Data-Driven Decisions for Restaurants: How to Collect, Analyze, and Profit

Here's where to get started, what data to look at, and what sources will generate the data you need to win.

January 2019 Seshu Madabush

With technological advances, most restaurants have access to huge amounts of real-time data from multiple systems. With the right strategic approach and processes in place, this data can be used to reveal many insights into every aspect of a restaurant’s business. However, when it comes to implementation of data-driven strategies to bolster sales and improve operational efficiency, most restaurant owners do not know where to begin. This article will help you understand how to get started with a data-driven approach, what data to look at, and what sources will generate the data.

1. Inventory Data

When coming up with menu options it is imperative that a restaurateur knows the ingredients of each dish, what quantities are required in order to prepare a dish, and thereby the profitability of each dish. Collecting data around inventory enables a restaurateur to:

Keep track of profit margins and hence have the ability to push more profitable items
Keep costs low by ordering the required amount as and when needed
Minimize pilferages and food wastes

What do you need

Some of the data points you should be looking at include:

Food inventory
Suppliers
Unit prices

Why do you need it

Food cost is one of the most important costs (can run as high as 38 percent).
You need to know the cost per plate for each recipe on your menu to determine its profitability.
By comparing your actual inventory to your theoretical inventory you can have a clear idea about the reason for discrepancies—waste, theft, burned food—and start improving on those processes.
Tracking food costs helps restaurants have a correct estimate of future expenditures on inventory.

With the help of this data you can analyze your best-selling menu items and your most profitable menu items to get an idea about which items are contributing to your bottom line and engineer your menu accordingly.

How do you get it?

Although, conventionally, most restaurant owners keep a track of their inventory manually, the process is usually time consuming and can be subject to human errors. Operators can their use point-of-sale system to keep track of inventory, saving a lot of time and effort. Food suppliers help restaurateurs walk through the inventory controls and menu mixes.

2. Financial Data

The viability of a business depends on its ability to sustain financially—the ability of a restaurant to keep track of profit and loss, cash flow and cost (actual & projections)—all these fall within the financial data collection and insights part.

What do you need

Some of the data points you should be looking at include:

Recurring items like your rent, utilities
Wages
Revenues (per time period)
Cost of raw material
Total number of items sold
Average cost per item
Total food cost
Cash flow projections
Profit

Why do you need it

This data determines whether or not your business is successful and affects almost every other aspect of your restaurant. The primary purpose of monthly financial statements is to enable you to assess the effectiveness of decisions and strategies.

How do you get it?

You can get a detailed report from your POS—based on order type, based on time, based on item etc.
Take a look at your credit card processor and figure out if there are any trends that you can predict
Online ordering sales from your system as well as third parties like GrubHub, UberEats, etc.

3. Kitchen Data

How efficient is your kitchen staff? What is the turnaround time for a dish to be cooked? Are there any patterns that you can see from kitchen?

What You Need

Some of the data points you should be looking at include:

It is important to have a correct estimate of cook time or how long it takes a menu item to go from the initial order stage to completion.
You would need to calculate and track the difference in cooking time of two food items on the same order, to ensure that food is fresh and at the right temperature when it arrives at the customer’s table.
Every successful restaurant owner has an accurate measure of the time it takes an order that has been prepared to leave the kitchen and reach the table.

Why do you need it?

Tracking of orders
Improved inventory management and waste control
Increased service speed and efficiency
Better customer service

How do you get it?

You could obviously manually measure and track such data for your restaurant, however, an automated kitchen display system could take care of collecting and reporting this data for you.

Information like purchasing habits, preferences, demographics, and personal information can be used to build long-lasting customer relationships which in turn drives sales.

4. Guest Management

To improve efficiency and customer service, a restaurant needs to keep track of data on guest management.

What do you need?

Some of the data points you should be looking at include:

How long customers have to wait before they can be seated at a table or wait times.
How many guests or parties can you serve within a given period or turnaround time?
What is the average size of parties of guests visiting your restaurants: for instance, couples, families of three or four or more?
How many guests do you have in your restaurant at a given time or average guest counts.
How efficiently you’re using your seating capacity at any given time or seating efficiency.

