Staff scheduling, inventory management, menu analysis, guest satisfaction, profitability, and so much more rest on the shoulders of accurate restaurant forecasting. Faultless restaurant forecasts, however, are dependent on navigating predictable trends like holidays and seasonality alongside unpredictable ones such as weather and major world events. When successful, they keep a restaurant in the black - but they require time, dedication, and a good bit of math to get right.
In this post, we'll walk you through everything you need to know about restaurant sales forecasting - from the reasons why to forecast, to steps on how to create forecasts accurately, to what you should consider when forecasting for your restaurant.
What is Forecasting for a Restaurant?
In a restaurant, forecasting is using data to predict how much the business can expect in sales in a given time period. On a macro level, sales forecasting helps a business set growth goals and determine its overall profit and revenue. On a micro level, forecasting helps a restaurant plan for inventory orders and how many employees need to work each shift to make and sell food. Inaccurate sales forecasting can result in wasted funds on labor, inventory, and even operating expenses for the restaurant.
Why Should You Conduct a Restaurant Forecast?
Restaurant forecasting isn't really a "nice to have" - it's a step all successful restaurateurs have to take. In a restaurant, a sales forecast offers multiple business-critical benefits that impact the long-term and short-term success of a restaurant. Here are just a few reasons to conduct a restaurant forecast.
Like all businesses, restaurants need to make money to survive. In a restaurant, profitability can be slim - the average profit margin tends to fall just between 3-5%. Since a restaurant forecast predicts how much revenue the business will pull in during a set period of time, you can deduct fixed costs from that number, as well as demand-based variable costs like inventory and labor, leaving you with a restaurant profit estimation.
In turn, the profit estimation can help you plan for upcoming initiatives for your restaurant once all of your expenses are covered, such as hiring and promoting employees, reducing turnover, impending restaurant renovations, or even expanding your business into new locations.
Effective inventory management is largely dependent on sales forecasting. Wasted inventory is one of the most needless - yet avoidable - expenses that a restaurant can make. Through sales forecasting, you can use historical sales data to predict how many chicken wraps you'll sell during the dinner shift, during dinner on a Tuesday, and even during dinner on a Tuesday in October.
A restaurant forecast helps you make more accurate inventory projections each time you call your supplier to stock up your kitchen with just the right amount of fresh ingredients. Each time you forecast your sales, you're referencing actual sales numbers from your past to accurately predict how much of what you'll sell and when. For new restaurants, forecasts help you plan a practical approach to breaking even through the numbers available to you.
Proper Service for the Restaurant
No customer wants to hear that you're out of their favorite dish. It's a disruptive experience for guests who need to take time to review the menu all over again and decide on a dish they might not enjoy as much. Proper forecasting can alleviate the chances of this happening and ensure a quality dining experience.
Restaurant forecasting can also improve the restaurant's operations and quality of service. Knowing how much business the restaurant will do can ensure it staffs up to decrease wait times for guests and increase table turn. Conversely, it can also alert you to when you might be overstaffed, which can help control the business's labor costs.
Restaurant Sales Forecasting Method & Techniques
Forecasting for Existing Restaurants
If you're forecasting sales for a restaurant that you've been running for a few years, you've already got historical data to help you plan your restaurant forecast. Here's how to arrive at a good number for your projection:
- Look at past data. Reference sales data from the same time in the past few years. Again, this could be for a shift, day, week, month, or even season.
- Adjust based on recent trends. Compare sales numbers from earlier this year to where they were in the previous similar time period(s). For example, say you're forecasting for the month of September, and you've found that sales from June-August were up 5% compared to those same months last year. By that logic, you would apply a 5% increase from last year's September sales to more accurately forecast for this upcoming September.
- Consider external forces. Take into account any extenuating circumstances, such as holidays, events, weather, or market changes that may have impacted the numbers from the previous period.
- Factor in trends. Adjust the forecast with any current factors that may increase or decrease your sales forecast, such as shifts in demand or supply.
- Get granular. Break the sales forecast down by menu items - based on historical data - to better plan for inventory ordering and employee staff scheduling.>
- Plan your schedule. Allocate your staff to the right shifts based on this projected demand.
By following the process outlined above, you'll be able to forecast in a way that acknowledges both your restaurant's future and its past - both of which are key attributes to successful sales projections.
Forecasting for New Restaurants
When you're just opening a new restaurant, things can be a little more complicated. You're basically starting from scratch and have no historical data from your business to base your sales projections off of. However, there are still ways for you to make an informed forecast. To start, you'll need the following numbers:
- How many days you'll be open each week.
- How many guests you'll serve - on average - in a given week. This number should include in-house seats filled, takeout customers, and delivery customers. Off-premise dining can be more difficult to accurately determine and will require some educated guessing based on ticket size.
- How much each guest will spend. This number should incorporate drinks, apps, entrees, and desserts. Again, this number isn't an exact science for off-premise dining, but educated guessing is a serviceable strategy here.
From there, you can incorporate all of these numbers into the following sales forecast formula for one week's forecast:
Restaurant Sales Forecast = Avg. Number of Guests X Avg. Per-Person Spend X Number of Days Open Per Week
You can get your revenue numbers from your point-of-sale records, and as we've covered, the number of guests can be based on your number of orders while factoring in estimates for the number of off-premise diners. Let's say your numbers break down as follows:
Average Guests Per Day = 200
Average Per-Person Spend = $20
Number of Days Open = 6
This would make the sales forecast formula break down as follows:
200 Guests X $20 X 6 Days = Restaurant Sales Forecast
200 Guests X $20 X 6 Days = $24,000
As a first time sales forecaster, you would then break that $24,000 down by menu item and factor in any circumstances that might be out of your control, but would still impact sales (such as impending weather). You can also adjust the forecast to make it work for a week, month, season, or even year.
