You’re probably sick of hearing about all the challenges facing the hospitality industry. Fluctuating food costs, unpredictable customer demand, tight profit margins – you know the drill.
What you really want to know is how to overcome these challenges, right?
Well, what if we told you that AI forecasting is the answer? 😏
With the right AI technology, you can accurately predict sales, demand, and performance to optimise costs and boost margins.
By the end of this article, you’ll know how AI forecasting works, why it’s necessary for restaurant success, and how to choose the right AI forecasting tools for your restaurant.
But first, let’s clarify what AI forecasting actually is.
How AI forecasting works: A technical overview
AI forecasting involves using technology to predict future sales, demand, trends, and performance. The technology analyses historical data from your POS system to estimate how much revenue you’ll make over a certain period. With this information, you can make quick and informed decisions to cut costs and increase profits.
For example, let’s say that your POS system shows that your most profitable time of the week is Saturday night. AI forecasting will analyse this data and let you know what your predicted revenue is. Then, you can ensure you have the right ingredients and staff to meet demand without cutting into profits.
Take a look at Nory, for example. Our AI-powered operating system analyses your previous restaurant sales, labour costs, productivity, and external factors (like the weather or local events) to accurately predict demand.
As a result, users can:
- Optimise labour costs. Ensure you have the right number of staff to meet demand, but avoid over-scheduling and spending too much on wages (which can dent your profits).
- Improve inventory management. Make sure you have the right amount of ingredients to meet demand without overspending on items you don’t need (which also reduces food waste).
Nory success story 🥳 Find out how Hartshorn-Hook achieves 97% sales accuracy with Nory. By integrating Nory with Lightspeed, Hartshorn-Hook could unify its systems and access real-time business performance. The results? Accurate sales forecasts that lead to immediate, informed decisions about business growth.
AI forecasting in the restaurant industry: What’s the latest?
AI has been floating around the hospitality industry for a while, but in the last couple of years, it’s really taken centre stage. 41% of restaurants plan to invest in AI forecasting and scheduling tools in 2024, while 31% plan to implement AI inventory and purchasing tools.
But AI hasn’t always been welcome in the industry. When it first hit the scene, restaurant operators were concerned about the impact it would have on the heart of hospitality.
Would this new technology understand the nuances of restaurant operations and customer interactions? Would it remove the people-first aspect of the industry?
The way we see it, these concerns aren’t an issue. AI shouldn’t replicate the nuance of humans, and it shouldn’t — that’s not where it provides value.
Where it really adds value is in supporting your existing processes.
It helps you optimise your schedules and cut costs to improve your bottom line — but you shouldn’t rely on it to manage every little detail of your business. That’s not what it’s built for. The real benefit of AI forecasting is making data-driven decisions that improve efficiency and profitability.
Our founder and CEO, Conor Sheridan, talks about this in his LinkedIn post:
“AI is a tool that can solve certain problems / use cases, it’s not a general solution to running a complex and challenging business.”
Another misconception is that AI is only suitable for large restaurant chains. Yes, it can support large restaurant operations — but it’s also an incredibly valuable tool for small to mid-sized restaurants.
Think about budgets and resources as an example. Smaller restaurants often deal with stricter constraints in these areas. AI forecasting allows these operators to make data-driven decisions about budgets and resources without needing a large team or extensive expertise.
Benefits of AI forecasting for restaurant owners
Okay, we’ve talked a lot about what AI forecasting is and how it’s impacting the hospitality industry. Now, let’s delve a little deeper into how AI forecasting can really enhance restaurant operations.
Improve inventory management with AI forecasting
AI forecasting is a great tool for improving your inventory management. Think about it — when you can accurately predict restaurant sales, you know exactly what ingredients and quantities you need to meet demand.
Nory, for example, predicts your inventory usage days in advance. Our software then creates demand-based orders and prep lists for your teams. The results? You spend less money on ingredients you don’t need, reduce your food waste, and grow your gross profit margins.
AI systems like Nory can also adjust inventory orders in real-time based on sudden changes in demand. This means you can instantly react to unexpected changes, making sure your restaurant remains profitable. For example, if demand starts to decrease, an AI system can update your inventory orders accordingly.
Optimise staff scheduling through AI predictive analytics
Labour costs are one of the biggest challenges restaurants face. 18% of restaurant operators list it as one of their top challenges
So how can AI forecasting help?
When you accurately predict restaurant demand, you know exactly how much staff you need in any given shift. This means you can create demand-based schedules, which is beneficial for a couple of reasons:
- You prevent overscheduling staff during quiet periods. Staff wages are a big cost for restaurant operators, and even more so with the minimum wage increase this year. If you overschedule staff, your profits can take a serious hit. But with AI forecasting, you can make sure you only schedule the staff you need.
- You ensure customers have a good dining experience. Under-scheduling might save you some money, but it comes at the cost of the customer experience. AI forecasting helps you create schedules with enough staff to meet demand, so customers are never left waiting for service.
Nory success story 🥳 Discover how Josie’s reduced labour costs by 23% in just four months of working with Nory — plus an increase of 20.% in sales per labour hour!
