Forecasting is important for every business, and restaurants are no exception. This technique predicts future business behavior based on past data. In particular, restaurant forecasting uses historical data, current data, and future trends to make key decisions, potentially influencing every major decision. As a restauranteur, it’s one of your most essential tools.
Historical data informs decisions like menu planning, including pricing and items, and the timing and success of promotions. It also plays a critical role in inventory control and scheduling. Most of the information needed for forecasting can be obtained from a good POS system.
Forecasting estimates future demand by analyzing past sales data while considering current economic conditions and making assumptions about future trends. It offers a realistic estimate of future sales that are used for staffing, marketing, and menu decisions. Through careful analysis and thoughtful assumptions, operators can develop a reasonably accurate forecast.
While forecast methods vary, most start with historical data and the analysis of past sales. As mentioned, much of this comes from your POS system as well as financial reports. With this in hand, operators look for trends, such as a rise or fall in business during specific holidays, seasons, town events, or times of the day.
Using market analysis, you can break down different shifts, such as lunch and dinner, and then analyze them separately to look for opportunities. For example, an analysis may lead to the realization that Wednesday lunches have been steadily slowing down, particularly in the summer. This realization can be used to look further into the issue to determine the cause and then use special promotions, marketing, or menu adjustments to increase sales.
The Benefits of an Accurate Forecast
It’s evident that accurate forecasting is critical for determining your inventory count, how much food to order during different seasons and events, and staffing considerations. There are several other benefits as well, including the following.
Adjusting the Menu and Prices
Using historical data to determine future menu prices and items is probably one of the most commonly used practices. Knowing how much food and what items sell at various times of the year can help you price and plan your menu accordingly. Did you offer deep-fried artichokes and turkey legs when the last Renaissance festival was in town?
How busy was your restaurant during that period, and how did those menu items sell? Was there a certain time of day that saw increased sales outside of regular ebbs and flows? You can see how this information plays a critical role in your menu. As we learned in Economy 101—an increase in demand translates to higher prices.
The price of seasonal ingredients also rises and falls depending on the time of year. Understanding this year-over-year trend helps operators adjust the menu price of seasonal items and determine the best time to include them on the menu.
Marketing and Promotions
Historical sales data can identify relationships between pricing and promotions. It can also consider the relationship between weather events and increasing or decreasing guest count.
Once you take advantage of this all-important tool, you’ll realize its potential for making much better long-term decisions year after year. You’ll also recognize the importance of factoring in a slight buffer so you’re never caught understaffed, with low inventory, or increased prices that have affected demand.
Using Your Sales Data to Create a New Revenue Stream
At EMERGING, our team is made up of data scientists and analysts who understand the importance of data as the world’s most valuable resource. In addition to using this data to ensure success, you can also use it to create a new revenue stream. One of the ways EMERGING helps its partners and clients is through F&B Insights, a platform that helps you monetize your sales data.
Like you, suppliers look at historical data and sales to determine what brands perform the best based on venues and locations. In fact, this information is so vital to them that they’ll buy it from you. F&B Insights helps you sell your monthly sales data to these suppliers by creating insight-rich reports from your POS data and delivering them directly to your supplier partners.
Of course, this is just a small piece of the EMERGING puzzle. We help our clients with supply chain negotiations, data-based expansion plans, increasing revenue, reducing costs, and giving them access to the world’s biggest database of local and national menus, identifying opportunities to raise prices without affecting demand. To learn more about F&B Insights or to schedule a consultation, contact EMERGING today.
What is the main purpose of forecasting?
Forecasting uses historical data to make informed and predictive decisions regarding future trends and major business decisions. It helps restaurants determine staffing levels, inventory needs, menu planning, marketing, and much more.
How is historical data used for forecasting?
Historical data helps determine peaks and valleys of demand and how pricing, promotions, weather, seasonality, and events may affect this demand. It enables restaurants to make intelligent decisions based on insights derived from past data.