As restaurant owners and management teams look at 2014 and beyond, there a series of key questions that they should be asking and need to ensure their ability to track and respond to the answers. The focus of this blog will be about the real world issues and responses and not as much about the much hyped "Big Data" discussion.
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This blog supplements our Resource Center content. We hope you visit often to learn more about how back office software can help your restaurant optimize food and labor costs and minimize waste.
Forecast Cycles and Frequency - The benefits of developing an accurate forecast have been reviewed in earlier blogs and are, at the most basic level, the best way to predict both product and labor needs to meet and exceed customer demand and expectations. While product shipments may only occur once to twice a week, labor needs are based upon expected daily sales and traffic. Given that both food and labor costs are based upon daily sales and activity, the forecasts need to operate on a daily basis.
Why Forecast – Risks and Benefits Restaurant and retail locations share a number of attributes. Both businesses succeed based upon the acceptance and ongoing support of direct use customers. Typically, many of those customers are also repeat customers who have repeatedly selected to frequent a location because both the products offered and the level of service meet or exceed expectations. In some instances, 80% of a retail or restaurant’s business comes from 20% of its customer base (the Pareto Principle). To drive return business, customers need to know that they will find the products and menu items they expect and desire and a level of service that exceeds their expectations. To accomplish both in stock positions for inventory and the right level of service, purchases or distributions must be completed in a timely manner and staff must be scheduled to work when the customers seek service. Both of these management functions depend on the quality of a forecast to ensure high levels of service.
What is forecasting? Building business plans require both knowledge and expectations about future events. Long term planning includes product lines, concepts, and locations for operation. Many of the key decisions that business leaders at all levels of operations face include beliefs and prospects for near term future events. In both retail and restaurant locations, these key decisions include the amount and type of inventory that should be purchased and held and how many people will be needed to meet customer demand and provide acceptable levels of surface coverage. To make these types of decisions, managers must plan based upon a forecast. Merriam-Webster Online defines a forecast as calculating or predicting some future event “usually as a result of study and analysis of available pertinent data”. By definition, a forecast is not a guess, a vision, or a speculation about the future, but is an expectation derived from analyzing past performance and drawing conclusions about the future.