management | 9 mins read

Sales Forecasting Methods for Restaurants - What You Need to Know

sales forecasting methods for restaurants what you need to know
Michelle Jaco

By Michelle Jaco

Introduction

Sales forecasting helps business owners make impactful decisions. Restauranteurs that can accurately predict sales can plan their operations around these projections. Knowing how much they expect to sell helps restaurant owners manage inventory and ensure they have enough staff to handle the anticipated business.

It isn't difficult for restaurants to accurately forecast sales. Even new restaurants can predict how much they will sell in a given period.

In this article, we'll explore some sales forecasting methods restaurants both new and old can use to predict sales accurately.

What is Sales Forecasting?

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Sales forecasting is when businesses use data from previous sales experiences to predict future sales. Having this information can help these businesses make accurate operational decisions.

Several factors go into making accurate sales predictions. These include historical saleson a weekly, monthly, or annual basesas well as economic conditions, changes in marketing spend, and even the weather.

New restaurants should make sales predictions before they go into business and then continue to make them as they grow. Constantly revising sales projection should enable restaurants to get an accurate view of expected sales.

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Why Sales Forecasting is Important for Restaurants

Restaurant owners use sales forecasts to ensure they bring in maximal sales while keeping costs in check.

Imagine two restaurant owners. One has a good idea of how much they will sell each day; the other doesn't.

On a busy day, the restaurant owner with accurate sales forecasts can ensure they have enough inventory and staff to serve everyone that comes into the restaurant, thereby maximizing sales.

During slower periods, they can bring in fewer employees and purchase less inventory, thereby reducing waste and saving money. The owner can also take steps to get more customers through the door during quieter times, such as increasing marketing spend or running events or offers.

On the other hand, the restaurant owner that doesn't have accurate sales forecasts is at risk of either being underprepared for busy days or overprepared for quiet days. This can result in missed sales, unnecessary costs, waste, and poor customer experience. They also have no way of making strategic decisions to help with restaurant growth.

Sales Forecasting for Investment
Sales forecasting is also an essential metric for restaurants looking to receive outside investment. It can help predict factors such as revenue, profit, and cash flow, which can help investors establish the potential returns or risks associated with investing in your business. If you want someone to invest in your business, you need a sales forecast.

Sales Forecasting Methods for Restaurants

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Sales forecasting methods for restaurants involve looking at historical sales and using these numbers to predict future sales. While this is generally easy for restaurants that have been around for a long time and have a deep and consistent data set, it can be a challenge for newer restaurants. Here is a look at how both established and new restaurants can forecast sales.

Sales Forecasting for Existing Restaurants
Established restaurants are at an advantage when it comes to estimating demand. They have experience and a large data set they can call upon to make accurate predictions. If you run an established restaurant, you need access to data collected by your POS system or other sales data.

If the figures suggest that last Monday you took in $1,100 in sales, and the Monday before you took in $950 in sales, and the Monday before that you took in $1,200, it will make sense you will also hit figures of around the $1,000 mark on the upcoming Monday.

This same data can be used to make estimates by the week or by the month. If you averaged $8,000 in sales per week during the previous few weeks, you can guess that the next few weeks will be similar. Having these figures at hand can help with ordering inventory for the upcoming week or month.

You can make these guesses more accurate by also considering data from the corresponding time in previous years to help spot annual patterns, as well as your restaurant's overall sales trends. For example, restaurant sales can be higher during the period before Christmas or during summer. Using data from a previous year allows you to anticipate how much busier or quieter than average you can expect to be.

Use Forecasting Software
While it's possible to create sales forecasts using past data manually, it can be beneficial to use software to help.

Sales forecasting software uses historical sales data pulled from your POS to give you a clear overview of past sales. Having the data clearly laid out makes it easier for restaurant owners to make decisions and spot trends.

For example, you may notice that a certain week of the previous year was particularly busy. Was this because of a local event? Or a spell of good weather? Having this information will allow you to prepare for the eventuality of higher sales in the following year.

