In a restaurant, sales are everything. Projecting future sales is a critical step in making sure your restaurant venture is profitable. Before you open, it is worthwhile to have a good idea of whether or not your sales will support your startup business. Pulling a number out of thin air does nothing for you, and although there is no real formula for projecting sales for your startup, making an educated guess is critical to planning your first-year cash flow. Below are a few guidelines for estimating the amount of money you can bring into your restaurant in the first year.
Estimate Your Number of Guests
By now you will likely have a location picked out, or at least an idea of where your restaurant will be located. A good way to learn a little about how many guests you may expect is by comparing your prospective business to existing restaurants in the area. Visit restaurants of similar size and service type. Although these restaurants may turn out to be your competitors, you can obtain valuable information by observing how many guests—also called covers—they serve during peak hours. You may even speak with a server to learn about how many covers they see in a week.
Do not base your estimations on how many people you will have at full capacity, since this may be unlikely in your first year of business. Figure out how many tables you will have and plan for about 75% of that at peak capacity, just in case. Also, pay attention to your area demographics. People may flock to a certain type of restaurant already, but may not be excited about going to yours, or vice-versa. A lot depends on your concept and location. » More on Choosing a Location for Your New Restaurant
Estimate Average Spending Per Customer
Once you have a customer count estimate, you need to come up with a per person average based on your menu prices. Make sure you use middle-of-the-road price values from your menu to figure this out. That means choosing moderately-priced menu items instead of the least expensive or most expensive. After all, you cannot expect all of your guests to purchase the most expensive steak on the menu every time. In general, your sales are a function of how many people you serve and how much they spend.
Also, be sure to take into account the difference in number of customers and per customer spending averages for different meal periods. For example, lunch periods tend to bring in lower average sales than dinner periods. This is because many restaurants charge less for lunchtime meals than dinner entrées, and they often attract more people for dinner than lunch. Days of the week will also bring in different sales as well. For example, Thursday nights are typically more profitable for restaurants than Monday nights. Create a chart showing estimated number of customers per meal period each day, as well as the per person spending average. The chart below shows an example of these numbers, figuring the projected daily sales and then the projected weekly sales.
|Number of Customers||Per Person Average|
|Breakfast||Lunch||Dinner||Breakfast||Lunch||Dinner||Projected Daily Sales|
|Projected Weekly Sales||$14,571|
Estimate Sales for the Year
After mapping out sales projections for the week, some restaurants will multiply their weekly sales totals by 52 weeks to get a year’s sales projection. Other restaurants divide the year into seasons to reflect the business they will receive during different times of the year. This is a little more complicated because seasons vary depending on region, but it can be more accurate since some months are typically busier than others. Think about what an average week’s sales might look like, and then ask yourself what you might make during a slow week and during a busy week.
Consulting seasoned restaurant workers or owners in your area will help you to determine what kind of traffic or sales volume to expect at different times of the year. Usually, these estimations will vary slightly from restaurant to restaurant, depending on your menu, your layout and your location. After even just a few months of operating, you will have a much better idea of what to expect as far as sales go, and you can modify your estimations accordingly. You should also assess your operations and marketing efforts if sales are not matching the projections in your business plan.
Running a restaurant is no small endeavor, and you are more likely to succeed when you have done the appropriate research and made some rational estimates. Figure out what you might expect as far as guest attendance and sales per person by checking out the competition and determining what is rational for your concept, location and customer demographics. This will also help make sure you are financially prepared for the revenue your restaurant will bring in during the tough first year.