How to Use Data to Grow Your Restaurant RevenueYour restaurant data can be a goldmine for helping you boost revenues — but only if you know how to use it.
If you want to uncover the secret to your restaurant’s success, it may be closer than you think. Technology does not only make running a restaurant easier and more efficient, but it can also provide a wealth of information about your business — but only if you know how to use it.
Unfortunately, most restaurateurs don’t know how to make the most of their data, said Rom Krupp, CEO of Marketing Vitals, an analytics software platform for restaurants. And if you can’t properly explore your restaurant’s data, you might be making business decisions based on half-facts and faulty information.
NCR Silver talked to Krupp to learn more about how restaurateurs can use their data to optimize price points, appropriately schedule staff and increase revenues.
Think beyond cutting costs
Krupp said most restaurateurs need to “fundamentally shift” the way they think about the data they collect. When you’re overly focused on cost-cutting, “you’re not making the right decisions,” he said. “You’re thinking about your bottom line; you’re not thinking about the guest.”
While it’s wise to look at your spending data and find ways to keep costs down, placing too much emphasis on minimizing expenses “creates a self-fulfilling prophecy where you always have problems managing labor costs and food costs,” he said.
Instead, Krupp said restaurants should focus on data that can drive more sales and increase guest frequency. “The reality is, in the restaurant industry, sales cure everything.The bottom line will come if your sales are healthy.”
Make sure you’re comparing apples to apples
When evaluating data, Krupp said many restaurant owners focus on the wrong information, which can lead to inaccurate conclusions.
For example, most restaurateurs measure employees on their sales divided by the number of hours worked, he said. “But the number of hours they worked is not the variable. The value of the hour is the variable,” he said.
Instead of trying to compare employee performance on a Monday noon to 1:00 shift with the same hour on a Friday, get a more accurate picture of your employees’ performance by normalizing your data to the specific day and hour worked — not the number of hours, he said.
“When you don’t look at the data correctly, you don’t understand how you can improve employee performance and how you can really drive incremental sales from your team members,” Krupp explained.
Evaluating your restaurant staff on this level will often reveal “pretty interesting things,” he said. The people you thought of as your best may not always be the best, and shifting around some of those team members may increase your revenue.
“Optimizing the right employee to the right size of party, the right shift and right section can make as much a 6 percent difference in the revenue of that shift. If you can swing a shift 6 percent consistently, that’s a massive growth,” he said.
Find the meaning behind the math
If you want data to make a real difference in your restaurant, stop obsessing over the mathematical calculations, advised Krupp. “Learn what drives the math, not the math itself.”
Take per-person average (PPA) as an example. Knowing your PPA is $18 doesn’t tell you much, but digging deeper into the data could reveal that guests with a $14 PPA have the optimal frequency. If you discover that most of your new customers are actually spending $17, that means they’re less likely to become frequent guests.
“To create optimal frequency, I really want to have people spend around $14. If I’m overselling them on the first visit, that will decrease their frequency. I might have gained three more dollars on that one visit, but I lost two or three additional visits out of it,” he explained.
Highlighting popular menu items is another example. Your signature dish may be the top selling dish on your menu, but if if it’s not bringing customers back for repeat visits, it may not really be your “most popular” item.
Related: How to Test Your Restaurant Menu
“You really have to dig down to figure out which menu item creates the most frequency,” he said. “Don’t focus on volume because a lot of people are going to come into your restaurant buy one time and never come back. They may generate a lot of volume, but they’re not telling you the story of your success.”
Experiment with your data — not your guests
According to Krupp, “The most expensive thing you can ever do in a restaurant is experiment with your guests. Guests react by not coming back — a very, very expensive proposition.” Instead, restaurant owners should use their data to simulate changes, such as a price increase, before presenting them to live customers, he said.
“Say your cost of beef just went up,” he said. “People who eat hamburgers are very elastic, meaning that a change in price creates opposite, negative reaction in spend. So, if you raise the price by a dollar, they’ll find a way to save that dollar by reducing their beverage buy or reducing frequency.”
But, if your data reveals that guests who buy chicken sandwiches are more inelastic, you could increase prices on chicken to offset the rising cost of beef by having the chicken customers foot the bill.
“Simulate things like that, and you can really reduce your risk and more predictably drive top line sales. That’s the name of the game,” said Krupp.