After each sales forecast is complete, set it aside and revisit it after the period of time is over to see how accurate your sales forecasting and inventory projections are. You might find that your business is growing faster than expected, and thus you should apply a 2% growth percentage to your weekly forecasts.
Since your restaurant is still in its infancy, you'll need to reconsider some of the metrics you base your sales projections on, such as menu prices, days/hours of operation, staff size per shift, and average ticket size - all of which could change in the coming months.
Factors to Incorporate in Your 2021 Restaurant Forecasting
Weather is a surprisingly strong indicator of restaurant success, and interestingly enough, the effect of weather varies by concept. For example, according to Pizza Marketplace, weather has more of an impact on casual dining restaurants than QSRs.
However, the most notable role of weather on a restaurant's sales forecast are the polar opposites of summer heat and winter weather. Snowy weather calls for immediate adjustments to sales forecasts, with a snow day costing some restaurants as much as 20% of bottom-line monthly profits. As for summer, some restaurants see a surge of sales due to outdoor dining, while others find July to be the slowest month of the year.
The effects of weather are among the most predictable when it comes to restaurant sales forecasting, so analyze the trends of how well your restaurant does when certain temperatures hit to see how you should be adjusting your forecasts.
Events can drastically drive up demand for a restaurant. For example, if you're close to a performance venue or a baseball field, you should familiarize yourself with their schedule to see if concerts or baseball games draw in crowds that want to come to your restaurant before or after attending.
And don't forget about events that aren't exactly local. For example, if you run a sports bar, you might find that you're mobbed on Sundays during football season, but things are a little slower when hockey's on. It's also worth considering much bigger events like the Super Bowl, which calls on wing restaurants to stock up more than they would on a regular weekend. For the 2021 game, hungry Americans consumed a record 1.42 billion wings as they watched Tom Brady get his ninth Super Bowl win - and it would be a shame if your restaurant missed out on a sale because you didn't have enough chicken in stock.
Restaurateurs are quick to adjust their forecasts for major holidays like Valentine's Day and Mother's Day - as they should - but what about other state, federal, bank, and statutory holidays? It's worth exploring the effect that holidays like Labor Day Weekend have on sales, too - otherwise your projections might come in too over- or under-target compared to your forecast.
Shifts in supply and demand for various foods can cause you to bring your sales forecast back to the drawing board. For example, with beef prices on the rise, it might mean you must begrudgingly raise the prices of your steak dishes. This price hike might discourage customers from ordering steak, which could lower your overall sales and require consideration when forecasting. On the other hand, if demand for pizza rises (as it did during 2020's lockdowns), this would call on pizzerias to increase their forecast target if solely basing it off of previous sales metrics.
Put simply, current events, supply chains, and shifting consumer preferences are timely and important indicators of a restaurant's sales - so keep an eye out for how some of these trends could impact your revenue.
Needless to say, a restaurant located near a summer vacation spot or in a popular skiing town knows it will have drastically different sales in the off season than the on season. But just because you're not operating a beach bar on Nantucket Island doesn't mean seasonality has no impact on your business.
Seasonal effects should be factored into your forecast if the business notably fluctuates during different times of the year. Restaurants in college towns, seasonally-driven vacation areas, and even those whose food is more popular one season than another should make a note of this.
Some restaurants have had to cut down on their table service due to staffing shortages in the kitchen or on their waitstaff. If you're intentionally lowering output due to a limited-size staff, you should keep that in mind when forecasting sales. For example, if you've estimated your smaller staff has cut normal productivity by 10%, be sure to factor that number into your forecast for a more accurate prediction.
Excel (or Google Sheets in a pinch) is a spreadsheet to help you break down your forecasted sales and visualize them with charts and graphs, using a restaurant sales dashboard template. You can also use the spreadsheet to break down your menu by item and run individual forecasts for popular menu items. Plus, you can keep the same workbook to easily store and reference your data for future forecasts. The downside is that it's a manual process to update this spreadsheet each morning, taking your time and attention away from what matters, your restaurant and guests.
Software takes out the brunt and time consuming manual work of sales forecasting, and can even build a perfect schedule based on projected sales from forecasts. Auto Scheduling software like 7shifts factors in all the considerations in scheduling based on forecasts, including overtime, weather, live POS data, employee availability, and more to align sales projections with labor needs.
7shifts will also use those Actual Sales values to populate Projected Sales, allowing you to create schedules based on those projections. Software not only controls labor costs, but its sales forecasting ability contributes to a more accurate way to manage inventory and perfect the guest experience.
Frequently Asked Questions
Who in a restaurant is responsible for production forecasting?
The restaurant's owner is normally responsible for sales forecasting for the restaurant. However, the owner should also consult with managers when forecasting, as they can speak to any unique circumstances that might have impacted the numbers contributing to a forecast.
How much historical data do I need for restaurant forecasting?
The more historical data you have for your restaurant forecasts, the better. Data on sales by date, day of the week, month, season, and even weather conditions for as far back as it's available can help you build a more accurate restaurant sales forecast.
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