Restaurant forecasting is one of the most important parts of managing a restaurant—it allows you to predict revenue at any given time period so you can make decisions on how much food to order or how you will write your staff schedule. It also lets you spot opportunities to create more business. Restaurants typically perform various forecasts; if you are a newer restaurant, I recommend figuring it at least once for the month ahead.
In this article, we will examine restaurant forecasting, its effects on restaurants, how to find an accurate forecast, and other basics surrounding this important aspect of food business management.
Key Takeaways
- Restaurant forecasting helps streamline your operation and reduce costs by planning ahead.
- You can forecast whatever combination of future sales, labor, customer volume, and food cost you find most effective.
- Your entire management team in the front and back of house should be part of the forecasting process.
What Is Restaurant Forecasting?
Restaurant forecasting—or restaurant sales forecasting—simply put, is the process of projecting your expected revenue for a given time period, using past sales and other historical data. While a majority of different factors can affect what happens to a restaurant day-to-day, an accurate forecast is something that can really help shape how you manage your restaurant and what kinds of costs you will have in relation to food costs, labor costs, and overall overhead.
Why Are Restaurant Forecasts Important?
Restaurant forecasts help you strengthen your business—think of them as the foundation on which you can build a successful food business. Accurate restaurant forecasting allows you to prepare for expected events, preventing potential blind spots and making your restaurant more resilient when the unexpected does happen.
If you are a chef, you no doubt have heard of the term “mise en place.” This translates into the phrase “everything in place.” I like to think of restaurant forecasting as the mise en place of managing your business. Like setting up a station before service, restaurant forecasting gives you a framework that you can build off of and lets you plan how exactly you will execute in many different avenues.
Types of Restaurant Forecasts
There are four major types of restaurant forecasts: inventory, labor, trend, and profit. I recommend figuring them all. But if you are just starting your restaurant forecast and have limited bandwidth, commit to performing at least one forecast for the month ahead, starting with the area where you think your restaurant has the most potential to improve. You can add more forecasts as you move forward.
Inventory Forecasting
How you manage your inventory is also a big factor in your food cost and meeting your financial goals. Restaurant forecasting helps with:
- Preventing food wastage: On average, restaurants waste 4%–10% of their purchased food before it even goes out to a customer. Having historical data for certain days, months, or seasons lets you make an educated guess on how much food you should have on hand for the upcoming days or weeks you are ordering for. This keeps food cost tight and avoids food wastage.
- Seasonal menu planning: Restaurant inventory forecasting also shows what items you should put on the menu more if your menu stays relatively similar season to season. For example, say a butternut squash risotto you served last year often sold out due to higher-than-average sales compared to other menu items. You’ll know to plan to order a little more ingredient-wise and also communicate to your staff that this dish is a successful sale in order to drive more business. You can also work backward, trying to nail down better food costs on this dish to make it even more profitable.
- More efficient planning: Proper forecasting lets you order food inventory more efficiently. You can build out order sheets for each ingredient, with each ingredient showing the amount you should order based on historical sales. You can also get a head start with local vendor orders to ensure you have the proper amounts you need while also being able to bargain for better prices knowing the rough quantity you are working with.
Labor Forecasting
Another key way in which restaurant forecasting can help you plan your business is with staffing plans and labor costs. Your restaurant forecast will include data on seasons, holidays, business driven by local sports games, and much more. For example, say your local professional football team drives customers to your business during football season when they play home games. You can look back at historical data and see what business volume was like, which can give you an accurate example of how you should expect to staff your restaurant in the future.
Restaurant forecasting allows you to accurately predict how much staff you need. You can rely on this data a lot more than just guessing about your staffing levels, and this can make your labor costs and guest experience better in the long run. Staffing cost is another factor in your profit and loss (P&L) that needs to be accounted for. On the flip side, understaffing leads to costs in loss of business or unsatisfied guests that can really hamper a dining experience and drive repeat guests away.
Seasonal Trend Forecasting
One of the other big business data points you can gain from sales forecasting is the ability to see seasonal trends and different revenue periods within a year for your business. Trends such as how temperatures affect your business volume, how seasonal ingredient variability affects dish success, and how much of certain menu items you sell based on time of year are all really important. This is especially true if you change your menu based on the seasons, or if different menu items become available due to weather changes.
