Importance of Accurate Restaurant Forecasting

If you’re not forecasting accurately for your restaurant, you’re throwing away a lot of money.
Why Your Restaurant Needs Accurate Forecasting to Survive
In this article

Accurate restaurant forecasting is a powerful tool that uses past data to estimate future outcomes. By external factors like local events and trends, and historical sales, forecasting provides valuable insights into key restaurant metrics such as sales volume, menu item ordering mix, and customer traffic.

Since you have a good idea of what to expect, you can plan ahead. Think about it this way: if you knew exactly how many steaks you were going to sell this week, wouldn’t you order just that amount so that you didn’t have to throw anything away?

That sounds simple, but simple ideas can be especially powerful.

This article highlights the importance of accurate restaurant forecasting and its impact on maximizing sales, enhancing customer service, making informed business decisions, managing employee scheduling, controlling inventory levels, attracting investors, and considering internal and external factors that influence business performance.

The Importance of Restaurant Forecasts

Gathering real data to create an accurate forecast might seem like a lot of work, but it’s worth it. You wouldn’t launch a new company with a business plan, and you shouldn’t plan your restaurant operations without an accurate forecast.

Forecasting helps you:

1. Maximize Your Profits

Slim profit margins are a reality of the restaurant business — most restaurants can expect average margins of between 3-5%. That means you don’t have room in your budget for waste. An unforeseen circumstance can easily cost you all of that profit margin, taking you out of the black and into the red.

Forecasting helps you anticipate your needs for a specific period of time. Rather than guessing, a good forecast uses a real data set to give you a more accurate projection.

This is crucial to maintain your margin throughout the year. You’ll know when to spend more effort on marketing, how to deal with seasonality, and it will be easier to maintain your baseline sales volume.

2. Boost Customer Service

What happens if you underestimate the number of customers you’ll serve this weekend?

  • You don’t order enough supplies
  • Popular menu items get 86’d
  • You don’t schedule enough staff
  • Wait times are high, even if your dining room isn’t at full capacity
  • Service is slow
  • Your overworked staff makes more mistakes

All of this adds up to a poor dining experience for your customers.

Right now, it seems like the whole world is understaffed. When you have trouble keeping your restaurant staffed enough for baseline foodservice, you definitely can’t afford to waste time and effort scheduling people on days when there’s not enough volume to keep them busy.

Learn about ways to improve customer experience in a restaurant.

An accurate restaurant sales forecasting software helps you find the right balance. You can keep scheduling light (and labor costs low) on days when your forecasting model predicts low overall sales. Then, your resources are more available for the times when you really need them.

3. Make Better Business Decisions

Forecasting happens all the time. Every time you build your staffing schedule, plan your menu, or order supplies, you’re making a prediction about the future. Do you look at your metrics each time you do these things?

4. Manage Employee Scheduling Seamlessly

Staffing and labor expenses can gulp down a huge chunk of profits in the restaurant industry. Forecasting your scheduling needs ensures you have enough crew members to take on a full capacity and spike in demand. And in case of slow sales, you won’t burn your money on overstaffing.

Nobody likes working when it’s under or over-staffed. You can anticipate seasonal variations and average daily seat turnovers to modify your team’s size better so that everyone has the right amount of tables (and makes enough money to make their shift worthwhile).

In short, understaffing jeopardizes your customer service experiences and overstaffing leads to wasted labor costs. Good forecasting mitigates both of these problems.

5. Manage Inventory Levels

Sales forecasting is a key to efficient inventory management.

Under-ordering can make your kitchen run out of popular menu items, and over-ordering is a recipe for food waste that can gnaw away at your revenue.

By diving into your historical sales data, you can see what your actual sales looked like on comparable days in previous years. Take into account other external factors (more on that later) and you can predict what supplies you need with almost uncanny accuracy.

Learn more about how to create a restaurant sales forecast here.

6. Analyze Your Break-Even

As you build your restaurant business, there will be times when you operate in the red. Accurate predictions empower you to make smart decisions toward breaking even and staying solvent through the slow season.

Your break-even analysis needs this information:

  • Fixed monthly costs like rent, payroll, and utilities
  • Average costs per unit: Total cost of all ingredients divided by the number of menu items
  • Average price per unit

With your break-even point calculated, you can plan ahead to get through the slow times with less food waste and maximize your profits when you have the business volume to support it.

7. Prove Your Value to Investors

Thinking about expanding? One of the fastest ways to do that is by attracting investors to help power your restaurant business.

Investors aren’t very interested in your concept, your menu, or your popularity on Instagram. They want to know if the money they invest is going to generate a return and how long they have to wait to see it happen.

Historical data is fantastic for this, but the main value in that information is that it enables you to make accurate projections about how your business is going to perform in the immediate and distant future.

