The restaurant industry is one of the most competitive sectors on the planet. Not only do we as a species need to eat and drink to survive; communal dining is an experience that people have cherished for centuries. And as we love to dine out whenever we can, there is a great deal of demand for restaurants in villages, towns, and cities across the planet.
But with such demand comes a significant level of saturation, which means that to thrive – or indeed survive – in the restaurant biz, getting ahead of the competition is essential.
In a previous study into big data examples in real life, we explored how the catering industry could benefit from the use of restaurants analytics – a topic that we’re going to delve deeper into here.
The Modern Restaurant Management and the National Restaurant Association revealed that around 60,000 new restaurants open every year. But shockingly, 50,000 restaurant locations close their doors each year. A sobering statistic if ever we saw one.
If you’re reading this, you might be wondering how you can prevent your budding foodie empire from joining the masses of ‘almost made it’ restaurants out there.
While there’s no quickfire solution or definitive answer to this question, we can say that investing in data-driven solutions, reporting tools, and leveraging the power of restaurant analytics will help you succeed in this most cutthroat of industries.
By managing your information with data analysis tools, you stand to sharpen your competitive edge, increase your profitability, boost profit margins, and grow your customer base. Data offers the power to gain an objective, accurate, and comprehensive view of your restaurant’s daily functions.
Here, we will look at restaurant data analytics, restaurant predictive analytics, analytics software for restaurants, and the specific ways that big data can help boost your business prospects across the board.
Let’s start by looking at the definition.
What Are Restaurant Analytics?
At its core, restaurant analytics is the concept of analyzing all of the data related to your restaurant business and transforming it into actionable insights with the help of business intelligence software that will ultimately lead to significantly improved efficiency.
In today's hyper-connected digital landscape, it's possible to collect, organize, and present every single fragment of information – from wait time to staff performance and menu optimization – in a way that will help your restaurant evolve and improve on a continual basis.
Why Are Restaurant Analytics Important?
Business analytics for restaurants is integral to understanding the inner workings of your business but and being aware of how you can improve it to foster a sustainable level of success that will set you apart from the competition.
By working with relevant key performance indicators (KPIs) and data dashboards, you’ll be able to track, monitor, and measure your most valuable business insights in a way that is clear, concise, and digestible, pulling from past, present, and predictive data. This will enable sustainable KPI management processes that will ultimately increase productivity and save money.
Restaurant data analytics will help you get to the heart of the issue and understand the whole truth about your business. While we’re on the subject, let’s look at how business analytics for restaurants will help you make positive changes that get real results.
In summary, restaurant-based data analytics is crucial to the success of your restaurant because they enable you to:
- Organize your data and omit any metrics that are relevant to your goals.
- Transform your most valuable data into actionable insights.
- Monitor, measure and track your performance with interactive KPIs.
- Spot emerging trends that will set you apart from the competition.
- Make your business more efficient, more intelligent and more profitable than you ever thought possible.
The Role Of Predictive Analytics In Restaurants
Studies from The Perry Group and The Restaurant Brokers suggest that 90% of restaurants that are independently owned close within one year of opening. Moreover, 70% of restaurants that manage to survive for 12 months close their doors within the next three to five years. So, it’s no exaggeration to state that the vast majority of restaurants that open in this world don’t succeed. But that doesn’t mean yours can’t.
We’ve explored what restaurant analytics is and how data analytics for restaurants can help you understand your business on a deeper level. But before we drill down into the specific ways in which restaurant data analytics can enhance your empire, it’s important to grasp the general role of predictive data in the service industry.
While predictive analytics isn’t some form of magic digital psychic, this branch of forward-thinking data and insight can help your restaurant make invaluable changes based on trends that suggest how particular elements of your business are likely to unfold.
Here are the primary roles of predictive analytics in restaurants:
1. Forecasting trends
Restaurant predictive analytics use historical as well as real-time data to forecast future strengths, weaknesses, and trends. By gaining access to this information, usually with the help of a live dashboard, you’ll be able to formulate strategies and create initiatives that will help enhance the future success of your business.
2. Panoramic vision
By working with predictive analytics, you’ll gain the ability to drill down into past and present trends, insights and visualizations and thus, create a narrative with your data. In doing so, you’ll enjoy a panoramic vision of your venture, gaining the perspective you need to really get to know your restaurant which, in turn, will give you the inspiration you need to develop innovative business-boosting strategies.
3. Operational efficiency
From the reduction of food waste to seasonal menu optimization and future staff performance levels, restaurant predictive analytics can assist in the daily, weekly, and long-term operations of your business – benefits that we will look at in due course.
But I Know My Business So Well…
At this point, you might be thinking, “Well, data is all well and good, but I’ve worked in the restaurant industry for a long time. I trust my gut – and I don’t think data is going to be more knowledgeable than me”. Let’s investigate that further.