Another factor in restaurant forecasting is the fact that you can break down how dishes do during respective seasons, allowing you to tweak your menu and increase profit. For example, say a French onion soup does very well in the Fall and Winter but drops by 70% in sales volume in the Spring and Fall. You can plan to either make much less of this soup in the warmer months, or you can swap it out for a new item. This may sound obvious, but maybe you make a killer chili that the data shows sells a lot year-round. You wouldn’t remove this item and you’d actually find ways to sell more of it. This is how forecasting data on seasonal trends can help your business.
Expected Profit Forecasting
The last major data point you can gather from restaurant forecasting is expected profit for a year, month, or certain given time. This is useful for a couple of reasons. Say some minor reservations need to be made in a given business year. You could easily forecast and find the time of year when closing for a light renovation will have the least amount of impact on your earnings and revenue.
Another important way you can use the expected profit from a forecast is when you need to make bigger purchases. Say you need more cash on hand for new equipment or restaurant updates. You can plan out when your expected revenue and subsequent profit are greatest so that you can keep your business financially healthy while also improving upon it. This can also help you know when to offer promotions, lean into new ventures, and when you can help build out your team with more staff and other necessary costs.
How to Conduct A Restaurant Sales Forecast
Conducting a restaurant sales forecast is very simple. It does require a few key numbers, but the following formula is the industry standard for conducting this task:
- Number of tables: The count of individual tables you have in a restaurant
- Seats per table: The number of individual seats per table in your restaurant
- Average check size: The average amount you expect customers to spend
- Average table turn: The average number of times new guests are seated in a service
Number of tables x Seats per table x Average check size x average turn of table = Sales Forecast
To calculate a restaurant sales forecast, you first need to know the amount of tables you have in your restaurant and how many seats you have per table. You can determine your average check size from historical data. Finally, an average dinner service table will have 2–3 turns. Below is a breakdown of this formula in action.
15 tables x 4 seats per table x $50 average check size x 2 turns per table = $6,000
As you can see, this starts to be important as it almost gives your business a goal of sales to hit. For my time in restaurants, our forecast was our way of trying to figure out if the business we were operating was successful or not. Say your sales forecast for a month of business is $530,000, and you come in at $490,000. Something within the month happened that made you miss your goal. You then have the ability to use historical data to see what impacted sales. You are also given the opportunity to make any necessary changes to get back on track with where you need your sales to be.
In regards to our example above, this final expected forecast would change based on a few reasons. One would be your adjustment of anticipated sales based on historical data. So for example, on a weekday like Wednesday, you may only do 1 “turn” or seating of your tables. So being sure to go day by day in a week is the key to getting the most accurate results. Furthermore, once you get historical data that is accurate, you can set targets on each day of the week so that forecasting runs more smoothly on a month-to-month basis.
How to Forecast for New Restaurants
Forecasting for new restaurants is a typical part of a restaurant business plan. Forecasting for a new restaurant will naturally be less exact than with an established restaurant as there is no historical business data to pull from. With a new restaurant, you are basically using the information you have like:
- Your operating hours
- How many guests you expect to come into your establishment
- How many days you are open
- Estimated average check
These numbers may change—as you could see a lot of business on days you didn’t expect or have slow periods before the neighbors learn of your business—it is good to generate a forecast to reference when starting to write staff schedules and order your first couple of inventories. Your forecast can also help you calculate how much money to set aside for contingency funds.
This formula will give you a rough estimate of sales forecast for a new restaurant:
Number of days open x Average amount of customers expected x Average expected check size per customer = Estimated Sales Forecast
For the formula above, you will also need to set it in a certain window of time. So, for example, you could do a week, a month, or even a quarter. This is the best way to create an estimate for your expected sales when you do not have any historical data, and you are starting out as a new restaurant operator.
To estimate your customer traffic, look at your market research. If you performed market research as part of starting your restaurant (and you should have), then you observed the customer traffic at competing restaurants near your location. Use these figures to inform your proposed forecast. To get your average expected check size per customer, calculate the most likely order for different day parts based on your actual menu and proposed menu prices, along with anticipated customer spending amounts.
Restaurant Forecasting Strategies
There are a few different strategies you can use to get good data from your forecast that will allow you to be ready to execute your business goals. Below are some of the top strategies to keep in mind for your next restaurant forecast.
