Restaurants, large and small, have the power to leverage analytics.
Restaurant operators sit on a ton of data that could make the difference between barely hanging on and profitability. The challenge is either they don’t know how to make sense of what they have, or the data is being held hostage by their payment processor.
Most restaurants use traditional point-of-sale (POS) systems that were designed to connect the front and the back of the house, as well as to collect payments and manage labor hours. These POS systems have reporting capabilities, yet they display raw numbers in text format that can be hard to make sense of. It is not uncommon for managers to spend a few hours each week translating data into insights. However, when they are able to use real-time data to make timely decisions, restaurant operators can easily increase sales per guest, decrease labor costs, increase back-of-the-house efficiency, and increase staff productivity.
Below are a handful of scenarios showing how data can help operators thrive during these challenging times and beyond.
Use Data for Advance Planning
Anyone who has worked in food services knows how quickly things move. Looking for patterns in data and understanding what the data is telling you can help you make timely decisions. With the right data you could:
- Offer specials during slow times. By summarizing the daily and hourly sales of each day of the week, and comparing to the pattern of the previous year, restaurants can create promotions such as “Tuesday Specials” and “Happy Hours.”
- Schedule labor and prepare food based on hourly demands. Managers can predict daily and hourly sales by referencing the same day last year and/or same day of the week in the last few weeks.
- Schedule the right number of staff during the most demanding hours. For restaurants with bars, managers can dissect hourly sales into alcohol sales and food sales, and schedule bartenders and servers at the times they are most needed.
Use Data to Fine-Tune Sales and Staffing
Managers can also use analytics during shifts to optimize profits in the moment. While it’s not always easy to bring more guests in at the last minute, you can get the most sales out of those who are already seated at your tables. For example, graphs comparing real-time trends with a comparison—e.g., having a view of what happened on the same day of the prior week—could allow managers to make ad hoc decisions such as:
- Upselling to increase sales per guest. If sales at 7 p.m. are looking slow, managers can inform servers to explain to their guests the rich menu of cocktails and recommend house-special desserts. Upselling these items can easily add 15 percent to 20 percent to sales per guest.
- Cutting staff during the last few hours. Similarly, when sales at 8 p.m. are not looking to match the reference trend, managers can let servers or cooks leave earlier, and maintain labor costs at around 25 percent of sales.
Use Data to Optimize the Menu
Due to increased food costs and labor costs, many restaurants have shortened the numbers of menu items to help increase efficiency and decrease food waste. This is not a trend that is likely to end when the pandemic does. With the right data you could:
- Aggregate sales of same items across multiple locations. What items performed better at which locations? Are there economies of scale for promotions, e.g. posting specials on social media that are applicable to all locations?
- Focus on best-selling items. Are the top few items more than 30 percent of sales? If not, are there ways to consolidate menu items?
- Promote higher margin items. Can items with higher margin be packaged as special items and sell more with $1 off? Does the data tell you these items sell faster with a discount?
- Increase inventory on menu items that often sell out. When items sell out in the first few hours, is there room for an increase in price? Should you increase inventory on popular items?
Use Data to Help Servers, Too
Restaurant analytics can be an effective performance management tool for servers. With labor shortages, managers need to get more out of each server. Managers can align their interest with that of the servers: the higher the sales per guest, the higher the tips servers take home. With the right data you could:
- Define key performance indicators for staff. For example, challenge them to increase sales of alcohol from 25 percent to 27 percent, so they know what they need to work on.
- Create competitions to motivate servers. The best servers have the mentality of salespeople, and they enjoy winning competitions like “Most Tiramisu sold!” A real-time dashboard can really add some good-natured competition.
- Develop the best talent. Identify the staff who are great at cross-selling and up-selling, allow them to serve as a trainer or team lead, so everyone can get better.
All in all, restaurants, large and small, can increase profitability via analytics by optimizing sales, expenses, efficiency and productivity. In the past only multi-location restaurants with in-house IT and Finance Departments could take advantage of these benefits.
With innovative technology such as smart cords taking item-sales data to the cloud, smaller restaurants can enjoy the same benefits of real-time analytics and data dashboard, all without upgrading their POS systems, or having to use the same POS systems for all locations.
Janette Chung is the Chief Product Officer at Copper, which offers a smart cable that modernizes legacy POS systems to enable contactless payments and to real-time analytics based on item-level sales data. Janette has 16 years of experience in global fintech including Alipay and PayPal. She is also a Founding Limited Partner at How Women Invest, a venture capitalist fund equalizing fund access to women-founded startups.