Essential Restaurant Menu Forecasting Techniques To Reduce Your Restaurant Costs

Running a successful restaurant isn’t just about serving delicious food—it’s about managing costs, minimizing waste, and ensuring profitability. One of the most effective ways to achieve this is through menu forecasting, a data-driven approach that helps restaurants predict demand for their menu items. Accurate forecasting allows restaurants to align supply with demand, ensuring they stock the right ingredients in the right quantities, prepare for peak sales periods, and optimize menu offerings. Without a clear forecasting strategy, restaurants risk over-ordering perishable goods, leading to food spoilage or under-ordering, resulting in lost sales and unhappy customers.

A well-planned forecasting system can help restaurants adjust their purchasing strategies, optimize labor schedules, and maximize profits even during economic downturns. Whether it’s anticipating the seasonal demand for summer salads or changing the menu based on rising beef prices, restaurants that leverage forecasting gain a competitive edge. It helps you analyze the demands of your customers and subsequently plan your menu based on these demands. Menu forecasting is needed to make food item production decisions, prevent wastage, and enable you to allocate the resources, such as staff or stock materials required to meet the demand.

Understanding Restaurant Menu Forecasting

Based on data-driven insights, menu forecasting predicts future sales and demand for menu items. Restaurant owners can make informed decisions about inventory management, staffing, and pricing by analyzing past sales trends, customer preferences, and external market conditions. This not only reduces food waste but also enhances operational efficiency. In a restaurant setting where profit margins are often razor-thin, accurate forecasting is critical for maintaining cost control and maximizing revenue.

Several key factors influence menu forecasting, including historical sales data, seasonality, and evolving customer trends. Analyzing past sales reports allows restaurant owners to identify patterns, such as the popularity of certain dishes at specific times of the year. For example, seafood dishes may see a spike in demand during the summer, while comfort foods like soups and stews are more prevalent in winter. External influences like food costs, inflation, and market trends also significantly shape menu demand. 

Restaurant Menu Forecasting Techniques

 Food service planning should begin with restaurant menu forecasting. This helps you anticipate customers’ needs and wants and prepares you for the upcoming business.

 Here are some techniques to help you forecast your menu items for increased profitability and optimum food costs.

1. Calculating The Popularity Index

Understanding which menu items are most in demand is crucial for effective menu forecasting, and calculating the Popularity Index helps achieve this. The Popularity Index measures the percentage of total guests selecting a specific food item from a list of alternatives. By analyzing this data, restaurant owners can accurately forecast demand, ensuring that the most preferred dishes are always available while minimizing the risk of over-purchasing less popular ingredients. This helps reduce food waste and allows for better resource allocation, ultimately boosting profitability.

The formula for calculating the Popularity Index is straightforward:
Popularity Index = (Total Number of Specific Items Sold / Total Number of All Items Sold) × 100

For example, if a restaurant sells 50 burgers daily out of 500 total items sold, the Popularity Index for burgers would be (50/500) × 100 = 10%. By consistently tracking this metric, restaurant managers can identify trends, such as seasonal trends, variations in dish popularity, or shifts in customer preferences. This data-driven approach helps in menu engineering, allowing restaurants to highlight high-demand dishes while reconsidering or modifying underperforming ones.

Calculating the Popularity Index is particularly valuable when redesigning a menu or launching new items. A newly introduced dish with a consistently low popularity index may indicate the need for recipe adjustments, better promotions, or even removal from the menu. On the other hand, dishes with a high popularity index can be strategically placed in menu highlights or upsell promotions to maximize sales. By leveraging this simple yet powerful metric, restaurant owners can enhance customer satisfaction, improve inventory management, and ensure their menu remains cost-efficient and aligned with customer demand.

2. Pre-Costing

 Pre-costing is a method of controlling food costs while forecasting menu items. It helps you control the cost of food before preparation and service.

 Pre-costing the menu will help you make better profits. Restaurant owners must forecast the selling price of the menu items to cover the preparation cost. You can start by calculating the food cost percentage.

 The food cost percentage is the percentage of your sales you spend on food. It is essential to identify this number before you start pricing the menu. It will give you the base price, which you can use as a reference when pricing the menu items.

Food Cost = Cost Of Goods Sold / Food Sales

This would tell you how much money you make when spending a certain amount on preparing a dish. Ideally, your food cost should be around 28-30% of your selling price.

