business-intelligence | 7 mins read

Sales Forecast Definition, Procedure & Results for New Restaurants

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Natasha Rego

By Natasha Rego

What is a Sales Forecast?

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As the name suggests, a sales forecast is a system that predicts the quantity of sales a restaurant can make in the future. With an accurate sales forecast, a restaurant manager can make informed decisions and predict short and long-term performance of a business.

This is important for a restaurant's success. After all, everything, from payroll, hiring, compensation, and inventory management, can determine where your restaurant stands.

Do not confuse sales forecasts with sales targets. They both are different terms. A sales target is something that a restaurant hopes to achieve, while a sales forecast uses several data points to make accurate sales predictions.

Forecasting methods give insight into how a restaurant should manage its cash flow, resources, and employees.

With a sales forecast, a restaurant can-
- Predict sale revenue
- Plan for future growth
- Allocate resources efficiently

Why is Sales Forecasting Important for a New Business?

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For any new mid-size or small business, accurate sales forecasting is necessary as it enables the owner to make better decisions, plan budgets, and detect problems at an early stage.

Sales forecasting allows you to-

- Estimate future revenue
You can get a picture of how much revenue your restaurant will generate every quarter, year, and month.

- Allocate resources
You will be in a better position to decide on the number of staff required, cash flow, and other resources.

- Growth strategy
You will be able to make good investment plans for your restaurant. This means, hiring, spending, and investing at the right place and at the right time.

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Sales Forecasting Step 1Calculate Your Baseline

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If you are new to the restaurant business, make sure to set a daily capacity baseline. This is a rough estimate of how much money you'll make, which can help you make a more accurate projection.

Let's take an example-
Your restaurant has eight tables with a capacity for four people each. If all these tables are filled for dinner, you can estimate 32 sit-down dinners on an average.
This can double if each table seats two parties each night.
If you offer an average of 32 takeaways, your sales forecast will be 96 per night.
So that means you will be serving 96 main courses per night.
4 diners x 8 tables x 3 turns = 96.

The calculation will be-

A dinner service would attract 96 customers. If your POS data has calculated per-person ticket size (which is the amount spent by each customer on an average) as $20, then your sales forecast would be $1,920. Let's take a look at how we came to this figure-

- Sales forecast = 8 tables x 4 customers per table x $20 per customer x 3 turns per night
- Sales forecast = 8 x 4 x 20 x 3
- Sales forecast = $1,920

You can create your restaurant's weekly baseline and obtain a clear picture of what your best-case and worst-case scenarios may be on a daily, weekly, and monthly basis by looking at the anticipated highs and lows.

  • A report by revenue operations platform Clari states that 93% sales leaders cannot forecast revenue within 5%, even with two weeks left in the quarter.

Sales Forecasting Step 2Calculate Monthly Estimates

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It's time to grow your daily projected client base into a monthly estimated capacity once you've established your daily estimated customer base. Simply multiply each of the units by the total number of workdays each month to get this. To get a complete picture of your monthly sales, you'll need to associate the monetary value of each item.

Also, make a list of your anticipated costs, including operational expenses and cost of goods sold, as well as your fixed obligations, such as mortgage and loan installments. Set your budget based on your sales data, rather than being conservative with this prediction. This can help you develop cost-cutting and revenue-increasing strategies.

Sales Forecasting Step 3Adjust Expectations

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It's time to look ahead and understand your monthly sales pipeline. Now that you've set some rough numbers as your average sales and understood what drives them for your new business, you can forecast future sales. However, realistically speaking, you won't reach maximum capacity every day, week, or month. You'll have to make intelligent assumptions about how quickly your business will expand, as well as have a better understanding of the market and observe its movements. Customer Data Analytics can present better insights when forecasting sales.

Sales forecasts will enable you to make decisions that can ultimately help you earn more profits. For example, if you predict a decrease in customers due to seasonal changes, you can alter your strategy by offering discounts, freebies, and suchlike.

You must also keep a tab on your inventory. Planning the right amount of supply can save money, time, and effort, and ensure customer satisfaction, minimum waste and boost Restaurant Sales.

Online employee scheduling software that makes shift planning effortless.
Try it free for 14 days.

Sales Forecasting Step 4Calculate Estimates for a Year

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There are a couple of methods to calculate your restaurant's first-year sales potential. The first is- double the weekly average restaurant sales revenue. If you expect your weekly sales to stay stable throughout the year, this strategy will work well.

However, if sales for your area's restaurants fluctuate seasonallyfor example, if there is a drop in summer merely taking one week's estimate and increasing it by all the weeks in a year could lead to misleading results.

If you're worried that variation will affect your average restaurant sales estimate, divide the year by seasons. It may seem complicated, but it will give you a better sense of your likely average restaurant sales for each part of the year.

You can also consult your restaurant's sales managers and sales reps for advice. Using Data that is reliable and accurate will help you estimate your sales traffic.

Sales Forecasting Step 5Calculate Direct Costs

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To ensure that your new business is sustainable, calculating actual food costs is necessary. Now you may wonder what is actual food cost?

Actual food cost is the depletion of inventory set against its value in money. It is also referred to as costs of goods sold. To calculate this, you need an accurate stock count and five other metrics-

- A specific timeframe
- Starting inventory value for that week
- Purchase in that period
- Ending inventory value
- Turnover

Let's say we take week 34. Count everything in stock and multiply the items by their monetary value for that week.

- If you add everything up, you get to know your starting inventory value.
- Now add the value of new purchases made in week 34.
- From this, subtract the value of the ending inventory.

The formula is- Starting inventory value + total value of new purchases ending inventory value = actual food cost

To calculate percentage, you have to take the actual food cost and divide it by revenue.

Benefits of Forecasting Software for mid-size and small business

Forecasting software is an essential part of your restaurant business. It helps you make smart decisions. Here are some of its benefits-

- Inventory management
Forecasting can assist you in determining how much inventory you will require. This will ensure customer satisfaction and full utilization of products. Zip Forecast makes it easy to adjust the forecast for big events or bad weather. Sales and transactions can be edited too. Zip Forecast is available on the app store.

- Accuracy
Predicting future sales is important. Restaurant sales forecast software improves forecast accuracy by almost 95%. With more precise sales data you can make better decisions and improve restaurant management. Zip Forecast integrates with your POS system to generate sales and transaction forecasts with just a click.

- Labor and food costs
Accurate Sales Forecasting will help you save money on food and labor. Using historical data to forecast future sales will increase the likelihood of lowering food and labor costs. Zip Forecast helps you reduce over and under labor scheduling. When used with Zip Inventory, you will know when it's time to restock your items. Using it with Zip Schedules can get your labor costs under control.

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See what our customers are saying about us.

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"Our customer's trust is what keeps us in business. They expect fresh tasting food with no threat of ill-born diseases. Zip HACCP keeps us compliant with HACCP and FDA regulations through its integrated temperature solutions, food safety assurance, and end-to-end task reporting. We also use Zip Inventory to save time on inventory counts and have much-needed predictability to our ordering process. The Hubworks business management apps are perfect for our restaurants."


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