Analyzing Restaurant Profits
Restaurants are changing the way they analyze profits and performance. New techniques for examining data are being used. New metrics are being calculated. And perhaps the most important change is the amount of data being examined every day, and throughout the day in some cases.
Historically, restaurants reported highly summarized data each day to manage the business. Sales for Lunch or Dinner, or sales mix for a day or week, or labor dollars as a percent of sales for the day are typical examples. Summarized data can mask operational issues, and it limits the depth of performance analysis you can conduct. For example, a daily labor metric could hide the fact that there were hours where too many employees were on the clock while at different times of the day staffing was insufficient to service customer demand.
Summarized data impedes in-depth analysis. The level of detail in the data determines the types of analysis you can perform. A classic example is using a Product Mix report (highly summarized) to evaluate a promotion. A product mix report can tell you how many of a promoted item you sold, and how much sales were recorded. However, it cannot tell you if people who bought into your promotion only bought the promoted item and nothing else. You need the details of every check to see what was purchased in combination with the promoted item.
A product mix report might give you a hundred rows of data, but check level details give you thousands of rows of detail to examine. The analytic value of check details is many times that of a product mix report. The range of questions you can answer with check details is much broader, but the more important thing is you can be more certain that your conclusions are based on fact, and not intuition.
The Problem Today
The same benefits of examining detailed versus summarized data applies to labor. Many companies look at summarized labor for a day or for the week. If this sounds like what you are doing today, you may be missing out on opportunities to improve your customer satisfaction and increase sales without increasing your labor costs.
For example, our clients have found a more effective measurement of labor costs involves looking at how well the number of people on the clock match the number of customers in the restaurant. The data can tell you whether, in each location, the management team made the right labor additions and subtractions based on traffic. A summary labor number will never be allow you to see that detail.
Most restaurants have all the systems they need to run the business. What most do NOT have is a platform that combines all their data into one place where can see all of the detail and the relationships between the data. In technical terms there are Transactional systems and Analytic systems. For reason too involved to describe here, the two worlds do not naturally meet. Any system is designed for either transactions or analytics. No system does both (at least not well).
So, in order to get serious about analyzing profits effectively, you may want to consider using a solution dedicated to data integration and data cleansing.
How are you currently analyzing restaurant profit margins? Is it working and if so, how do you know?
Mirus is a multi-unit restaurant reporting software used by operations, finance, marketing, and IT.
For more information, please visit: www.mirus.com
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