6 ways to use restaurant data to grow profitability

Restaurants generate a lot of data. Using that data effectively is the challenge — and the opportunity. It doesn’t matter if you’re running a single restaurant or a chain of them, data tells a story that can guide you toward greater profitability.

By Christian Berthelsen|Dec 13, 2023|10:55 am CST

For those in the restaurant industry, collecting data is never a problem. We’re swimming in it. But harnessing that data to drive profitability is another story. Jerry Phillips, VP of Technology at Whataburger, put it best when he said, “The problem we have in the restaurant industry is we love data. And we generate a lot of it. But we don’t use it very well.”

In today’s competitive market, leveraging data can no longer be considered a nice-to-have, relegated to the most tech-savvy operations. It’s an absolute necessity for the growth and profitability of any restaurant, regardless of size. For large-chain restaurants, where every decision can have significant financial implications, using data to inform your strategies and actions is an operational imperative.

That’s why we’ve put together this list of six practical ways to use your restaurant data to grow profitability.

“The problem we have in the restaurant industry is we love data. And we generate a lot of it. But we don’t use it very well.”

Jerry Phillips, VP of Technology, Whataburger

1. Improve Forecasting with AI

Accurate forecasting can mean the difference between just scraping by and thriving. By analyzing a wide variety of data, you can predict future demand with much more accuracy. This foresight allows you to staff appropriately, stock up on the right ingredients, and ensure you’re not caught off guard when business booms or drops off.

For example, Fourth’s advanced AI forecasting uses state-of-the-art machine learning algorithms to analyze your company’s data to quickly detect patterns, learn trends, and identify event outliers so you can confidently plan for future demand. It takes into account multiple factors — historical sales, guest counts, in-store promotions, holidays, local events, the weather, and more. By incorporating these factors into your forecasting, you have a much better chance of meeting demand without overextending your resources.

And then there’s the power of real-time analytics. This is where you can really shine in adapting on the fly. If a sudden rush of customers comes in or if it’s unexpectedly slow, real-time data helps you make immediate decisions. It’s about having the flexibility and insight to adjust quickly, ensuring your restaurant operates smoothly and cost-effectively at all times.

What’s the secret to improved profitability? The ability to predict the future.

Skip the crystal ball and learn how Fourth’s AI Forecasting is helping the hospitality industry predict future demand.

2. Reduce Food Waste

Another area where data can drive significant cost savings is by reducing food waste. By meticulously tracking and analyzing your restaurant’s food usage patterns, you cut down on waste while also tuning into which dishes customers crave — and those they don’t. This invaluable insight helps you adjust your ordering habits, ensuring you don’t overstock items that don’t sell and focus on what your diners actually enjoy.

Using data to track customer preferences is just the beginning. As technology advances, more restaurants are harnessing data to take a more dynamic approach to managing food production. Using robust back-office solutions, restaurants can adapt their kitchen production to align with forecasted sales and then use real-time data throughout the day to respond to the actual pace of demand. If a particular dish is flying off the menu, the system prompts the kitchen to ramp up production. On the other hand, if another item is seeing less demand, the system advises scaling back, ensuring that ingredients are used when they’re fresh and avoiding spoilage.

This level of responsive production planning maintains high standards of food quality and minimizes waste, leading to a more sustainable and profitable operation.

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3. Streamline Inventory Management

Now, let’s take this a step further. Sophisticated back-office systems can also use your data to help you streamline inventory management with features like automated ordering suggestions. Imagine having a tool that looks at your past sales, considers current trends, and then accurately helps you align stock levels to customer demand. This isn’t just about avoiding spoilage or reducing excess stock; it’s about being smart and efficient with every dollar you spend.

Getting it right is a balancing act — you want enough inventory to meet demand but not so much that you’re throwing money away when ingredients spoil. And that’s where data comes in. By leveraging the power of predictive analytics, restaurant managers aren’t just guessing what the restaurant might need. They’re making informed decisions that keep costs down and the kitchen running like a well-oiled machine. It’s a simple change that can have a big impact on the bottom line.

4. Lower Labor Costs

Another way using restaurant data can help you grow profitability is by lowering labor costs. With restaurant labor costs typically hovering around 28-33% of total revenue, any reduction to your labor spend will improve profit margins. With accurate demand forecasting, restaurant managers can schedule smarter — ensuring the right people work the right shift at the right times of day.

According to our internal data, on average, restaurants lose 10 to 25% of gross revenue per location when not staffed properly to meet demand. By using advanced quantitative methods to forecast demand, you can predict busy times and make sure you’re fully staffed when you need it most. Just as importantly, you can accurately anticipate the quieter periods when you can scale back without affecting the quality of service you provide your customers.

Employee performance metrics are another valuable piece of the puzzle. By tracking employee performance, you can use that data to make informed decisions about staffing. You’ll know who your most efficient workers are and where they’re needed most. This isn’t just about tracking — it’s about understanding your staff’s strengths and using them to everyone’s advantage.

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5. Personalize your Marketing

The days of blasting one-size-fits-all messaging to customers are over. Customers expect one-to-one, personal communication. It makes them feel seen and valued, and it starts by diving into the data you already have. By analyzing your customers’ habits — what they order, how often they dine with you, and how much they spend — you can start to see patterns. These patterns allow you to tailor your marketing efforts to different customer segments.

Loyalty programs are a goldmine for personal data. They tell you not only what your customers like but also what might entice them to come back. You can use this data to craft rewards and incentives that resonate with each individual, making them feel like part of the family.

A robust CRM system is your best friend here. It tracks all the nuances of customer interactions, giving you a detailed picture of their preferences and history with your restaurant. With this information, you can send out automated emails that hit home — like a birthday discount or a “we’ve missed you” message after a customer hasn’t visited in a while. This approach keeps your restaurant top-of-mind and invites customers to return again and again.

 6. Improve the Customer Experience

Customer experience is at the heart of any successful restaurant. Every online review and social media post is a snapshot of what your customers think and feel about their dining experience. Collecting this feedback is the first step in understanding where you’re hitting the mark and where you might need to make adjustments.

This isn’t just a theoretical exercise. UC Berkeley researchers analyzed restaurant ratings on Yelp.com and found that, on a scale of 1 to 5, a half-star rating increase translates into a 19% greater likelihood that an eatery’s seats will be full during peak dining times. And a Harvard University study found that a one-star increase in a restaurant’s Yelp rating led to a 9% increase in revenue.

Sentiment analysis tools can sift through the language used in reviews and comments to help you spot patterns and get a sense of the emotions behind the words. Are people feeling delighted, frustrated, or indifferent? This analysis can highlight what’s working well and what’s not, giving you a clearer direction for making improvements.

Once you’ve gathered and analyzed this data, it’s time to act on it. This could mean tweaking your menu to phase out dishes that don’t excite your customers, training your staff to provide extra hospitality, or rethinking the lighting in your dining room to level up the ambiance. By responding to your customers’ feedback, you’ll build an experience they’ll want to come back to — and tell their friends about.

Conquer the day with data-driven solutions

As Jerry Phillips said, restaurants generate a lot of data. Using that data effectively is the challenge — and the opportunity. It doesn’t matter if you’re running a single restaurant or a chain of them, data tells a story that can guide you toward greater profitability.

Need help unleashing the power of your restaurant’s data? We’d love to help. When every hour of every shift matters, Fourth helps you conquer the day.