Picture this:
Padma runs her family’s restaurant in a trendy downtown neighborhood. Every week, she creates her staff schedules, plans the menu specials, and orders supplies.
Her method is simple — she always schedules the same amount of servers and orders supplies to replenish whatever was used up last week.
However, the restaurant always seem to be over- or under-staffed, and there have been a lot of weeks when the kitchen has either 86’d popular menu items or thrown away spoiled ingredients. Between the wasted supplies, lost revenue, and frequent service issues, it’s really cutting into profitability.
Padma’s forecasting method is missing a lot of important information. She decides to try something new.
With a holiday weekend approaching, Padma looks back at her sales data from the same holiday weekend the year before. She notices that her sales were three times higher than usual on that day, even though she remembers running out of her most popular dishes.
Padma forecasts that her sales will be higher this year. To prepare, she schedules additional staff and stocks up on supplies. She also prints extra carryout menus to encourage repeat business from new customers.
The results are phenomenal. Customers have a great experience, kitchen and waitstaff are fully prepared, and Padma has her highest sales day every. Even with the large extra order, there’s no waste.
That’s the power of restaurant sales forecasting.
What Is Forecasting for Restaurants?
The simplest way to define restaurant forecasting is this: you look at data from the past and use it to estimate what’s going to happen in the future.
At a deeper level, forecasting uses data from economic trends, historical sales, and market analysis to predict future key metrics such as sales volume, menu item ordering mix, and customer traffic. All of this means that your forecast is a lot more accurate than a general guess.
You can use your forecast to make decisions about restaurant operations, scheduling, marketing, and more.
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.
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.
An accurate restaurant sales forecast 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
5. Manage Inventory Levels
When Is the Best Time To Implement Restaurant Forecasting?
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?
The easiest way to implement forecasting is to install specialized software to make it easier. Looking back at your POS data and actual sales takes too much time to be a practical way to operate. External variables like weather, neighborhood foot traffic, and local road closures might not even make it to the table for consideration, much less their fluctuations in real-time. You need a way to take those historical data into account without manually pulling reports. That’s where automation comes in.
The best time to install that software is as soon as you’re ready to cut out waste in your restaurant.
But what about brand new locations?
If you're a new restaurant, you don’t have much data. This means that you may have to trust your gut and be ready for some trial and error before you get enough sales data to make more accurate predictions.
However, even a new restaurant should have some kind of forecasting mechanism in place to look at external circumstances. Factors like weather, events, and other things outside of your control have a big impact on the number of people in your dining room.
How To Create a Sales Forecast for Your Restaurant
The steps outlined here give you a general idea of how forecasting works. If you use a forecasting tool, much of this is done for you so the result is faster and more accurate.
Step 1: Gather Data
Restaurant sales tend to follow the same pattern over time. Look at data from recent years for the same week or month you’re trying to forecast. Do sales normally grow, drop, or stay the same in this period of time?
This data can come from a variety of sources, including POS (point of sale) system sales reports and historical sales data.
Once you have this data, you'll need to organize it into a format that's easy to work with. For example, you may want to create a spreadsheet with columns for each month and rows for each menu item.
What if you don’t have years of data? In this case, you can’t rely on past performance to forecast your future needs, so you’ll need to look at more recent trends. As a worst-case scenario, estimate your needs based on your business goals and the amount of marketing and promotion you’ve done to meet those goals.
Step 2: Establish a Baseline
The next step is to establish a baseline. This is the average sales volume for your restaurant over a specific period of time. We recommend looking at the past year.
Calculate the average daily sales within that period. You may also want to look at specific indicators such as your average labor costs, the average weekly order size for carryout containers, and the rate at which you consume important ingredients.
Some managers like to calculate baselines for each month to make it easier to spot trends, too. This can help you manage seasonality over the long term.
It’s also a good idea to predict how many guests you’ll serve. Calculate your average daily visitors, then multiply that by the number of days for which you want to forecast. In other words, if you serve an average of 150 people per day and you want to forecast for the next 14 days, you can estimate that you’ll serve 2100 people.
Step 3: Identify and Factor in Recent Trends
Once you have a baseline, you can start predicting future sales. To do this, you'll need to look at trends in your data and make assumptions about how these trends will continue.
For example, if you've noticed that your sales have been increasing by five percent each month this year, you can assume that this trend will continue for the month(s) you're forecasting.