3. Volume Forecasting

Volume forecasting can be identified by looking at the previous restaurant sales volume. This technique is particularly useful when preparing for special events, seasonal rushes, or promotional periods, ensuring that restaurants are well-equipped with the right ingredients, staff, and menu items. You can check through the data of a previous event and make a note of the most requested food item. This will help you prepare for the upcoming event and forecast the menu items accordingly.

Objectives of volume forecasting are:

•  Predict the number of meals to be sold
• Foretell the choice of menu items by the patrons
• Facilitate the purchasing of raw materials
• To ensure the availability of the food items

 By leveraging volume forecasting, restaurant owners can minimize food waste, control costs, and improve operational efficiency. This method not only prevents last-minute rushes but also enhances customer experience by ensuring that popular menu items are always available. In today’s data-driven restaurant industry, volume forecasting is an indispensable tool for improving profitability and maintaining smooth operations during both regular dining service and high-traffic events.

4. Using Technology For Restaurant Menu Forecasting

You can easily achieve all of the above-mentioned tactics for restaurant menu forecasting with the help of  Modern POS systems. The following reports will help you forecast your menu items better –

(i) Daily, Weekly, Month Sales Reporting

The Sales reports come in extremely handy when you are forecasting your menu. Based on the sales generated and the footfall in your restaurant, you can predict the number of menu items that will be sold.

For instance, during the weekends, the footfall is generally high, and thus, you would need to prepare more food items so that you are not sold out.

(ii) Menu Item Performance Report

The menu item performance report gives in-depth reports about how the items on your menu are being received by the customers. You can check the total sales of a particular item for a given period through these reports and also view the feedback given by the customers for it through the Feedback App.

If certain items on your menu generate the highest sales, you can use this information to ensure that that item is always in stock and ready to be served. Similarly, if a particular menu item is repeatedly getting poor reviews, you should consider removing it from the menu or bringing changes in the preparation method to ensure customer satisfaction. You can eliminate the food items that are not doing well for you, as there is no point in stocking up on the raw materials that are not being used.

Along with this, your restaurant POS should also give you a comprehensive report on sales and cost analysis. It will avoid any food wastage and will help curb the food cost. Gain complete insight into restaurant operations with instant daily analysis using restaurant reporting software. Designed by restaurant chain owners for data-driven decision-making, this powerful tool offers 200+ insightful reports to help you uncover essential data and optimize performance. With real-time analytics, you gain instant daily insights into restaurant operations, ensuring you stay in the loop with live updates from all your outlets. Seamlessly synced with the cloud, our reporting software keeps you in control, allowing you to make smarter business decisions based on more accurate predictions and, up-to-the-minute data.

Case Study: How Chili’s Used Menu Forecasting to Cut Costs and Boost Sales

In 2024, Chili’s, a prominent U.S. casual dining chain, embarked on a significant turnaround by implementing strategic menu forecasting and operational enhancements. Under the leadership of President and CEO Kevin Hochman, the chain simplified its menu, focusing on core items like burgers, chicken crispers, fajitas, and margaritas. This streamlining not only improved kitchen efficiency but also aligned inventory with customer preferences, reducing waste and costs. Additionally, Chili’s shifted its marketing strategy from discount-driven promotions to more effective advertising, resulting in a 19% increase in customer traffic and boosting sales to $1.35 billion in the latest quarter. The company also invested over $400 million in modernizing operations and staffing, further contributing to its resurgence.

Key Takeaways for Restaurant Owners:

• Menu Simplification: Focusing on core, high-demand items can streamline operations and reduce waste.
• Data-Driven Marketing: Shifting from generic discounts to targeted advertising can attract and retain customers more effectively.
• Operational Investment: Investing in staff and modernizing facilities can enhance customer experience and drive sales.

Conclusion

In today’s fast-paced and competitive restaurant industry, menu forecasting is not just a strategy—it’s a necessity for maintaining profitability and efficiency. Effective forecasting ensures that the right ingredients are stocked at the right time, preventing over-purchasing or stockouts while also enabling smarter staffing decisions to meet peak and slow periods efficiently. With rising food costs, labor shortages, and unpredictable supply chain disruptions affecting the restaurant market, data-driven forecasting provides a crucial advantage in maintaining financial stability. With a unified restaurant solution, this technique lets you weave your restaurant’s story, ensuring every dish served is a step toward success. Investing in the right tools and practices today can mean the difference between thriving and merely surviving in the restaurant industry of tomorrow. Follow the above-mentioned techniques to ensure a steady business!