How to write a restaurant business plan: forecasting sales (part 2)

8 Apr 2019

If you are planning on opening your first hospitality venue and you want to work out what your sales are going to be - you're in the right place. 

 

You've probably noticed the 'part 2' bit in the title.  So it should come as no surprise that there is a 'part 1' to our guide on forecasting sales for your new restaurant.  If that did come as a surprise, I suggest you go and read part 1 first.  

 

We're going to do some sales forecasting -  hoooray!  

 

This is the fun stuff.  No more thinking about fit out cost or how to raise funds - let's park all that boring crap and start counting the money we're going to be making!

 

Or not.  
 

We're going to try and forecast sales figure you actually have a chance of hitting when you open the doors.  

 

We have (very helpfully) provided you with a spreadsheet so you can just plug in numbers and get a lovely sales forecast popping up - head over to the bottom of our hospitality page to download it (as always, completely free, no marketing lists, no nothing - just go and get it).   

 

First thing is first

This is a forecast - IT WILL BE WRONG.

 

All forecasts are wrong, we just don't want to be wrong by much.  


The point is, whilst we need to be thoughtful with our forecasting, there is only so much detail that it is worth going into, especially if you haven't even opened your doors yet. 

 

I guarantee that the menu you have carefully sculpted on google docs will not be the menu you are operating 4 weeks into your venture.  Items will come in, some will go, prices will change.  

 

And that is just your menu, let alone any other variables.

 

So let's be accurate, without being over the top

 

Now for everything below, we are trying to work out what a typical week will be.  Yes, you'll have highs and lows, but the majority of your weeks are typical and if you can get that right your numbers are not going to be far out..

 

 

Stage 1 - work out your average spend

If you are already open you just look at the numbers coming out of your till.  But as you are not open you are going to have to estimate this.  

 

Loads of way to do this, but we are going to 

 

  1. calculate the average price of each menu section

  2. guess how much an average customer will consume on a quiet day and a 'weekend' day

  3. This give you a LOW spend and a HIGH spend

  4. Assign LOW/HIGH spends to the different days of the week

This all makes way more sense if you look at the spreadsheet 

 

 

Now look at those high and low average spends.  It is really important to try and sense check these against existing restaurants.  Now this is not easy to do, but spend a bit of time googling and you can find quite a lot of stuff out.  

 

If you are going to be doing something which is similar to high street chains there is load of info out there in financial reports.  Otherwise, look for interviews with well known restaurants within your cuisine/concept as there will be some info there. 

 

You're just looking for something which gives you a guide of whether or not you are on the right track.

 

In general, people overestimate the average spend figure because they 'over order' for their average guest.  Think of other ways you can check these figures if you can't get hold of other restaurant figures as a guide.

 

 

Step 2 - work out your available covers

This is dead easy, it's basically just counting.  

 

With one added step.

 

We're looking for available covers - you are almost never going to fill your venue 100%.  3 people book and you sit them on a 4 top.  That's your 100% sunk.

 

So lets take a percentage of your covers that are available when you are 'maxed out' for total available covers - I find 95% works pretty well, but if you are running communal tables (like a maniac - give me my space!) you could push this number higher - as always, it depends on your concept. 

 

 

Step 3 - estimate your peaks and troughs

You need to guess how many people you are going to serve each hour of each day.  Sounds like a pain, but it's pretty easy using the sheet we have.

 

 

Step 4 - check that what you have done in step 3 makes sense

The fist thing you are going to do is check the heatmap that the spreadsheet produces.  Almost all hospitality business have a peak day or day part during the week so you should have a heat map which builds to this, as below.  

 

Now check the amount of table turns the above covers suggest.  When you start forecasting above 1.5 table turns per sitting is when you normally see new restaurant forecasts go very awry (of course, this is concept dependent - my local sushi place only has about 15 covers and a short dwell time so forecasting a couple of turns for them would be completely appropriate)

 

 

If you are happy with the above, then head over to google and check the demand curve of similar restaurants  and restaurants in the area you are planning on opening in (see part 1 for details on that).  If your heat map or dining time is very different to what is being showing you may want to consider again what you have entered

 

 

 

Step 5 - check your sales

You have now done enough to calculate weekly sales.  Once you have a weekly sales figure try and compare this with restaurants in the area you are planning on opening in. 

 

Your landlord may have figures they can share with you, as could the property agent or outgoing tenant. 

 

Additionally, you can ask other local restaurants - some may be more forthcoming than others on this.  

 

 

 

Step 6 - apply seasonality

Actually, we're not going to apply seasonality here, but maturity (a word on seasonality in a minute). 

 

By maturity we just mean, how long will it be from opening your door to hitting your target sales. 

 

As our spreadsheet talks about only the first year of a businesses life seasonality plays less of an impact (although there is an argument for modelling seasonality and maturity - but I assume you have better things to do then go through that).

 

Maturity schedules are really hard to predict, we have put in an example on the sheet but you need to work out what works for your concept.  A few things to think about

 

  • Maturity can often take 12 months

  • Strong social engagement means you can hit maturity in a short period (not always good as it can swamp a new opening when staff are not up to speed and can lead to long terms problems)

  • Week on week increases tend to be modest after the first 6 weeks (without advertising / PR events)


Speak to people who have done it before with similar concepts or in a similar geographic location to get a better idea of what works for your concept.  

 

A quick point about seasonality - if sales were perfectly even throughout the year then every week you would make 1.92% of total sales (or monthly this would be 8.33% of sales). 

 

But as seasonality does have an impact, you see this percents above or below this average.  

 

For most concepts you do not see wild swings away from these averages (very rarely more than 2% on the monthly figure).  

 

That's it!!!

There you go, all done! 

 

Well not quite.  Go back and take a look.  Now not of course - sleep on it first.  

 

New restaurant opening almost always over estimate sales from their new openings.   So go back over your figures with a sceptical eye and check your figures against figures of existing restaurants as much as you can.

 

 

That is the end of guide 8 - in the next guide we will talk about forecasting labour costs.  

 

If you know anyone who these guides would help - please share it with them!   And if you like what we're doing, share it on social so others can see.

 

If you want to see more of these guides as they are published, either connect with me or follow me (Tim Cundy) on LinkedIn.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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