Industry Update
Opinion Article 3 August 2020

Become A Pro: Data Analysis For Small F&B Businesses, Part 2

By Tiziano Nessi, Product Manager at HOSPITALITY.digital

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Evolve from the basics to become a pro

This is the continuation of the article 'Data analysis, learn the basics'. The rules of the game are still the same. The next three data-driven tactics have a higher degree of complexity to be applied. Ming-Tai Huh, a famous restaurant owner said, "It is easy to open a restaurant, the hard part is to run it and make money over a long period of time". Technology is the enabler of long-term success. Now that the cost of mobile app and cloud data dashboards are drastically decreasing, small restaurants can take the guesswork out of their daily routine and base their decisions on data.

In this article, I will explain three data-driven tactics. There will be a strategy for advertisement efforts, take-out and delivery, and to conclude, I will touch base on the most important KPI for any restaurant: the revenue per available seat hour RevPASH. Let's get straight to it!

#1. Real return of investment from advertisement (ROI)

  • Impact on which KPI: Revenue, # customers
  • Difficulty to apply it: Medium
  • Tools needed: POS
  • Run time before seeing results: 2 months

Be it a social media post, an article on a food blog or in an offline magazine, how can a restaurant owner analyze the ROI of this activity with facts? I am sure many of you spend quite some time on social media to create the right branding with non-sales focused posts. This is important and you need to keep doing this. Nonetheless, I am also sure that you want to create some posts to drive more traffic and revenue towards your restaurant.

How can you measure a social media campaign ROI?

  • Focus a few posts on similar product categories for two weeks (Here's a great article)
  • Track the revenue of those categories before and after the campaign, is there a significant variation?

In this case you can analyze if your campaign had an impact on the product sales.

Voucher codes: A more precise ROI analysis

To have an even better overview of the ROI, you can use a "voucher code" strategy. Insert the code on your social media post and if the customers present the code when paying, they receive X% discount on that article. The voucher code strategy is good to win new customers, as consumers are affected by price elasticity. In fact, 77% of shoppers are influenced by discounts.

#2. Take-out and delivery, the new normal

  • Impact on which KPI: Profitability margin
  • Difficulty to apply it: Medium
  • Tools needed: Excel
  • Run time before seeing results: 2 months

New profit margin? New menu

Since the COVID-19 pandemic, delivery and take out have become key revenue drivers for the RO. However, I have seen too many restaurants offering the same menu for in-house and to go, this is not sustainable for the RO balance sheet. Restaurants need to create a new menu adapted to the delivery business only.

The key words for this menu are three: margin, margin, margin.

Delivery commissions and a lower selling price are two facts which are shrinking the already tiny profit margin of a dish. Therefore, the RO needs to properly pick the dishes they decide to have on the delivery menu. Experiment new ideas with the ingredients you already have in the kitchen, but don't copy the in-house menu and make it the delivery one.

In Berlin, the restaurant Barra started serving a new chicken sandwich (it's so yummy!) during quarantine for delivery only. A dish which yields high margin and is easy to package. It was so successful that Barra now is planning to open a second location based on their quarantine menu.

#3. Revenue per available seat hour (RevPASH)

  • Impact on which KPI: Revenue
  • Difficulty to apply it: Difficult
  • Tools needed: POS, Excel
  • Run time before seeing results: 4 months

Seats are a perishable asset - every rotation missed is a missed revenue opportunity. If the seat is not filled during a meal, the revenue is gone (probably to a competitor!). After COVID-19, this metric is a matter of survival because restaurants will work with smaller seats capacity, thus, avoiding a missed opportunity is crucial. More than a practical recommendation, this is an essential metric to keep track of.

How to calculate RevPASH?

RevPASH is calculated as follows: take hourly revenue generated and divide it by the seats available. This is the metric to always keep under the radar and work to increase it.

What are the common ways to impact this metric?

  • Increase the average spend: upsell with aperitive, water, digestif and coffee.
  • Decrease the amount of time each party stays at every table: have a double service for the evening service (but communicate it clearly to the customers upon arrival).
  • Decrease the time that a table stays empty: last minute offer to be posted on social media on quiet days, in order to attract price-sensitive customers.

Conclusion: Data helps to take informed (and better) decisions

Restaurant technology helps the RO in the process of adopting data-driven decisions on a daily basis. I suggest to start with the easiest recommendations and build up your confidence that data can have a positive impact on your revenue and profitability. In order to have a successful shift toward a data-driven mentality, your restaurant tech stack should provide you with the possibility to measure each activity you implement.

To conclude, some of the recommendations mentioned above might not work for your specific business, but don't get demotivated, keep the "learn-by-doing" spirit and you will find the right data tactic for your restaurant.

Tiziano Nessi

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