Using Data to Drive Decisions
More and more, managing your business can and should be influenced by data, as it can paint a clear picture to help improve guest engagement and increase profitability.
Maintaining overall profitability is one of the most critical challenges facing operators today. Simply put, profitability is the difference between sales and costs. New sales pressures—such as consumers turning to food outlets other than restaurants—are combining with ever-rising labor and other costs to squeeze already thin profit margins.
More operators are employing data to help them maximize profitability. Strong and consistent data analysis enables operators to uncover opportunities to enhance guest engagement and increase profit margins.
A variety of technologies have emerged to facilitate knowledge databases. In the process, they are redefining how operators view and manage their businesses.
Operational technologies and data exchange
Operational technologies—such as inventory and recipe software—have been around for some time. They have become essential base-level technologies that every operation should incorporate as part of its business analysis functions.
More recently, it has become possible for operators to link data from these technologies to vendor purchase data. Linking operator and vendor systems produces a variety of reports that enable operators to close the gap between what they purchase and what they sell. The result is far leaner inventory with fewer stocking issues—you can have just enough of the right product at the right time—which, in turn, slashes inventory costs and provides greater assurance of guest satisfaction.
Data and technology management
Contrary to popular assumption, linking systems through data exchange doesn’t eliminate the “work” of managing data. Many service providers offer setup solutions as part of the purchase price, but menus and recipes still have to be maintained over time.
As with all technology, the more data you provide, the more accurate a picture you’ll get from the system. Given all your other responsibilities, however, you have to balance the effort you put into the system versus the value you derive from it. It’s helpful to consider the law of diminishing returns here:
“A point at which the level of profits or benefits gained is less than the amount of money or energy invested.”
With data solutions, that point is the intersection between, “How much effort am I willing to expend on maintaining data over time?” and “What will that data actually give me?” There is a certain minimum level of effort that all operators need to invest—such as maintaining all the menu/recipe data related to twice-yearly core-menu adjustments and up to four-times-a-year full menu changes. What you’re willing to do beyond this minimum will help determine the type of technologies you should implement.
Different service types can and should engage with these technologies differently. Limited-service restaurants, with menus that are generally smaller and less subject to change/variability, can use these technologies a bit faster—and potentially to a greater degree. Full-service operators should consider starting with the menu items that generate 70 percent or more of their annual sales. These items will likely define your core menu and brand, and so are less likely to change over time.
Review the business impact for setting up and maintaining this data before considering whether it’s worthwhile to expend effort on the remaining 30 percent of menu items. Many operators find that the 70 percent approach is directionally sound and more useful than a 100 percent approach, which is highly accurate, but often too impractical to maintain over time.
Operational digital technologies are here to stay and they represent an essential step forward for operators seeking to boost profitability. The key to choosing the right solution(s) is to outline your business goals and meet with technology and business experts who can help you navigate the scope and scale of effort required.
Access to this kind of data can be a boon to restaurants looking to operate more efficiently and better serve guests. Before you get started here are just few issues to think through:
- Cost/ROI analysis. You must determine whether you will get a sufficient return for your investment. The key is to separate what would be “nice” to know from what is essential to sales growth or cost control.
- System assumptions. These systems provide data-driven “insights” based on algorithms developed by the companies building them. It is important that you understand the assumptions/questions that drive the algorithms of the systems you’re considering.
- Assigning a role. Success requires that you assign responsibility for analyzing data and recommending business decisions to someone on your team. While these systems tout “automated decisions,” none of them can account for the wide variety of foodservice industry variables. You’ll get strong directional insights, but decisions must ultimately be yours.
- Historical behavior/future behavior. This kind of data can provide a great view on historical guest behavior. It may not account for future moments of definitive change, such as a brand reposition or holiday menus. Again, the data is directional, not definitive, in nature.
As the foodservice industry continues to mature, the opportunity for guesswork continues to shrink. Operators must implement long-proven operational technologies in order to effectively evaluate their business today. At the same time, the most promising opportunities for high-level performance can be realized through new and emerging technologies. Employing both will facilitate data-driven decisions that maximize guest satisfaction and profitability.