Big data is big business for restaurant franchisees in the Information Age. Collecting and analyzing massive amounts of data can be a powerful business function, and the world’s most innovative companies have been investing in it for years. But the franchise world has been relatively slow to adopt. Many franchisees are struggling to remain competitive, but data analytics can help franchisees uncover actionable insights like opportunities for sales improvement, minimizing loss, and increasing restaurant efficiency.
The Rise of Big Data in Restaurants
Before the era of data analytics, restaurant chains used “gut instinct,” “on the ground” observations, and spreadsheet analysis of POS system data to make decisions. Even when data was utilized, information was often kept in silos with little collaboration between departments. But with the advent of big data analytics, restaurant franchisees now have the means to make data-driven decisions to improve operations, whether it be identifying top revenue-generating menu items, improving employee productivity, analyzing order sizes, managing inventory, or optimizing customer lifetime value. This requires restaurant operators to focus on what’s happening in the present with near real-time metrics delivered to all levels of the franchise. This distribution and democratization of data means faster, more informed decision-making and more agile teams which can be a key advantage in the competitive and fast-paced restaurant industry.
But big data isn’t just an IT initiative. While it’s true that IT still has an important role to play, data initiatives have spread to almost every level of restaurant organizations. This information can inform decisions around site selection, operations, staffing, marketing, menu development, inventory, training, and more.
7 Franchisee Benefits of Data Analytics
Though data analytics and business intelligence are not new, many franchisees are still in the early stages of learning to leverage millions of data points to improve results. Here are 7 ways that restaurant franchisees can turn data into action:
- Labor Efficiency and Retention
Labor remains a key driver of success for every restaurant even among ever changing laws and mandates. For the second year in a row, restaurant professionals cited hiring, training, and retaining staff as their biggest challenge to success. With an industry turnover rate of 73% and an average cost of more than $3,500 to replace a worker, it’s clear that this is a major issue for restaurant operators. Analytics can identify an employee’s strengths regarding sales, check size, speed of service, etc. When an issue arises, data can help managers determine if the issue is training related or if the employee is in the wrong position for their skill set. When organizations understand their employee’s strengths and weaknesses based on performance they can put them in a better position to be efficient and successful.
- Increase Check Size
Some argue that the best way to increase check size is by discounting menu items to sell more. But this is a dangerous misconception that can hurt margins and devalue your brand if overused. Alternatively, the best way to increase check size is with a well-trained staff who know how to upsell things like drinks, dessert, and coffee. A robust data analytics solution will allow restaurant operators to identify high-performing employees to praise or advance and low performers to re-train or motivate to improve.
- Track Omnichannel Sales
Omnichannel may have started as a retail ideology, but it’s quickly become the standard for every industry including restaurants. In addition to dining in and take out, many chains are working to let their customers order anywhere using different methods — call-in, on-line, mobile, TV, smart watches, tabletop tablets, kiosks, etc. — and experience one seamless and consistent brand. Analytics helps provide you with the data you need to improve the channel experience by identifying sales trends by channel, meals by channel, customer frequency, the impact on your loyalty program, etc. Restaurants need to prepare with the right POS and analytics solutions to support this growing, and increasingly complex trend.
- Streamline Reporting and Compliance
No more piecing together information from disparate systems. With a robust data analytics platform, all mission-critical data is housed in one place. This means that Restaurant and Region Managers can spend less time on manual processes and more time managing while still staying compliant.
- Optimize Operations
The restaurant industry can be an unusual combination of seasonal predictability and unpredictable customer demands A data-driven enterprise can easily access actionable insights into operational performance across locations, regions, and brands. Data can reveal exactly how much stock operators should hold to avoid waste or overstocking or identify labor scheduling challenges. This type of information can significantly increase savings and reduce waste across the enterprise.
- Increase Customer Loyalty
Most restaurant chains have loyalty programs, but it is difficult to determine how effective these are without a good analytics tool; the task is cumbersome, and it is difficult to get good answers. However, using the right analytics, these chains can get answers quick, determine what is working and what is not working, and rapidly adjust the program. These organizations analyze the success of the program by looking at key elements, including frequency of purchase, items purchased, time of purchase, net benefit, etc.
- Loss Prevention & Asset Protection
Analytics can also be used to aid Restaurant Loss Prevention by identifying internal and external theft and fraud, operational deficiencies, customer interface issues, and inventory shrinkage. Rather than manually reviewing check data and video to identify fraud, restaurant operators can utilize transactional data and analytics to identify suspicious transactions through bench-marking. Then, video can be used as confirmation, rather than as the primary tool for identifying loss. Rather than starting with video and searching for the problem, restaurant management should avoid false positives by letting your data tell you when a store, employee, or item is outside the norm.
Restaurant Franchise Data Best Practices
Though restaurant data analytics is not a new concept, many restaurant franchisees are still in the early days of developing a data strategy. Here are four best practices to keep in mind while getting started:
Go All In
There is no halfway when it comes to data analytics. Too often restaurant leadership fails to take full advantage of their data’s full potential by relying on dirty data or subpar systems, failing to break down data silos, or neglecting to obtain buy-in from every level of the organization. To become a data-driven enterprise, organizations must invest in technology, people, and culture or risk joining the 60-85% of big data initiatives that fail.
Ask the Right Questions
Big data and business intelligence initiatives can yield amazing results for restaurant franchisees. However, without asking the right questions, efforts can lack clear direction. There is an all too common misconception that systems will somehow discover what’s interesting in the data and deliver it to users on a golden platter. It’s more productive to start with a question or a few questions and then seek answers within the data.
Spread the Word
Nearly every data analytics initiative will have a champion – someone who will advocate for the importance of collecting and leveraging data, supporting the use of data analysis in decision-making, and actively promoting best practices throughout the organization. This person will get the ball rolling and keep everything on track but becoming a data-driving enterprise will required democratizing data through distributed analytics. This means that individuals at every level will have the opportunity to lean on data to make better decisions. This culture of evaluation and improvement will be better suited to keep pace in an evolving restaurant industry.
Stick to It
Unfortunately, many chains only turn to data when things are going wrong and set it to the side when results are positive. The problem is, if you don’t know why you’re being successful then you don’t know how to replicate it. In order to reap the long-term benefits of becoming a data-driven franchise, data must always be front and center.
Learn more about how enterprise data analytics can be used to improve profits, increase sales, and drive action across restaurant locations, download our eBook “Data-Powered Dining: Leveraging Data Analytics to Grow your Restaurant Chain.”