Let’s assume that you’ve been in the restaurant industry for decades. Maybe you’ve worked your way all the way up from a dishwasher to the owner or manager position. Or maybe your family has had a restaurant for as long as you can remember and you’ve been involved since you were young. Either way, you’ve developed a finely tuned sense of “what works” in your restaurant and geographical location and what doesn’t. You’ve tried specials, tried promotions, and switched the menu around.
You feel just you’ve done just about everything. After all of these experiments, you know what your customers like, dislike, and what they might be interested in the future. Nobody is disputing that. Data can’t run a restaurant for you, and data can’t replace in-the-trenches experience. Data also can’t replace your creativity, your style, and your passion for your business.
Here’s the thing: data isn’t meant to “replace” anything. Instead, restaurant analytics are an addition to your already capable business intelligence. And let’s be honest for a moment: it’s possible that some of your intuitions aren’t perfect. Let’s say you feel that you know:
- What types of dishes your customers like best
- Which servers are bringing in the biggest orders consistently
- What new promotions are likely to sell
You know these things based on past experience, and so you developed beliefs for each of these areas. The problem is our modern world is changing at an accelerating rate. Your beliefs and intuitions can quickly become inaccurate.
Data can serve as a way to “check yourself” and get to the bottom of what truly makes your business tick. As data science guru Peter Chen wrote in an article, “analytics can’t come up with ideas, but it can help you improve on good ones, avoid trying bad ones, and uncover flaws that can be fixed”.
A Case Study In Cooking Up Profits
Let’s illustrate some of these principles at work in a case study. Dickey’s Barbecue Pit is a U.S. based, family-run restaurant chain with over 500 locations. One day, CEO Roland Dickey pitched an idea to his wife (and CIO) Laura: “Barbecues and Big Data – let’s make this work!” More than just big data, the couple wanted real-time, actionable insights.
After getting their restaurant analytics system into place, they started to collect “priceless” information, such as:
- Demographic data: Thanks to analytics, Dickey’s now knows that their average lunch guest is a 43-year-old man who drives an SUV to work. They even know that this customer’s average commute time is 30 minutes. As a result, Dickey’s is now specifically targeting Ford owners who live 15 to 30 minutes away from a Dickey’s location in their advertising.
- Behavioral data: Dickey’s learned that women with kids often go to a location on a Wednesday, and enjoy a long lunch late in the afternoon. Because of this data, Dickey’s now advertises “Craft Wednesdays” on Pinterest as a draw in for mothers and their children.
- Shared customer interests: Dickey’s found that their customers love fantasy football and dogs. As a result, they started to advertise on fantasy football sites and dog lover sites, as well as T.V. channels like Animal Planet. They even use dogs in their catering photos as a brand move.
Finally, as a result of the real-time nature of their restaurant analytics platform, Dickey’s managers and franchise owners can do nifty tactical moves related to daily sales trends. Combining your knowledge with various sales KPIs, you can optimize your operations.
For example, you can perform local sales initiatives based on items that are building up in inventory or do local sales if there is less business in a certain location than originally anticipated.
Another plus point for data analytics for restaurants.
Modern Restaurants Analytics Answer Critical Business Questions
One of the fundamental benefits of restaurant-based data analytics is that fact that it can help you uncover critical business questions. By doing so, you’ll make your restaurant more cohesive, more competitive, and of course – more profitable.
As a restaurant business owner, you’ll no doubt have a host of burning questions you’ll want to find actionable answers to every single day. And as we said, restaurant analytics will help you with the process.
For your reference, by using interactive dashboards, you’ll be able to find tangible answers to the following restaurant-based business questions:
- Which items of my menu or which menu deals are most popular?
- What are my quietest periods on a weekly basis?
- Which server or waiter is performing the best, consistently?
- How well is my staff schedule working in terms of profits and service?
- Is my revenue growing steadily over time?
Let's see how this works in practice.
6 Ways Restaurants Analytics Can Help Your Business
Expanding on our previous points, it’s time to explore how embracing data-driven solutions can help you answer questions and improve efficiencies in a number of key areas - in a real-world context.
So, without further ado, here are six key ways that restaurant-based analytics can help your business.
1) Increasing order sizes with drinks
If you’re designing a new drink menu, you can look at your restaurant analytics to see what drinks people tend to order with certain items on your menu.
Then, you can increase these sales by suggesting these already popular wine or drink pairings with meals both on the menu, and through your wait staff.
2) Getting more repeat business with menu analytics
You can use restaurant analytics to identify which items on your menu are studs, and which ones are duds. This works best in conjunction with a customer loyalty program so that you can track individual customers’ patterns over time.
