9 Restaurant Revenue Management Tips to Increase Your Performance

5 min readAug 14, 2018

March 5th, 2018 by Thibault Catala

You have probably heard about revenue management or yield management in hotels, airlines or more recently even when booking your Uber? Good news (or bad?) These practices are now happening in all other sectors and especially in the food and beverage industry!

If we look at the definition of revenue management, it is about the management of prices and capacities in order to sell the right product, to the right customer, at the right time, at the right price and via the right distribution channel.

We understand more or less how it works in hotels, but how can we really apply these revenue management practices in the restaurant industry?

Easy! Four letters: K.I.S.S. “Keep It Simple Stupid”!

1. Be Clear in your Goals

How do you know if you are on the right track, when you didn’t set any prior goals? At the beginning of the year (or if you have not already done so do it now!), take a paper and a pen and write down your revenue goal for the year. We are not talking about profitability here just revenue. 100’000 Euros? 200’000 Euros? 1’000’000 Euros (!!!)? Once you have your annual goal, divide that number by 12 to get your monthly goal. Any months with higher demand such as Christmas and New Year’s Day for example? Adjust your monthly goals accordingly. This step will be very important later.

2. Track Your Performance

Once you have your goal, you will now monitor your performance against these goals on a daily basis. Tools like REV21 can help you collect your daily performance and give you indicators on your trend to identify whether you are heading in the right direction or not.

https://www.youtube.com/watch?v=-65FUEIBf1g

3. Analyze your Data

The fun part now! You have collected your data, put everything together in an excel spreadsheet, now you will need to run a statistical analysis. While I would love to write about all the different analysis you could do, I believe I am probably going to lose you here. So let’s keep it very simple:

Identify daily patterns (a simple clustered columns chart by day of week in the selected variable will be enough). Any day of the week where you recorded more revenue? Or more costs? I thought we don’t talk costs here Any opportunity to increase your demand on certain dates or maybe your profitability drops on Fridays and Saturdays? Was this happy hour thing a good idea finally?
Ask yourselves what the reasons for these daily irregularities could be.
Maybe you even have hourly data available and you are able to identify low demand periods within the day that you could exploit better.
Identify correlations in your data. Do you make more sales when it’s hot and sunny outside? Or maybe you are experiencing a significant growth of revenue when it’s raining? Do special events in the city, football games or seasonal sales in shopping centres nearby drive revenue? Are these events an additional demand generator for your business?

Just thinking about all this, gives you a head start and will allow you to identify risks and opportunities in your operations.

4. Create a Demand Calendar

Take your annual calendar, as well as 3 markers (Green, Yellow, Red) and color each day of the year accordingly:

Green — low demand
Yellow — normal demand
Red — strong demand

Keep in mind your previous results and the correlations you found between the different days of the week. Any special events coming this year? School vacation? Write down everything you can imagine that could impact your performance (positive and negative as well).

This will allow you to anticipate your activity, organize your schedules as well as your inventory accordingly.

5. Forecast

Very similar to the previous point and a little bit further: once you have identified your historical performance, you are now able to predict (more or less accurately) your future activity.

Think about how many customers you will have in the next few days. Not necessarily long in advance, just look for next week, note the number of covers and revenue you think you’ll be doing. Once the day is over, compare these forecasts with your current performance. The goal here is to have the most accurate forecast to plan your future activity, adjust your staff and plan your inventory accordingly. Keep a dynamic and strategic approach to your business activity.

6. Optimize Your Menu

Have you heard about “menu engineering”? Potentially the most efficient technique in restaurant revenue management to optimize the profitability of your menu. Analyze the contribution of each article in relation to its popularity; classify your articles in 4 different categories: Horse / Dog / Star / Puzzle.

Studies have shown an increase of more than + 15% on profits if menu engineering is done regularly and effectively.

If there is one thing to remember from this article it is here! Make your menu engineering as soon as possible, think strategically, optimize, adjust and you will see an uplift in your bottom line quickly.

7. Identify your Best Sellers

Your point of sale system usually allows you to identify the performance of your waiters. Take the top 3 and ask them to train other team members with their upsell or service technique. Identify the average price performance of each server and train those who perform below. This can be small adjustments as techniques to offer additional coffee or offer different wines or starters, but the impact can be huge on your performance at the end of the day.

8. Develop your Online Presence

Any revenue management technique is good to take, however if the demand for your restaurant is very limited, it will have a much smaller impact. Invest in a website; increase your online presence on social media (Facebook, Twitter, Pinterest, Instagram). Check if your restaurant is correctly displayed on Google Map and pay attention to your SEO. Today, marketing, the reputation of your restaurant (TripAdvisor) and your online presence are vital to stay ahead of your competition.

9. Keep Moving Forward!

The most important thing is to change mentalities in the food and beverage industry and in every business. Do not stay immobile on an idea, concept or sales strategy. Test your idea / strategy -> Follow the performance and learn the effectiveness of these decisions -> adjust accordingly to find the optimal efficiency for this / or change completely -> Repeat until you find the best approach for your restaurant.

It works -> very good continue

It does not work as well as you hoped -> I have learned something, I adjust and I start again until I find the best approach.

But continue to innovate, improve and above all continue to move forward!