Additionally, forecasting software allows you to dig deeper into the data. It shows sales figures on an hourly, not just on a daily basis. This could show that in summer your restaurant is busier than normal later in the evening as people come in to enjoy the longer days. If you simply looked at sales data related to daily sales, you would not notice this trend.

Finally, sales forecasting software often includes predictions based on algorithms. This automatically makes sales forecasts based on your restaurant's historical data, saving you time and allowing you to focus on other aspects of running your restaurant.

Sales Forecasting for New Restaurants

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It's much more difficult for newly established or as yet unopened restaurants to make sales forecasts. Nonetheless, there are things these restaurants can do.

Calculate Your Restaurant's Capacity
The first step you should take is to calculate how much you could sell if your restaurant operates at full capacity.

Look at how many tables you have and how many sittings you expect at each one. For many restaurants, this will be two sittings in the evening, and one at lunch.

Next, you'll have to estimate how much you expect each customer or table to spend. As a new restaurant, this will require some guesswork on your behalf. A good place to start to could be to look at the average price of mains, starters, desserts, and drinks and base your calculation on what you expect customers to buy.

You can now put these two figures together to discover your daily capacity. If you expect your restaurant to bring in an average of $30 per person in the evening and $13 per person at lunch, and you anticipate 2 evening sittings and a single lunch sitting, then at maximum capacity, you will earn $73 per seat (($30*2)+$13=$74).

If your restaurant has 30 seats, you can estimate that on a day when you achieve maximum capacity, you will earn $2,200 ($74*30).

Of course, your restaurant is unlikely to operate at full capacity every day. Your sittings may also vary if you offer brunch, service throughout the day, or you operate as a bar in the evening. You'll have to take all of this into consideration.

Here are some methods you can use to estimate how busy you will be.

Use Existing Experience
Many new restauranteurs already have experience in the restaurant industry. If you've worked in a restaurant similar to the one you are opening, you can use this experience to make rough calculations of how busy you expect to be at specific times.

Competitor Analysis
Likewise, you could check out competitor restaurants to see how busy they are and add this data to your calculations. The owners may be willing to talk to you about how busy they are at different times.

Revise Your Numbers as You Get More Accurate Data
Once you open, you should constantly revise your initial sales projections based on your actual experience. You may notice that while certain days are much busier than you anticipated, others are quieter. Alternatively, you may realize that people spend less on dessert and more on wine.

Adjusting your sales projections based on these figures can help ensure you are ready to make better business decisions.

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Sales Forecasting Variables

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Any accurate sales forecast should take into account the many variables that can affect your business. Your restaurant will need to have a way to consider these when making projections. Here is a look at some of the things that could affect your forecast.

Holidays
The effect of the holiday season on your restaurant will depend on your restaurant. Those that are able to cater to groups may see an increase in sales, as families, workplaces, or groups of friends, go out to celebrate more frequently.

On the other hand, restaurants that are unable to cater to this type of party may see a decline in custom. While this can be a bit of a lottery for new restaurants, established ones will likely already have a good idea about how the holiday will affect their projections.

Conversely, public holidays could drastically affect business when compared to a typical day. A public holiday on a Tuesday, for example, could result in your Monday night being far busier than it normally would be.

Weather
Weather can seriously affect restaurant sales. This is likely to be even more so if you rely on foot traffic from, for example, passers-by on the high street. Unseasonably cold weather, snow, or heavy rain can hugely reduce the number of customers you get.

However, when the weather is warm, restaurants may receive a higher than the normal number of customers.

You should compare these variables to the season's typical weather. For example, if the weather in January is usually cold, cold weather won't necessarily affect sales in comparison to a normal year, whereas higher than average snowfall could.

Market Changes
Changes to the local market or national economy can affect restaurant sales. Competitors opening up could reduce sales as locals have more choice of what to eat.

Likewise, changes to the area you are based in can affect sales. If a lot of shops or bars open nearby, you could see an increase in sales, as people are more likely to visit the area.

Wider economic changes can also affect projections. If the economy is in a downturn, people may be less likely to spend their money eating out.

Ultimately, making forecast predictions involves looking at your historical sales as well as considering the broader environment your restaurant operates in. Accurately projecting sales can help you make better business decisions.

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