restaurant is busiest and adjust your staffing levels accordingly. This can help ensure you have enough staff to handle peak periods without overpaying or understaffing.
For more information on the importance of sales forecasting for restaurants, check out our article on the topic.
What is the sales forecast formula for a restaurant?
The formula for calculating sales forecasts for restaurants will depend on the chosen forecasting method. However, a basic formula for calculating sales forecast is:
Projected sales = (Number of customers) x (Average check size)
To calculate the number of customers, you can use historical sales data, market research, and competitor analysis. Average check size can be calculated by dividing total sales by the number of customers during a specific period.
