Paying attention to sales is a daily factor. First, we walk in and look at the reservations. Then, in our heads, we figure out the expected sales for the shift. But there are so many more areas of sales that help us understand how we are doing – or what we need to improve.
There are six primary ways to analyze sales data: Sales per person, sales by square foot, sales by meal period, sales by day, sales by the week average and sales by the month.
Sales Per Person
Without question, every restaurant pays attention to the sales numbers. Why? Sales are the heartbeat of the business. With extensive sales, the heartbeat is humming along great. With slow sales, the heartbeat is at a resting rate.
Every restaurant owner wants a restaurant with a fast heartbeat. Any way sales are reviewed will assist in the forecasting and budgeting of the operations. By knowing the sales, it allows the restaurant to forecast correctly. The sales per person are what it says: the total dollars each guest spends.
Why is it so important? Knowing the sales per person allows operators and owners to forecast and budget their sales and labor numbers. Understanding the averages will enable the management to predict the following weeks’ sales and schedule accordingly.
Without this information, it won’t be easy to plan. For instance, without knowing the following week’s sales forecast, simply scheduling staff based on what is typically scheduled could negatively impact the service and labor for the week.
The goal of forecasting is to be as close as possible to the forecasted sales and labor percentages without a significant variance. This helps the entire operation with labor, purchasing and scheduling.
Many full-service restaurants have per person averages of anywhere from $25-$65 per guest. The higher-priced restaurants like steakhouses or prime seafood restaurants will have higher per person averages. They can average from $85-$130 per person. Keep this information close to your mind and maintain excellent productivity, labor and sales.
Sales by Square Foot
There are specific sales numbers within a restaurant that can tell the owner if the restaurant is doing well. The first indication is the sales per square foot. To compare the restaurant to others in the same segment, many owners look at this number. For example, if the full-service restaurant is doing $400-$500 per square foot in sales, they are either underperforming or breaking even.
On the other hand, if there is a high-volume restaurant with sales per square foot of $600-$900 or more, the restaurant should be making more than the average profit. The sales per square foot results are essential in telling the business owner the immediate profitability and comparing to others in their segment.
To get the number, take the total sales and divide it into the total heatable square feet. The result will give you the total. (For example, $3.5 million in sales divided by 5,000 square feet equals $700 per square foot.)
Sales by Meal Period
If sales are an issue, it’s best to know the sales by meal period. This means the sales by meal period must be separated in the point of sale (POS) system. Keeping track of the annual sales within dayparts (for example, breakfast, lunch and dinner) makes it easy to see where and when the sales problems are. Is it from lunch or dinner? Is it always between a specific timeframe? Running a sales report by “hour” or “daypart” through the POS system should show the area of concern.
Sales per meal period is an excellent way to know how the business performs during a specific time frame. Maintaining a six-week rolling average of sales by daypart (lunch or dinner) will also help understand the sales trends.
For example, based on the rolling averages, are lunch sales decreasing or increasing? Or, do the dinner sales averages drop in the warmer months? Again, maintaining a rolling average spreadsheet will provide you the information. If you use Hotschedules, their reports may provide this number for you.
Separately, the POS data can also include a breakdown of sales and labor per hour. The resulting number will be the total sales per hour. If the entire day is rung in together and not separated by daypart, it will make it very difficult to locate where and what time sales problems occur.
Sales by Day
Many of us review the sales per day. We know on a Monday sales are going to be less and on Saturday sales should be excellent. But having this information gives you real evidence that cannot be disputed.
Once there is a five- or six-week running sales average by day, one will see those numbers are typically close to each other on a week-to-week basis. It also allows you to go back months or years and see the comparison. For example, did the sales by day drop compared to two years ago? If so, why?
Lastly, you can take the combined Friday and Saturday night sales and see where they compare to the weekly sales. If the Friday and Saturday night sales are more than 50% of the weekly sales, this could help you market your weekday business in a better fashion. The goal is to maintain an excellent daily sales average consistent from day to day and not only on the weekends.
If on any given day, sales spike upward, one has to ask themselves why. Was there something different from a regular day, and could it happen again? The daily question should always be, “Why were we busy or slow today?”
The other question to ask is, “How did we react to the slow or busy business?” Reacting to business volume helps or hurts profitability. How does one respond? The management may respond by either adding, reducing or having the staff work longer than scheduled. All of this coincides with the sales numbers.
Sales by the Week Average
Like sales by the day, the sales by the week will be close to the average sales from the prior six weeks. The data here is the weekly sales. This data tells us something. For example, if the weekly average sales are decreasing, one has to ask themselves why.
Have the menu prices decreased? Are sales lower at the bar or in the dining room? How about the covers? Have the weekend nights decreased, or is it the mid-week sales? Have they decreased? If so, you have found the problem. By reviewing the information, it makes us better restaurant operators.
If the management is averaging the weekly sales, they are typically similar, depending on the time of the year.
For instance, if the restaurant is seasonal, the off-season sales may drop rapidly, and the management may have to adjust labor and purchasing based upon this occurrence. Knowing the prior sales trends or the upcoming fluctuations in sales should give management time to adjust schedules and purchasing. Having this data available could result in a more efficiently run business while purchasing the correct amounts of products and schedule accordingly.
Sales by the Month
Typically, restaurants budget weekly or monthly sales goals. However, documenting monthly sales provides first-hand knowledge on how the business is doing and what to expect for the upcoming monthly sales.
Not knowing enough about the sales will only hurt profitability and the operation. But by analyzing the monthly average sales and comparing it year over year, management will be better informed and ready for any changes to purchasing or labor.
Let’s take a minute to break down the quarterly sales and profit. (See chart below.) For example, take the first-quarter sales and divide them into yearly sales. The result will be a percentage of sales (23%). So, 23% of the annual sales were in the first quarter. Do the same for each quarter. Now do the same with the profit.
In the example below, it reflects 73% of the yearly profit is in the fourth quarter. The sales in the fourth quarter are 32% of the total sales for the year. Why is this important? This spreadsheet reflects the company had a poor third quarter, so reacting to the decline was necessary. If not, there could be issues of overstaffing, over-ordering or a cash flow issue.
On the other hand, in January, with a $90,000 profit the prior month, the bank should be replenished with the fourth quarter’s profit. It’s vital in budgeting the labor, too. It will allow the company to budget correctly based on the actual sales in each quarter.
As one can see, analyzing sales assists in maintaining the purchases, overseeing the labor and a better-operated restaurant. Without any analysis of these numbers, the restaurant is simply running on autopilot. Therefore, analyze the sales in any way possible, and we all become more knowledgeable in our operations.
Original Post: