Achieving Accurate Forecasting

Written by: Jane Handel

Accurate Forecasting For RestaurantsWhen planning ahead, forecasting methods—and accuracy—vary dramatically restaurant to restaurant. 

To look ahead, many managers rely on their gut instincts, others on a combination guesswork and copying and pasting past weeks’ approaches. While intuition is a necessary piece, the real secret to seeing the future is having a comprehensive understanding of the past, and the right tools and data to make better predictions. In an industry where tight margins are getting even tighter, pure guesswork simply won’t cut it.

The more accurate the forecast, the more profitable the business. Knowing what you are going to sell (and when) means you know what to buy, and what schedule to set to ensure the right number of people on at the right time. Striking the right balance between expectation and reality means less waste, more profit, and happier employees and guests. 

The key to achieving an accurate forecast is using the data you already have at your fingertips.  Combining internal data (like historical sales analysis and recent trends), with external information (such as weather, national events, and holidays), and overlaying local manager knowledge (for things like construction in the area or local events) allows self-learning algorithms to accurately forecast the individual items that will be sold, right down to 15-minute increments. This approach is known as demand forecasting. 

Demand forecasting for stronger schedules 

With labor as one of the highest possible costs for a hospitality business, it stands to reason that more accurately planning and scheduling labor should be a top priority.

Instead of designing schedules around SPLH targets or predicted covers, the demand forecast shows the shape of the day so managers can see exactly how many employees are needed in each area to meet the demand. It also takes into account exactly how much time is needed to deliver each activity, including non-revenue-generating (but necessary) activities like prep and cleanup. This allows managers to set a more accurate schedule, and set staggered start and end times to minimize over- or under-staffing. Employees have better shifts and the guests experience the best-possible level of service. Meanwhile, in states where predictive scheduling legislation exists, setting more accurate schedules initially helps limit liability and change consequences, further protecting the business from change fees.

Read the complimentary Science of Scheduling white paper to learn more

Inventory management and prep-planning

Using the demand forecast to manage prep planning helps further reduce wasted time, money, and effort. “Managed prep planning” is the science of purchasing the right inventory and managing kitchen production using analysis and calculation. Restaurants who manage their prep planning end up with the right products and labor available to prepare dishes based on customer demand. 

A robust demand forecasting engine will create predictive orders and a plan to optimize kitchen prep. Not only does this help you figure out how many people you need when scheduling kitchen staff, but also your team will spend less time prepping items that only end up in the trash, will be more efficient in their prep work, and better equipped to meet customer demand. The benefit? Improved forecasting accuracy here simultaneously lowers your environmental impact and strengthens your bottom line.

The demand forecast also helps guide your purchasing strategy by ensuring you only purchase what you need. It helps avoid falling into the trap of, for example, buying in bulk to access discounts, only to have much of that item go bad before it can be used. 

Full-system integration and limiting data errors

As busy operators know, it is impossible to get ahead if you’re constantly scrambling to catch up. With manual processes and teams working in silos, inaccurate or outdated data is often lurking, and is easy to pull accidentally. The errors only compound as they flow through the system. Cobbled-together systems leave room for error, too, and many managers miss out on opportunities to optimize as a result. 

Fully integrating your systems can help achieve the single version of the truth, and tools like Fourth Analytics can simplify the process of aggregating and correlating data to ensure that the most accurate, up-to-date data is being used. And with easy to use, pre-built dashboards and reports, it’s easy to uncover hidden opportunities for improvement and act on them quickly. 

With a back-office solution that allows your menu, HR, scheduling, purchasing and inventory management systems to seamlessly integrate with your POS and other integrated solutions, a single data set can flow among them. This helps you drastically reduce error, save time and money, and streamline operations. With correlated data comes complete visibility into the ins and outs of the organization, so better decisions can be made more quickly and with less of an administrative burden. 

Learn more about fully-integrated back-office restaurant systems.

Measuring forecasting accuracy

Measuring the accuracy of your forecast is critical to staying ahead. Commonly, we find operators comparing the forecast to actuals on a weekly basis, or even by aggregating sites to an organizational level. The problem is that this approach can hide critical information and give an unrealistic view of how accurate the forecast is. 
When looking at sales, for example, the revenue could be much higher than expected on Monday, and considerably lower on Thursday. By the end of the week, the two values have canceled one another out, and the manager would see that sales were on target for the week. By looking at the daily figures, the inaccuracies are revealed, showing the two days that were majorly off, and two opportunities for improvement.

At Fourth, we use Weighted Absolute Percentage Error (or WAPE) to understand the true levels of forecast accuracy. WAPE ensures that instances of under or over forecasting are not canceled out in weekly figures or regional aggregations. And, because it is a weighted measure, operators are able to see the true cost to the business, proportional to the size of each location. WAPE helps reveal previously hidden insights and clear opportunities for improvement. 

To learn more about how you can achieve the most accurate forecast possible, get in touch. Or, download our complimentary Science of Scheduling white paper to see how accurate demand forecasting can help transform the scheduling process.

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