For example, let’s say you run the data for a few months of purchases. You’ll be able to divide your menu items into 4 categories:
1. Your all-time greats:
These items are ordered a lot, and people tend to reorder them
Definitely don’t mess with these – if anything, consider doing more advertising mentioning these dishes or feature them in some other way. Additionally, if you’re looking to add new items to your menu, your “all-time greats” should be the first place you look for inspiration. If all your “greats” are steak dishes, it’s possible that new vegetarian dish won’t pan out so well.
2. Your “one-hit wonders:”
These items are ordered a lot, but people don’t tend to reorder them.
You’ll want to investigate these further. Are people not re-ordering because the dish is bad? Or did they just want to try a “different” dish to see what it would be like? If it’s for the first reason, you can re-work the dish to be better or get rid of it altogether. However, if people just wanted to try a “different dish” – this is also a useful thing to know. Apparently, this item is tantalizing! Examine the item’s name and menu description for clues that you can apply to the rest of your menu.
3. Your “hidden gems:”
People don’t tend to order these dishes that much, but once someone tries it once, they’re hooked.
This is a great case for analytics because you can run promotions and discounts to get people to try these dishes. Once they try them, your work is done. This category could also possibly benefit from better menu names and descriptions to make them more appealing to people who haven’t tried them before.
Additionally, these are great dishes for your wait staff to highlight, giving them a chance to show off their knowledge. After all, many people love the idea of a “hidden gem” that is delicious but not well known.
4. Your laggards:
These dishes aren’t ordered very often. When they are ordered, people don’t order them again.
You should either rework these dishes or get them off your menu because they’re giving your restaurant a bad name. It’s much better to have a “tight” delicious menu with fewer selections than it is to have a sprawling menu with some so-so items on it.
As a final note here, you should train your staff to give recommendations from the “All Time Greats” and “Hidden Gems” category whenever a customer asks for a recommendation. These dishes have the best chance of making a good impression (and getting repeat business).
3) You can (objectively) see who your star performers are
Let’s say you rely on your manager’s opinion when it comes to hiring and firing staff members. This probably works fine – but your manager might have their own biases that color and distort their perceptions of what wait staff is performing at a high level.
If you have restaurant data analytics related to employees’ average order size, for example, you can have a much clearer idea of who’s “bringing home the bacon”.
4) You can see (and anticipate) trends
Once you’ve been using your restaurant analytics for a while, you’ll be able to know things like:
- What your busiest times of day are
- What your busiest days are
- What holiday business is like
And this is when data visualization tools join the party to give you a helpful hand in order to arrange your various indicators and measures into compelling business dashboards. Thanks to these insights, you can plan your staffing needs better and make sure you’re not over or undermanned for any given shifts. In order to make the most out of this data, you will need to visualize it to comprehend it better.
5) You can improve your financial flow
One of the most crucial components of any successful restaurant is financial efficiency.
In addition to better managing your inventory through restaurant predictive analytics software, you’ll also be able to gain a deeper understanding of where you can adjust your profit margins to increase revenue while maintaining an incremental level of success. By using a financial dashboard, you can even get notified if a business anomaly occurs.
Moreover, the data served up by financial analytics software for restaurants will offer you a comprehensive insight into the success of your deals, offers, and comps. If certain offers work better than others, you may want to focus on creating promotional strategies to reach a wider target audience. Alternatively, if you discover that a particular deal is costing you more money than originally anticipated, you’ll be able to remove it or make the changes necessary to ensure it’s profitable.
Increased cash flow and financial efficiency guaranteed.
6) You can reduce food waste
We covered this briefly earlier, but as a food-based industry, this plus-point of restaurant analytics software is certainly worth exploring in greater depth.
As a restaurant, food is money, so the last thing you want to do is waste it ( food wastage in large volumes is also unethical). By working with the right dashboard reporting software and KPIs, you can increase the food management element of your restaurant’s operation.
Analytics software for restaurants can help you understand which products you're likely to need the most or least quantities of according to their shelf life in relation to demand at specific times of the day, week, month, or season.
Moreover, the insights delivered by analytics software for restaurants will give you the information you need to develop food prepping schedules that will ensure you reduce your waste, maximize your profit margins, and improve your restaurant’s general organizational infrastructure.
Restaurant analytics software is a priceless tool for any modern, ambitious, and forward-thinking restauranteur.
Restaurant data analytics will give you an added competitive edge that will not help you understand your customers in far greater detail. You’ll also be able to uncover insights about your business that you never even knew existed – it’s through these discoveries that the greatest growth occurs.
In today’s cutthroat – but potentially rewarding – restaurant biz, you need every advantage you can get to win on the food-based battlefield, and restaurant analytics will help get you where you need to be.
Start your journey to success today with a 14-day free trial and gain insights from modern self-service analytics software!