As a restaurant owner, you can’t predict the future, but you can come pretty close with the right tools. OK, maybe “predicting the future” is a bit of an exaggeration. But thanks to rapidly evolving technology, you can forecast future foot traffic and sales with a fair amount of accuracy.
But why does that matter?
Well, for one thing, your operational growth may depend on it. You may be able to get by on guesswork and good luck when you first open your doors. But as your business grows or expands into new locations, your profit margins will depend on greater precision.
This is where demand forecasting for restaurants can help streamline your operations, enhance the customer experience, and boost profitability for your business.
“It’s really about using existing data to make smarter decisions for the future,” explains Back of House operations expert Marylise Trepanier. “Fortunately, data analytics tools are getting more powerful all the time. This means you can get much deeper insights into your data, and increasingly accurate restaurant demand forecasting.”
Data-driven demand forecasting means using the data you already have access to in order to better anticipate future sales. The patterns and trends in this data can help you predict the patterns and trends up ahead.
Restaurant demand forecasting generally depends on a few different sources of data to help you make more accurate forecasts:
Obviously, there’s a lot of number-crunching involved in demand forecasting. And as your business grows or even expands into multiple locations, the sheer volume of all that data can be overwhelming. At this point, maybe you’re thinking it would actually be easier to just predict the future off the top of your head.
Fortunately, if you’re using the right tech in your restaurant, you kind of have access to a crystal ball. Restaurant demand forecasting is becoming more advanced, intuitive, and accurate all the time thanks to the tools built directly into most modern cloud-based POS systems. And thanks to AI, we’re also seeing more integration of restaurant demand forecasting into food inventory management systems, scheduling platforms, and digital media marketing tools.
According to an article from IBM, AI-powered tools can help you make sense of the patterns and trends in your existing data using:
As Marylise explains, “These AI tools are doing the complex calculations that we can’t do. They're identifying the patterns that we can’t really see. And they’re providing insights and reports that make it easy for us to understand.”
Now that you know what restaurant demand forecasting is and how it works, how can you use it to improve your operation? How do you make all of this data collection, number crunching and insight work for you?
“The real point of it is to make smarter operational decisions based on what your demand forecasting tools tell you,” Marylise notes. “Now that you know what to expect and when, how can you make smart shifts to your approach that can improve profit margins?”
Here are just a few ways to do exactly that.
“With the right forecasting tools, you can drill down customer demand to very specific time periods — summer brunch traffic, weekday happy hour sales, or the whole month of October,” Marylise points out. “This means you can make well-informed staffing decisions based on your expected demand.”
“This is an important one,” Marylise continues. “Overstaffing during slow shifts is a waste of time and money for everybody involved — you and your staff. Understaffing is just as bad, because it can have a negative impact on the customer experience and it can burn out your staff members.”
Effective demand forecasting for restaurants can help you anticipate staffing needs with greater accuracy. Now you're saving money on slow nights and maximizing customer satisfaction on busy nights.
With the right restaurant demand forecasting tools, you could be lowering your labor costs and driving revenue through repeat business. For example, advanced staffing platforms like 7shifts and Push Operations specialize in demand forecasting for restaurants.
“For many restaurants, inconsistent inventory management can be a big source of loss,” Marylise points out. “Over-ordering can lead to spoilage. And over-portioning your menu items can lead to plate waste. All of this is cutting into your margins, whether you know it or not.”
It becomes increasingly important to identify and control these sources of waste as you grow. Overstocking and overportioning can chip away at profit margins for a single location. But as you grow into multiple locations, you’re also multiplying your waste. The results can be truly damaging to your bottom line.
With restaurant inventory forecasting, you can get a clearer picture of the likely demand for certain menu items and ingredients, even as this demand fluctuates by the time of day or the time of year.
Not only can this information help you avoid overstocking or understocking key ingredients, but it can also help you engineer recipe portions and menu prices based on past diner habits.
All-in-one inventory management systems like MarginEdge bring together cost management and recipe analysis tools to help you order ingredients and portion out recipes with greater precision. And providers like Navi Cost Control offer affordable and easy-to-use tools to help smaller operations control their costs and engineer menu items for maximum profitability.
Restaurant demand forecasting isn’t just about anticipating demand. Demand forecasting leverages your historical data, which means you also get valuable insight into the ebb and flow of your business over the course of a year. That insight can be extremely valuable when it comes to preparing for and offsetting these seasonal shifts.
“That’s where restaurant demand forecasting is valuable from a marketing perspective,” Marylise observes. “Your historical data can tell you that your summer sales are usually soft, that you get a lot of foot traffic during the holiday season, that your revenue spikes every time you do limited-time drink specials.”
That kind of data can be essential as you approach the next summer, holiday season, or happy hour. You can make more precise, data-driven decisions about which special offers are likely to attract more customers in the slow season. You can put a big marketing push behind your popular high-margin items during the holiday boom.
If you’re not sure how to turn that historical data into an actionable marketing strategy, there are vendors that can help. Social media management tools like SproutSocial and SocialPilot can help you turn data-driven insights into strategic social media campaigns.
And these services can boost the strength of your restaurant demand forecasting by integrating with your POS system and gathering data on popular searches, keywords, and social media trends.
When it really comes down to it, demand forecasting is about using what we already know to make better decisions in the future. With that in mind, make sure you’re always in the know on the latest trends and developments in our industry by signing up for our monthly Operation Station Newsletter.