This post was written by Elizabeth Norton from our proud partner, Tenzo.
Running a restaurant is no easy feat. Staying on top of all your costs and revenue is a daunting task if you manage one location (let alone multiple). From staff scheduling to ordering the right amount of inventory, the behind the scenes of a restaurant is chaotic at best.
Many operators rely on their instincts to make day-to-day decisions, but that doesn’t have to be the case anymore. That’s where business intelligence and forecasting come in. They provide a better understanding of your operations while reducing food waste and your impact on the planet.
According to WRAP, 920,000 tons of food in the UK is wasted by the hospitality sector every year, ¾ of which could have been eaten. In terms of environmental impact, food waste adds massively to global warming. In fact, if food waste were a nation, it would be the third-largest producer of greenhouse gases in the world, behind China and the United States.
These figures as well as the fact that 52% of restaurateurs naming high operating and food costs as a top challenge, clearly show that eliminating as much waste as possible should be high on every operator’s list of priorities. But how do business intelligence and sales forecasting help with this?
Using BI: The metrics you need to keep track of
The key to fully understanding where your costs and excess waste occur is by tracking metrics that can help inform key business decisions.. The first of which is your actual vs theoretical usage report.
Theoretical Usage Report
Theoretical usage refers to how much and how many of your ingredients you should have used during a certain period. This is calculated based on how many sales you made and what quantities should have been used to make these sales according to your recipes.
Your actual usage is what was actually used based on your stock check numbers. Ideally, you want these two numbers to be the same, but there will always be a small discrepancy: a burger may have been dropped on the floor and had to be thrown away, a customer sends something back and it needs to be remade, and so on and so forth. Being aware of this discrepancy and doing everything you can to keep it to a minimum is key.
Your actual usage number is also the cost of goods sold. By tracking what percentage of your sales revenue is being used for ingredients, you stay on top of what you expect to spend and can quickly respond to prices suddenly going up before it’s too late.
You can also use your cost of goods sold alongside your cost of labor and your sales numbers to see you flash P&Ls for a given time period, giving you an immediate view of how your business is running.
On top of actuals versus theoreticals, you’ll want to keep track of your waste as a percentage of what you buy. Every restaurant has different types of waste - you’ll have recorded waste: all the waste that gets logged on Marketman, and unrecorded waste: when chefs may have used slightly more than the recipe dictates or anything that isn’t logged. It sounds obvious, but knowing how much you throw away every week allows you to keep better on top of your ordering and tells you what’s popular and what’s not, saving you money.
It’s also worth recording how much food is wasted on your customers’ plates. To do this, simply keep a separate bin for plate waste and weigh it at the end of the week - you’ll be able to figure out approximately how much of your inventory isn’t being eaten once prepared. If it’s a large amount then it might be a good idea to reduce portion sizes or check that exact recipe quantities are being used during preparation to keep wasted food to a minimum.
All of these precise metrics are of course predicated on your operations processes. Taking regular stock checks (at least once a month, but preferably once a week), keeping precise recipes and measuring waste can all give you invaluable data that enables you to make more informed business decisions that cut costs in the long run.
And once you have everything set up, you can look forward to automated reports - no more downloading spreadsheets and doing complicated calculations so you can spend the time you used to spend doing that on actually improving your operations.
Forecasting: Stay ahead of the curve
These different streams of data can not only help you in the moment, but also enable you to predict what the future may hold. The future of your restaurant’s sales, that is.
Forecasting your sales on a daily basis allows you to estimate your inventory needs fairly accurately, however using more advanced AI technology can allow you to forecast by hour or even at an item-level.
By incorporating external factors such as weather, season, holidays, or local events, AI forecasting like that offered by Tenzo can give you more accurate sales forecasts. Not only does this allow you to staff efficiently, it means that over-ordering or under-ordering inventory is no longer an issue.
Dynamic par ordering
The process of ordering inventory based on forecasted sales is called dynamic par ordering. Traditionally, restaurateurs have used static par ordering to stock their businesses. This involves taking a stock count and ordering items to make up a fixed number. An example of this would be always keeping 100 burgers on hand, so that every week you order however many you need to make up 100.
Dynamic par ordering, on the other hand, involves ordering in inventory based on future sales predictions. That means that instead of always having 100 burgers in stock, you look at factors such as holidays, events and weather to deduce how many burgers you’ll need, changing the amount you order every week depending on these factors as opposed to simply ordering to make up a fixed number. This process can drastically reduce your waste as you’re ordering based on demand, not arbitrary numbers.
The future holds many more exciting forecasting abilities. We’re most excited about prep sheets - a system that tells you what to make and when in advance of your customers coming through the door. Basically, an AI forecast could tell you that burgers are most popular at 12:30 on a Monday so at 12 o’clock you’ll be instructed to start prepping burgers; then when the customers arrive, they experience less waiting time and you’re not overwhelmed by orders.
Begin your data journey
If you’re worried about the environmental impact of your restaurant as well as keeping a close eye on cash in this weird new normal, business intelligence and forecasting are likely to be your best friends. BI keeps you in the loop on all the different facets of your restaurant so you’re never surprised.
Track vendor prices over time, track how much waste is produced at each location, track your staff costs - track everything and you’ll be able to act at first sight of a problem. Adding forecasting on top of that means that you’ll always be catering to demand. Goodbye to rotten food thrown away and goodbye to unexpected rushes. Save cash and fight global warming at the same time.