Look at Historical Data
One of the benefits of tenure in a restaurant is being able to have data through your point-of-sale (POS) system or other sales reporting tools that will give you the ability to look at sales over a large period of time. Say you are a restaurant lucky enough to be five years into your business. You have four full years of data to help you understand business ebbs and flows, non-common busy seasons for your restaurant, and how much revenue you can expect through any time you view throughout the year.
While numbers year-to-year may not match up exactly, you can start to find trends that help you better manage the business. For example, you may notice that your revenue and business volume increase by 10%–15% every year from August to September. This is a perfect way to know that September is a very busy month for you each year, so more focus on adjusting your inventory and staffing levels is key during this time of the year.
Identify Customer & Business Trends
One of the crucial ways to forecast your business is to use the found data you have in order to capitalize on trends that your customers tend to stick to. I worked in a restaurant once where a certain appetizer would sell 35%–50% more during weekdays for whatever reason. It was a unique item that just saw more volume during business lunch hours and other weekday dining occasions. Once we knew this information, we could plan ahead for this item and the busier time periods in which we knew we could expect to sell more.
Other business trends could include season changes and how your business is affected by them. You may also live in a city that has seasonal weather that may affect travel and other ways for your customers to get to your restaurant. Forecasting allows you to guess the future by looking at the past. Finally, you can see overall trends in where your food revenue is coming from. You might find out that your vegetarian item sales have risen by 18% in a financial year. This is all relevant to how you operate, and it all comes from forecasting in order to find the trends you can capitalize on or prepare for.
Focus in on Holidays, Weather Events
Holidays are some of the busiest times for those working and operating in restaurants. They can drive business volume to max capacity and can be very stressful on a business if not prepared properly. With sales forecasting, you can anticipate the volume you should expect based on years past, and you can also find what kinds of foods are being sold most frequently during these holiday services. You can staff up and prepare your cooks for these specific menu items to have a lot of volume. Maybe you need to have more holiday beer on hand for your bartenders to pour. Or maybe you might see that truffles did not sell a lot last year so you save on the cost of bringing them through the kitchen door.
Additionally, many restaurants do have the added challenge of determining weather events and other problems that may come up that impact business but are not in direct control of the restaurant operator. If you work in an area that is affected by snow, you may want to find data on days when more snowfall took place just in case you have an unexpected storm. You can find what customers ordered, how revenue was impacted, and you can gauge how much or how little staff you actually need in these circumstances.
Tune in on Menu Performance
Annual or quarterly audits on how your menu is performing are key in forecasting the business you can expect to do in the coming days, weeks, and months. With sales forecasting, looking at individual dishes, drinks, or dining experiences and seeing the data on how they have sold and performed overall is key in not only restaurant forecasting, but also on what you need to do in order to operate a better business.
You may find some items need to be removed, as they are not moving and not helping your restaurant make a profit. You may also find menu items that do exceptionally well, and you then will go ahead and highlight them more to the customers you are serving. This is a crucial way to look at your business volume in a granular way in order to adjust and pivot into more revenue-earning opportunities.
Restaurant Forecasting Tools
There are some different tools to help you be successful in restaurant forecasting. It can seem to be a daunting task at first, but using some of the resources listed below can help you make sense of your data and build out actionable steps to improve your business.
- Point of Sale (POS) software: The most helpful tool is one you likely already have; your restaurant point of sale (POS). The reports contained in your POS can show you a wealth of historical sales, labor, and customer traffic information to help you build future projections.
- Inventory software: Inventory management software typically comes with built in sales and order forecasts based on your historic use. Some restaurant POS systems have inventory management software built in, but you can also find third party solutions (MarketMan and Crunchtime are popular).
- Scheduling software: Most restaurant scheduling software includes forecasting data in order to help staff your restaurant to where it needs to be without breaking the bank.
- Reservations system: If you use a reservation system, you can pull reports to predict your future customer volume based on your historic performance.
- Accounting and bookkeeping apps: Bookkeeping tools (like Quickbooks, Xero, and others) house your financial data and can easily create reports to help create forecasts based on your restaurant’s past performance.
Frequently Asked Questions (FAQs)
Here are some of the most common questions about restaurant forecasting.
Bottom Line
Restaurant sales forecasting is a truly important job that will help you not only anticipate the future, but also let you look at the past through historical data to see where your business can improve. It also helps with tasks such as inventory ordering, staff scheduling, and overall decision-making in your business day-to-day. Be sure to use the article above to become a master at sales forecasting so that you can improve your business and offer your customers the best experience possible.