Forecasting is an important part of your business plan, especially when you’re trying to win over investors.

8. Manage Internal and External Factors

Factors like weather, marketing initiatives, and competitions can build or cripple your business.

Internal factors are things that happen within your business. For example, if you run a television ad advertising that kids eat free on Thursday nights, you can anticipate that more families with kids will come in on Thursdays.

External factors are things that happen outside of your business like community events, holidays, and global pandemics. You can’t control these things, but you can adjust your plans to maximize benefits and minimize risks.

For example, if you’re normally busy on Saturdays, but you know that the weather is supposed to be stormy, you can anticipate that business will be slower than usual. You can schedule fewer servers and skip the specials that involve extra ingredients.

Let’s take a closer look at some of the internal and external factors that affect your forecast.

Factors to Consider When Forecasting

Here are the significant factors that every restaurant needs to consider:

1. Weather Fluctuations

Weather can help or hurt your restaurant business, sometimes in surprising ways.

Suppose a walkway to a nearby office building passes right outside your restaurant. When the weather is terrible, more employees will opt to eat at your place during lunch hours instead of going somewhere farther away.

Predicting weather far in advance is unreliable, so it’s important to check the forecast for the week when you make your schedules and order supplies. If you use forecasting software, weather reports should be built into the algorithm to give you the most accurate possible predictions.

2. City-wide Events

What’s going on in your locality? It could be political rallies, sports competitions, festivals, concerts, and other events. Keep abreast with these local events, as they can bring or take away business from your restaurant.

Some events will drive tons of foot traffic to your location. In those cases, prepare ahead with extra carryout menus or an attractive happy hour promotion.

Other events seem to drive people away.

In some cases, local events create hours of dead time followed by a huge rush of patrons that catches you off guard. Suddenly, your empty restaurant has a 1-hour wait, and you find yourself desperately calling staff in for more help.

You can forecast all of these things. Historical sales during the same event last year are a big hint.

3. Marketing, Strategy, and Operations

Promotional and marketing efforts are aimed at boosting customer count. Consider them when forecasting.

You should also monitor price increases and how they impact your sales. Increased prices might lower the average order size, change which menu items are most popular, or affect how often people come back.

Other operational decisions like service quality improvement, restaurant renovations, and “green” initiatives (like using compostable supplies and focusing on more sustainable sourcing) can impact sales over time. Keep a record of these types of changes so that you can track results and forecast more accurately.

4. Competition

Is your area welcoming a new competitor? Did a rival hang up their boots and close their business? Competition or lack thereof are crucial considerations in forecasting.

When new restaurants enter your marketplace, take your game a notch higher if you want to attract and retain your customers. You may consider some extra initiatives in your operation and business at large.

5. Repeat Group Business

You can read recurring trends from repeat groups to forecast more accurately.

Restaurant owners like you tend to know your whales. If the local bodybuilders convention always stops by for a protein-packed dinner on the last day of their conference, you know how to plan for that.

Build relationships with your repeat customers, whether they’re the couples that come in for breakfast every weekend or the salespeople that stop by in a big group after their annual strategy meeting. Once you have a more cordial relationship, you can encourage more frequent visits and plan better for those big parties.

6. Holidays

Holidays like Mother’s Day and Valentine’s find restaurateurs ready to serve the special occasion crowd. But the statutory, bank, state, federal, and other holidays are also crucial.

Holidays like Labor Day Weekend can affect your restaurant sales. You better consider them to avoid a scenario where your projections come in too under- or over-target.

7. Market Dynamics

Changes in the supply and demand of foods can force your forecasts back to the drawing board.

For instance, you may have to begrudgingly hike your steak prices due to increasing beef costs. That could cause fewer sales — and far more expensive food waste if you have to throw away unsold portions.

Market dynamics can affect other trends drastically. In the example above, imagine you’re dealing with high beef prices on Valentine’s day, which falls on a Saturday. Normally, you’d see an especially high volume of steak orders on this couples holiday, but this year, it’s wise to offer several lower-cost options with better margins.

8. Seasonal Success

Every restaurant deals with seasonality. There are busy times of the year and slow times of the year.

The trick is that every restaurant’s seasonality is a little bit different.

While it’s typical that eateries are busier in the summer and slower in the winter, that’s not always the case. A lunch spot that relies heavily on office workers might have its busiest time of the year during tax season.

The best way to determine how your business ebbs and flows is by looking at your own data.

Boost Your Profitability With Smart Restaurant Forecasting Technology

You want all the benefits of accurate restaurant sales forecast but your plate is packed full of other equally crucial things crying for your attention. What should you do?

Usher in for real-time forecasting.

Our easy-to-use and accurate forecasting techniques will put you many miles ahead of your competitors and other factors. Put our algorithm to work — it’s the best employee you’ll ever have.