How to Forecast and Budget for Your Restaurant
Mastering the Art of Restaurant Forecasting: A Step-by-Step Guide
In the fast-paced world of restaurant management (or any hospitality business for that matter), accurate forecasting is the key to success. By anticipating demand, managing resources efficiently, and making informed decisions, restaurant owners can optimise profitability and ensure long-term sustainability. In this blog, we'll delve into the fundamentals of restaurant forecasting and provide you with practical tips to help you master this essential skill.
Understanding Restaurant Forecasting
Restaurant forecasting involves predicting future sales, expenses, and other financial metrics based on historical data, market trends, and other relevant factors. By analysing past performance (using systems such as tills and online booking platforms) and projecting future trends, restaurant owners can develop actionable strategies to optimise operations, drive revenue growth, and achieve their business goals.
Step-by-Step Guide to Restaurant Forecasting
Gather Historical Data
Start by collecting and analysing historical data related to sales, expenses, and other key performance indicators (KPIs, see our KPI blog for more information). Look for patterns, trends, and seasonality factors that can help inform your forecasts. Use platforms such as your EPOS system, online booking system, delivery portal data (such as Deliveroo) and accounting software.
Identify Key Drivers
Identify the key drivers that influence your restaurant's performance, such as foot traffic, customer demographics, menu offerings, and external factors like weather or economic conditions. Understanding these drivers will help you make more accurate forecasts. You need to forecast higher sales revenue for peak periods as you will need to increase your spending budgets for stock to ensure you don’t run out. The same applies to quieter periods.
Develop Forecast Models
Develop forecast models using the chosen method, taking into account historical data, key drivers, and any relevant assumptions or constraints. Use software tools or spreadsheet templates to streamline the forecasting process and perform calculations efficiently. If you need more support, you can purchase our forecast template and one hour of online training.
Validate and Adjust
Validate your forecast models by comparing predicted results with actual performance over time. Adjust your models as needed based on new data, changing market conditions, or unforeseen events to improve accuracy and reliability.
Monitor Performance
Monitor your restaurant's performance regularly against forecasted targets and benchmarks. Identify variances, trends, and deviations from the plan, and take corrective actions as necessary to stay on track and achieve your financial goals. Ensure you share data with relevant team members and that management understands the forecast and targets set.
Continuously Improve
Continuously review and refine your forecasting process based on feedback, lessons learned, and evolving business needs. Incorporate new data sources, technologies, and best practices to improve accuracy, efficiency, and effectiveness over time.
Ensure Forecast Data is Realistic
Before you can set a gross profit target (GP%) on your forecast, you must know what your gross profit is for your menu. To do this, you must cost all your food and drink items correctly. We advise you to start with a 70% gross profit target (However, this will vary depending on the business. For example, a coffee shop will have a better GP% than a steakhouse). To achieve a 70% GP% the total purchasing costs for the cost of goods (COGS) would be 30% of the net sales. Your COGS should include all food, drink, packaging and disposable cleaning purchases. If you need help costing your menu, contact us for a quote.
We contributed to an article for The Caterer on how to cost a menu, so if you would like more information, you can read the article here.
Whether you're a seasoned restaurateur or a budding entrepreneur, investing time and effort into mastering restaurant forecasting can pay dividends in the form of improved profitability, enhanced competitiveness, and greater resilience in the face of uncertainty. We also advise you to train your management team so they are confident in their ability to work with set targets. Our consultancy can provide your management team with profit and loss management training.
If you need more support, you can purchase our online training and forecast template at our Business Tools Shop. If you would like help with costing your menu and forecasting, contact us today for a project price.