Keys to Making Accurate Sales Forecasts
Forecasting in the restaurant business is a challenge. A strong forecast looks at hours, not weeks. It considers real-time conditions, like the weather, and guides owners to smarter, more accurate, more profitable decision-making.
Rain with a Chance of Profit
It's Wednesday night. You're planning for next Monday, your slowest day. You're running a new promotion: half off on a second entrée. The grill across the street is showing the playoff game on its big screens. Your other closest competitor is facing road construction. The weather report anticipates thunderstorms. This coming Monday, in so many ways, isn't going to be like last Monday.
How much inventory should you purchase? How many people will you need?
Accurately forecasting the answers to those two questions is one of the great goals of restaurant management. Eliminating waste and controlling payroll is a recipe for profits—no less important than portion control. Forecasting is key. Accuracy is paramount.
Forecasting by instinct and personal experience—putting a finger in the air—can only take you to "Mondays are slow." But all the detail is missing. This kind of "feels like rain" forecasting can't deliver the level of accuracy you need for tight control of your staffing and purchasing. So many other factors, beyond just history, play a role. For next Monday, the only way to get an accurate forecast is to be able to mathematically incorporate every important factor: items ordered most and least on Mondays, impact of a promotion on sales, impact of bad weather. Day of week, time of day, community events, sales item coefficients: each has to be factored in for a forecast that's on the money.
Forecasting Controls the Under/Overs
Accurate forecasts control two of the biggest threats to restaurant profitability: "The Under/Overs."
A recent study conducted by LeanPath estimates that between 4 percent and 10 percent of the food restaurants buy is thrown away. The impact of running out of a menu item is as hard to track as it is significant: how many customers won't come back because of it? Forecasting helps ensure you keep waste to a minimum and that inventory is always available.
Servers standing idle or stretched too thin—either way, the situation is a drain on profit and on customer satisfaction. Forecasting offers the best window into how much staff to bring in for any given time of any given day.
The Anatomy of a Forecast
An accurate forecast has two ingredients.
1. The Data
In most cases, a restaurant's POS captures a lot of the data needed—Maitre'D stores and manages all the raw data required. Most POS systems handle the collection of this "structured" data routinely—storing sales, inventory, and marketing data. From these points, they can produce reports like sales-per-period, revenue-per-server, and so on.
Maitre'D also allows you to store and analyze more "unstructured" data, such as notes about the weather or the impact of a competitor promotion.
2. The Analysis
While most POS systems gather the data and produce historical reports, Maitre'D lets you forecast what the impact of a promotion will be for next Monday, in bad weather, before you staff, or before you order from suppliers. It integrates all this information into a range of operational forecasts, including quarter-hour sales forecasts, per-item forecasts, production tables, staffing, and more.
Finally, is your forecast the best it can be? Use these three simple guidelines to test it.
Is It Granular?
How detailed is your forecast? On Saturdays, your sales may increase by 10 percent, but your forecast must include knowledge of the items you're selling more of—is it burgers or beer? You already know that a sales increase means more staff on hand, but your staffing forecast must include the times of day when you need the extra help. Waste must be forecast as well, to serve as an operational benchmark. And the forecast needs to exclude some days from its analysis (for instance, if a power outage closed you down for a night).
Is It Current?
How much of your forecast is based not just on history, but what's happening right now? You expect low-range sales on Mondays. But don't forget the road construction, the marketing promotion, and the big game across the street. Your forecast must integrate all the relevant data for you to make accurate and profitable decisions.
Is It Measured?
How are you measuring your forecasts? The measurements you'll use to determine forecasting accuracy come from many sources. Analysts, associations, and parent companies offer operational benchmarks you can use. As you use forecasting to tighten staffing, expect to quickly see a rise in revenue per employee and a drop in payroll. And you can tell instantly at the end of each day whether waste is decreasing.
The opinions of contributors are their own. Publication of their writing does not imply endorsement by FSR magazine or Journalistic Inc.