Why Restaurant Sales Forecasting Software is Essential for The Financial Health of Your Business

Predictive Analysis
Branden McRill
October 3, 2022

Two major challenges are currently facing restaurant operators.

Supply chain disruptions are still causing problems across the industry. Meanwhile, a labor shortage following “The Great Resignation” is making it difficult to find staff. 

Add to these problems the looming threat of further pandemic restrictions and operators are faced with a huge amount of uncertainty in their decision making.

One area of restaurant tech that can provide stability is sales forecasting. Being able to forecast accurately is essential to gain certainty over your future and make informed financial decisions for your restaurant.

Traditionally, sales forecasting relies on historical data from your POS. But a new breed of sales forecasting software goes beyond historical performance to help you make smarter predictions.

With more accurate sales forecasting, restaurants get protection from the uncertainty facing the industry.

What is restaurant sales forecasting?

Restaurant sales forecasting is the process of predicting future demand in order to determine the volume of sales for a given period. Accurate forecasting helps a restaurant optimize purchasing and scheduling, and, at a higher level, allows for better goal setting and future revenue predictions. 

Without any forecasting, you’re relying on gut instinct or pure guesswork in your purchasing and staffing decisions.

With the added benefits of AI and machine learning, we can now distinguish between traditional restaurant forecasting, which relies solely on historical sales data, and a new breed of sales forecasting software, which uses more data sources to precisely predict sales numbers into the future. 

Traditional forecasting

Traditional restaurant sales forecasting is based solely on historical data – and perhaps the intuition and experience of the manager.

You can build a model by hand and attempt to predict demand with a simple calculation: 

Sales Forecast = Table Count x Seat Allotment x Average Ticket Size x Table Turn

Managers tend to calculate a forecast for busy days and quieter days based on historical sales data to get an idea of the demand for the next service.

By looking at the average sales for the last ten Saturday nights, for example, you’ll get a fairly accurate prediction of what to expect for the coming Saturday. 

But what about holidays, rainy days, or special events in the area? Or what if you’d like to understand how much you’ll likely sell by category or by hour? There’s a multitude of other factors that can affect how busy you are and what you are likely to sell.

Intelligent forecasting 

Machine learning-powered forecasting software takes the traditional method of sales forecasting and adds several new dimensions to improve it. It uses historical sales data from your POS and scheduling systems, plus other internal data from reservations and event management software. 

But software can go even further by taking into account weather forecasts, holidays, and seasonal behavioral patterns. The system processes all of this data and uses machine learning to make predictions that simply wouldn’t be possible with manual calculations.

In addition to providing incredibly accurate predictions, sales forecasting software produces a range of reports so that managers and owners can make sense of this wealth of data. It offers granularity by time and by category, providing far more accurate and actionable forecasts.

Typical features include: 

  • Daily and weekly projections
  • Projected numbers for future revenue, covers, and item sales
  • Food and beverage sales predictions by the day and the hour
  • Aggregation of data across restaurants for multi-unit  groups
  • An enterprise dashboard for a global view of the data
  • Live view of actual versus projected sales
  • Integrations with POS and scheduling platforms

How does restaurant sales forecasting affect my financial decisions?

Restaurant sales forecasting software providers claim up to 95% accuracy in projections. And with sales forecasting, the proof is in the proverbial pudding since you can compare the prediction to what really happens. This validation can help you feel confident in basing financial decisions on projections.

The benefits of more accurate forecasts are numerous, helping your restaurant save money and plan effectively.

Optimize labor scheduling

When you know how much you’re going to sell hour by hour, you can build your labor schedule to meet demand and maintain a consistent labor cost as a percent of sales. 

You’ll save money by not over-scheduling staff and won’t miss out on opportunities for sales as a result of understaffing. Sales forecasting software can even provide real-time staffing guidance so that you quickly adapt to changes.

All of which means you can improve restaurant employee engagement by preparing staff for what they can expect in a given shift, and give them more certainty about future schedules. This leads to more secure and happier staff – which is especially important with the current labor shortage plaguing the industry.

Intelligent ordering

With accurate sales forecasts in hand, you can order based on what you are going to sell rather than ordering to pre-set par amount.   

Projections based on historical sales data give you a rough idea of the volume of ingredients you will need. But when you get smarter insights you will have a clearer picture of exactly what you are going to sell and when. 

This is especially important when you are purchasing expensive perishable ingredients with a short shelf life. You need to know both how much and what you're going to sell in order to avoid either wasting expensive ingredients or letting the customer down when you run out during service. 

A sudden change in the weather, for example, can affect the types of products that people want. Smarter predictions will help you have enough frozen drinks prepared when a sudden heat wave hits. 

With the current uncertainty over supply chains, you don’t always know whether ingredients will be available or if costs are going to suddenly rise. With accurate forecasting, you get a better idea of what you will need ahead of time so you’re not as vulnerable to the uncertainty in the market.

Make better business decisions

Not only can sales forecasting software help you predict demand and optimize labor and purchasing for a few weeks at a time, but accurate revenue predictions help you make better long-term decisions. 

You might find that there’s so much demand in a given area that you want to open a new location. Or purchase a piece of equipment to ramp up production. 

Or the sales figures could tell you to hold off for six months as you’re going into a slower period. 

Overall, more accurate projections using data that you could only make sense of using smart prediction software could give you insights to make the right decisions for long-term stability and faster growth.

This becomes essential when you are trying to secure an investment. You can show potential investors your forecasts, as well as how accurate previous forecasts have been, to give them confidence in the profitability of the business going forward.

Increase certainty with smarter restaurant sales forecasting

5-Out's smart restaurant forecasting has the potential to give your business the certainty to tackle the biggest challenges facing operators today.

5-Out integrates with your existing systems enables you to get all the insights you need without a complete tech overhaul. 

With certainty over your sales forecasts, you can optimize your purchasing and scheduling, and make the big long-term decisions to drive growth. And with the low upfront cost, a healthy ROI is almost guaranteed.

Get started with 5-Out now!

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5-Out is on a mission to maximize the profitability of every restaurant, using machine learning, artificial intelligence and predictive analysis to automate smarter, better decisions.