Another example is if you notice that last year and probably the year before you had more sales on Friday for, let's say, the month of November, then you can prepare for additional staff on Friday this year for the month of November.
Step 4: Consider External Forces
External factors have a huge impact on your restaurant business. While you cannot control these external factors, you can plan around them.
Consider the weather report, local events, holidays, and other trends. Based on this information, predict if you need to adjust your expectations to produce a more accurate sales forecast.
For example, if there's political unrest, a major religious holiday, or a very competitive restaurant in your area, it’s reasonable to expect that your foot traffic will drop.
Also, take into account things such as weather, events, and market changes that may impact your sales. Nice weekend weather after a dreary week makes people want to get out of the house, and you’ll see a spike in traffic around mealtimes. Make sure you’re staffed up and ready to handle the influx.
External factors have a huge impact on your restaurant business. While you cannot control these external factors, you can plan around them.
Consider the weather report, local events, holidays, and other trends. Based on this information, predict if you need to adjust your expectations to produce a more accurate sales forecast.
For example, if there's political unrest, a major religious holiday, or a very competitive restaurant in your area, it’s reasonable to expect that your foot traffic will drop.
Also, take into account things such as weather, events, and market changes that may impact your sales. Nice weekend weather after a dreary week makes people want to get out of the house, and you’ll see a spike in traffic around mealtimes. Make sure you’re staffed up and ready to handle the influx.
The next step is to establish a baseline. This is the average sales volume for your restaurant over a specific period of time. We recommend looking at the past year.
Calculate the average daily sales within that period. You may also want to look at specific indicators such as your average labor costs, the average weekly order size for carryout containers, and the rate at which you consume important ingredients.
Some managers like to calculate baselines for each month to make it easier to spot trends, too. This can help you manage seasonality over the long term.
It’s also a good idea to predict how many guests you’ll serve. Calculate your average daily visitors, then multiply that by the number of days for which you want to forecast. In other words, if you serve an average of 150 people per day and you want to forecast for the next 14 days, you can estimate that you’ll serve 2100 people.
Tools To Use To Automate Restaurant Forecast
There are two ways you can choose to automate your restaurant forecast.
1. Use Excel/Google Sheets
If you're looking for a more hands-on approach, you can create your own forecasting system.
This option may be more time-consuming, but it will allow you to customize the system to fit the specific needs of your restaurant.
There are a few things you'll need to consider when creating your system.
First, you'll need to decide what data you want to include in your forecast.
This may include sales data, customer data, and inventory data.
Next, you'll need to choose a forecasting method. There are a number of different methods you can use, including trend analysis, regression analysis, and time-series analysis.
Keep in mind that you’ll need to do this manually every time you place a supply order or create a schedule. If you’re good with formulas and like doing data analysis, this is fine.
Also, be aware that your forecasts will be about 35% less accurate than an AI-powered software because you are more likely to miss some of the external factors that affect your sales volumes.
2. Use a Software
Forecasting software is the fastest and most accurate way to handle restaurant data. Most good software options will also help you with staff management, saving more administrative time.
The downside to the software is that it usually has a monthly cost. However, this cost is generally low, and the money you save on spoilage and other waste can turn that investment into a higher profit margin for your restaurant.
There are a number of software programs that can be used to automate forecasting.
One popular option includes Lineup.ai.
Lineup.ai can be used to input data, create forecasts, and generate reports.
It can also be customized to fit the specific needs of your restaurant regardless of location and order channel. Lineup.ai will combine your restaurant's historical data while at the same time considering real-time external factors such as weather and events to generate dynamic hourly, daily, and weekly sales forecasts
Bottom Line
Forecasting is an important tool for all restaurants, both new and established. It can help you set goals, make plans, and track progress. Perhaps most importantly, it enables you to make more money.
By following the steps in this guide, you can develop a realistic forecast for your business. And by automating your forecasting process with tools like lineup.ai, you can save time and make more accurate predictions.
If you're looking to improve your restaurant forecasting, Lineup.ai can help. We are equipped to help restaurants stay ahead of technology in the restaurant industry. Our features include dynamic channel-based forecasting by hour, day, and week, sales history tracking, trend analysis, and scheduling.
Book a demo today and learn more about how we can help your business grow.