Why You Need It:

Guest management data will help you identify bottlenecks and give you an indicator of where to you could improve.

How to get It?

Wait times can be calculated manually. While you can get the turnaround time from your POS by deducting the time a table has been assigned to the time a check has been cut out. Your POS could also provide you data on party size and guest count.
Seating efficiency is related to your wait times. Are you seating a party of four in a table that can accommodate six guests and so on? This would be obtained from comparing your party size against your seating chart and then compared to your wait times.
You can also get analytics, such as do you have a large number of couples or singles, and that means your seating should accommodate couples with tables allocated for four. Also, you might want to have some kind of a plan B to accommodate larger groups so that you do not disturb other customers in the restaurant.

All of these data points require some time and energy to organize and calculate manually, but improvement in efficiency are definitely worth the effort. On the other hand you could get an automated guest management system tied up to your POS to make your life easier.

5. Customer Data

Most businesses collect some data on their customers. Most of them have basic contact info, like a name and a means to contact via email, phone number or street address. However, it is equally important to have guest-specific data food allergies, their favorite dishes from their purchase history, and their birthdays or anniversaries, at least for your regular customers.

What do you need?

Some of the data points you should be looking at include:

Name
Address
Phone numbers
Emails
Birthdays
Anniversaries
Favorite menu items
Purchasing habits
Food allergies

Why You Need It?

Your customers are the most important aspect of your business and targeted marketing efforts show much better results as compared to a cookie-cutter approach.

Optimize your menu: Restaurants have a significant amount of data on their customers that can reveal which menu items are more popular than others. With this data in hand, you can manage your restaurant inventory better, avoid food waste, and decide which menu items to promote. This information also helps ensure that you are comfortably stocked for busy nights or decide which items should be replaced with more profitable choices.

Build better relationship with customers: Information like purchasing habits, preferences, demographics, and personal information can be used to build long-lasting customer relationships which in turn drives sales. For instance, sending out gift coupons on birthdays or anniversaries, or keeping in mind food allergies while sending out a promo offer to a guest.

Offer rewards: You can send discounts or special offers to your customers, encouraging them to return. Personalization is the key to building long-term customer loyalty. With data in hand, you can create personalized offers on the basis of previous purchase history.

Give preference to your regular customers: It is a great idea to build a bond with your regulars by offering special privileges in the form of unique discounts or promotional offers.

Encourage slow-hour visits: You can create targeted offers to lure your regular visitors to visit you during the slow hours.

Determine busy and slow days to create restaurant promotions around your slow nights.

Create a better marketing strategy: Data from these sources can help you to frame an informed marketing strategy.

How to Get It?

There are several ways of collecting customer data. You can obviously collect contact information, email ids, birthdays or feedbacks manually or train your staff to do it. You can also collate data collected through loyalty programs or any other programs that you may be offering to your customers. Several of these third-party apps, including loyalty programs, can be integrated with your POS to give you a more comprehensive set of data. You can even go for a full-fledged customer relationship management software that takes care of all your marketing requirements automatically.

6. Social Media Data

Although there is a lot of varied opinions on the importance of social media for your restaurant business, it can’t be argued that you would miss out on a large segment of your potential audience if you totally ignore your social media presence.

What You Need

Some of the data points you should be looking at include:

Number of followers
Average reach
Average engagement rate

Why You Need It?

Most of your current and potential customers spend a significant part of their day interacting on social media platforms. It becomes pertinent to harness this valuable resource to understand how your target audience perceives your brand and engage with potential customers.

How to Get It

Most of this data is built directly into the social media platforms you use via “insights.”

Once you have all the relevant data sets from multiple sources, the next step is to collect the data in one place in order to get a comprehensive view of the data. Analyze each data set in relation to the other in order to draw meaningful insights and actionable strategies. With strong restaurant data systems in place, you can preserve your energies for what’s truly important—running your restaurant.

Seshu Madabush is a serial entrepreneur with a focus on restaurant marketing, working on the latest venture mKonnekt. mKonnekt is a customer engagement platform that mines customer data to create personalized and unique dining experiences.