As a restaurant operator, you know that a modern point of sale (POS) solution generates tons of data. The question is, how do you use that data to materially improve restaurant operations? One of the best applications for POS data is as a tool to make more accurate restaurant sales forecasts. Data-based sales forecasts can give you a degree of precision that was previously out of reach, as well as set you up to better allocate staff shifts, improve your COGS control, and instill a culture of financial responsibility in your management team.
The above benefits are earned from having access to properly contextualized POS data in a place that you consistently check. The ideal solution is not to try to manage your restaurant directly through your POS; but rather to integrate your POS data into a comprehensive system like a restaurant management software suite. RASI offers easy data integration of leading POS systems transferring your POS data into the same unified software you utilize for payroll, accounting, financial goal setting, and tracking.
What is a Restaurant Sales Forecast?
When running a restaurant, it’s critical that you’re able to estimate your revenue ahead of time. This type of estimation is commonly called a sales forecast. A basic restaurant sales forecast enables you to set your food and labor expenditures at the appropriate levels to maintain a target profit margin.
As an example of forecasting for restaurants, you might know that you are consistently exceeding last year’s monthly sales by 10%; and that last year in the month of March, you sold $120,000 in food and beverage. Your forecast for this March is therefore 110% of $120,000 for a total of $132,000 (120,000 x 1.1 = 132,000).
Common techniques for Restaurant Sales Forecasts
Forecasting for restaurants is a complex area with multiple valid approaches. We’ll review how to make a sales forecast for a restaurant using several of the most common techniques.
- Calculate your restaurant’s daily capacity
One of the simplest approaches to forecasting is to estimate your restaurant capacity. That is, if you have a great night of business in which all your tables are used to the max, how much money would you make? You can answer this question with the following formula:
Number of tables x number of seats x number of turns x average ticket price = daily restaurant capacity
For example, let’s say you have 20 tables with 4 seats and turn each table 2 times a night. That means you can serve a maximum of 160 patrons a night. Then say your average ticket is $20. Your restaurant’s daily capacity is 160 x 20, totaling $3,200. On your best night, you could make that much in sales.
Once you know your daily capacity, it’s easy to turn that into a weekly sales forecast by assigning a capacity percentage to each night you’re open. Continuing the example above, say your 20 seat restaurant is open Wednesday to Sunday. You estimate based on the observation that you operate at 50% capacity on Wednesday, 70% on Thursday, 90% on Friday and Saturday, and 70% on Sunday. Your weekly sales forecast then becomes:
(0.5 x 3,200) + (0.7 x 3,200) + (0.9 x 3,200) + (0.9 x 3,200) + (0.7 x 3,200) = 11,840
In a typical week, you could expect to make $11,840.
- Seasonal projections
If you’re like most restaurants, your monthly sales date is apt to display strong seasonality. That means sales will vary significantly based on the time of year and the weather. To achieve accurate sales forecasting, you should therefore take into account data from a similar period in the past.
A simple approach to seasonal projections is to always compare the current month to the previous year’s month, or an average of the last five years. For example, you could forecast for March 2022 based on March 2021. By establishing your forecasting of the same month in prior years, you capture seasonal variables, such as people’s propensity to eat out when the temperatures begin warming.
- Week over Week and Period on Period
Similar to the month-over-month approach described above, you may choose to define your comparative sales period as a rolling average of the last 90 days, the last 30 days, or simply the last week.
It’s up to you how granular you want to make your forecasting period. Be aware that if you choose shorter periods, such as basing your sales forecast on the last 30 days, you may be surprised by seasonal trends. August sales may not be a great guide to September sales if customer behavior changes with the season.
- Using detailed POS data and trends
The final and most technologically advanced approach to sales forecasting is taking advantage of the wealth of data available from a modern point of sale software, known as restaurant POS analytics.
RASI seamlessly transfers POS data directly into our integrated software suite, culminating in restaurant operators’ financial reporting and accounting metrics. This data transfer enables forecasting on a detailed level without tedious manual data entry and allows you to capture quickly moving trends. For instance, POS data could tell you that you have a new hit dish on your hands or that a new large group has made your restaurant their weekly meet-up location. This is information you’d be unlikely to capture and incorporate into manual sales forecasting.
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How does POS data make Restaurant Sales Forecasting better?
As just discussed, POS data is collected in real-time (and has easily reviewable records), allowing you to capitalize on quickly moving sales trends and changing circumstances. The feed-through of POS data into your restaurant accounting system enables you to avoid duplicate manual data entry. It keeps your critical operating metrics up to date at all times. You don’t need to wait to understand how you’re performing relative to your forecasting.
Granular sales data from your POS, combined with ingredient cost tracking, positions you to judge the success of your menu. If changes are necessary, you can work with your chef on menu engineering, optimizing for popular dishes with controlled ingredient costs and contributed margins. A solid understanding of your COGS (cost of goods) allows you to manage your restaurant’s menu and continued profitability from an educated, financial perspective.
POS data also allows for objective assessments of employee performance, such as revenue-per-server (i.e., Server ROI), comps and discounts usage, and more. Managers can use real numbers when coaching staff, and restaurant operators can increase the financial literacy of their management team. The availability of detailed financial performance data makes it easier to instill a culture of results-oriented responsibility across the business, from manager to hostess.
How does having a good Restaurant Sales Forecast drive restaurant profitability?
A data-driven sales forecast sets you up to reverse-engineer your COGS level. By knowing roughly where your sales will come in, you can determine how much you should be spending on ingredients and inventory. That, in turn, allows you to predict your profit on those sales (taking into account labor and overhead). Sales forecasts are thus an essential tool for maintaining desired profit levels.
Similarly, your sales projections provide a guide to scheduling shifts for your team. When you know how many customers you expect to serve in a given period, you can optimally allocate labor to avoid understaffing or overstaffing. Without sales forecasts, staffing becomes pure guesswork.
The wealth of data that a POS provides operators represents an opportunity to make operational decisions based on hard numbers. You’re empowered as an operator to make a close inspection of sales trends, such as quantifying and understanding your best-selling dishes.
POS data can lead to many interesting and profitable avenues of investigation, like the following questions:
- What traits do best-selling dishes share that drive sales?
- Can you create more menu items that have these traits?
- How successful have your specials and discounts been?
- Do you see specific promotional channels working better than others?
- How about your table turnover—do some servers have consistently faster turns?
- Does revenue-per-server vary significantly?
- Can you teach your slowest servers to match your fastest servers?
By pursuing these and other data-based inquiries, restaurant operators can make changes that drive sales and profits.
How to select software that enables sales forecasts based on POS data
Now that you’ve seen the power and potential of POS data, you’re probably wondering how to harness it with software. The best solution is an all-in-one software suite that integrates POS data, accounting, payroll, cash management, and operational metrics, thereby eliminating manual data entry and giving you a single point of access for all your restaurant data. RASI’s comprehensive restaurant software is the choice of thousands of restaurants across the country.
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When you sign up with RASI, a dedicated team will successfully onboard your management team, configure the software to match your operational flows, and coach you on how to use the software to set and meet financial goals. Contact us today for a free demo!