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Numerical Insights publishes articles on a variety of topics including business analytics, data analysis, data visualizations tools, improving business results, supply chain analytics, HR Analytics, gaining competitive advantage, strategic workforce planning, and improving the bottom line. Feel free to browse our topics below.

 

Data-Driven Decision Making for Restaurants and Bakeries

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Data-driven Decisions: A Must for Today’s Entrepreneurs

Individual locations of large restaurant chains are supported by the enterprise systems in their corporate locations. These systems assist each location in viewing sales, sales patterns, usage of ingredients, profitability, inventory analysis and more. An individual owner of a restaurant or bakery doesn’t have the luxury of corporate support and enterprise computer systems but still has to figure out how to compete with these chain locations. Data-driven decision making has become an invaluable tool for these entrepreneurs.

Which Dishes Should Wait Staff Suggest?

Being able to maximize the total profit of a restaurant begins with knowing the profitability of each dish on the menu. For a bakery, it’s the profitability of each food product sold. For the profitability of each restaurant dish, we need to know two things: 

  1. What can we charge a customer for each dish?

  2. What are the costs that go into preparing each dish?

 Let’s begin with how much you can charge. On the lower end, we know we need to charge enough for each of the dishes on the menu that the sale price exceeds all of our costs. The same concept holds true for bakeries attempting to determine how much to charge for a freshly baked loaf of bread or specialty pastry. On the upper end, we want to charge as much as possible to maximize our profit but we don’t want to go beyond what the customer is willing to pay. The customer always has the choice of walking past your business and going to another restaurant or bakery.

To determine the cost of each menu or bakery item, we begin with the ingredients and recipes. Based on past sales receipts for ingredients, we can determine the underlying cost of each recipe. While this information and the cost that the customer is willing to pay gives us an initial view of profit, we must remember that this item level profit must also cover expenses such as electricity, salaries, taxes, insurance and inventory waste. Inventory waste comes in the form of expiring ingredients, prepared items that didn’t sell that night… and knocking over the occasional bag of flour onto the floor.

Knowing how each of your menu items stacks up on profitability gives you the ability to make good decisions about what to offer. These costs should be periodically reviewed to ensure that all items remain profitable. Ingredient prices change over time, so make sure you’re set up for ongoing calculations. 

How Do I know When Consumer Preferences are Changing?

 Most restaurants open with a set menu and that menu never changes. Unfortunately, that also means that as consumer preferences change over time, your menu items may see reduced sales. For this reason, it is important to monitor the sales popularity of each menu or bakery item in addition to the ongoing material costs. 

With the implementation of sales and ordering technology, this data can often be retrieved easily. Once the data has been obtained, the trends of both product popularity and profitability can be calculated and monitored. 

Guest Analysis and Satisfaction 

In the past, customers would stroll up to your restaurant window, read the menu and decide whether to enter. Today, it’s all about the ratings online and comments on social media. How many of us now google a restaurant prior to going in to ensure the overall rating score from the general public is above our predetermined minimum value? 

Tracking data on social media followers and reviewing rating values is only part of what you need to know about your customer base.

  • What is the average seating size for guests?

  • How long do guests generally stay?

  • How long are they waiting before they are seated?

While the answer to these questions does not directly impact profitability, it will impact it indirectly. The analysis of these items speaks to customer satisfaction and capacity planning. If you know where the bottlenecks are in the entire dining experience, the elimination of them can help to increase revenue. 

Knowing the profitability of what you sell, tracking changing customer preferences and maintaining high levels of customer satisfaction will increase any business’ chance of long-term success.

 

 Bio

Tracey Smith is a recognized analytics expert, speaker and author. She is the President of Numerical Insights LLC, a boutique analytics firm addressing the needs of businesses large and small. If you would like to learn more about using data for better decision-making, please visit www.numericalinsights.com or contact Tracey Smith through LinkedIn.