Reduce human error to improve accuracy
Mistakes happen in restaurants — we’re all human, after all. But when it comes to traditional forecasting, these mistakes can be pretty detrimental to your bottom line.
With AI forecasting, you reduce the risk of error and increase accuracy across your entire restaurant operation. The technology uses real data from your previous sales to make accurate predictions, ensuring that all the necessary information is taken into account.
This precision minimises the risk of overestimating or underestimating demand, ensuring that you make informed decisions on inventory, staffing, and ordering.
Nory success story 🥳 See how Rocksalt uses Nory’s real-time insights to improve forecasting accuracy by 97.5% and reduce labour costs by 14%.
“Because all the ordering and invoices are updated daily, we can catch a price increase from a supplier pretty much instantly. As soon as we spot it, we can react to it immediately.”
Stephen Burns, Group Operations Manager at Rocksalt.
Enhance the customer experience with AI forecasting
Providing a good customer experience is one of the core pillars of restaurant success. It can help you get good reviews, encourage repeat business, and build a solid brand reputation that inspires more diners to walk through your door.
So how can AI forecasting enhance the customer experience?
There are a couple of ways:
- Streamlining the dining experience. With accurate forecasts, you can improve your resource planning. This means ensuring you have the right amount of staff to meet demand and reduce wait times, and that you avoid stockouts by ordering the right amount of ingredients. This leads to a more consistent and satisfying customer experience.
- Offer a personalised experience. AI can analyse customer behaviour, like meal preferences and spending habits, to offer personalised promotions and recommendations. Given that 80% of customers are interested in some form of personalisation when visiting pubs, bars, and restaurants, this is a pretty great way to enhance their overall dining experience.
Gain a competitive edge in the competitive hospitality market
It’s no secret that the hospitality industry is competitive. As of December 2023, there were 36,000 licensed food-led premises in Great Britain.
In such a competitive market, restaurants must be nimble to survive. This means quickly reacting to market changes, optimising costs, and doing whatever you can to gain a competitive edge.
This is where AI forecasting can help.
With an AI-powered system, you can respond faster to market trends and changes. This fast response time ensures you stay relevant and profitable in the competitive landscape.
You can also predict customer behaviour, like their preferences or spending habits. With this information, you can provide customers with the best possible experience to stand out from your competition.
AI forecasting tools: What to look for and how to choose the right one
Here are some of the key features to look out for when choosing AI forecasting software for your restaurant:
- Ease of integration. Your AI system should seamlessly integrate with your existing systems, like your POS software. This ensures that the new technology can easily pull real-time data to create accurate forecasts and predictions without causing hold-ups in your operations.
- Real-time data processing. Real-time data is essential for responding to sudden changes and making timely decisions about your profitability. Make sure the system you choose has access to these insights in real-time so you can stay agile and minimise losses.
- User-friendly interface. Choose technology with a simple interface to ensure smooth adoption across your staff. If the system is complex and confusing, it can prevent them from using it effectively. Take a look at Nory’s product tour as an example of an easy-to-use AI system.
Hot tip 🔥 It’s a good idea to choose a system that has proven success in the restaurant industry, like Nory. That way, you know that the technology can handle all the ins and outs of restaurant operations.
Find out more about how Nory uses AI to enhance restaurant operations.
Overcoming challenges in implementing AI forecasting
Worried about how to implement AI technology successfully?
Don’t be — it’s easier than you think. Here’s how to tackle some of the common challenges.
Cost of implementation
For some restaurant operators, the initial investment in implementing AI technology can feel overwhelming. But think about it like this — what are the long-term cost savings of using this technology?
Calculating your ROI can help you determine if the technology is worth it. Spoiler alert: it usually is. Take a look at our success stories to see how other restaurants have reduced costs and increased profits by using AI technology in just a matter of months.
Training and adoption
To ensure a smooth adoption, you need to make sure that all staff are confident using the AI technology. This means training teams on how the system works and how to use it in daily operations.
But you have a million and one things to do every day — how do you find the time to support your team and make sure they’re happy with the new system?
One of the best ways to overcome this hurdle is to use a system that provides support and guidance for its users. In other words, you need a supportive tech partner by your side to ensure smooth implementation.
At Nory, for example, we take a customer-first approach to our partnerships. This means we’re always on hand to guide and support you through implementation, ensuring everyone is confident and comfortable using our technology.
Data privacy and security
Maintaining data privacy and security is important when using AI forecasting systems, especially because they can contain sensitive customer information.
UK restaurants must adhere to data privacy laws (like GDPR) which have strict guidelines on how personal data is collected, stored, and used. If you don’t comply with these regulations, you could be hit with fines, legal consequences, and reputational damage.
To ensure your data is safe and secure, use a system that has robust data privacy and security features. Look out for things like data encryption, anonymisation, and consent management.
Case studies: Restaurants thriving with AI forecasting
Let’s take a look at some restaurants that have successfully implemented AI forecasting and seen tangible benefits.
Badiani
Badiani is an authentic gelato shop, with its roots firmly in Italian history. Since launching internationally in 2015, Badiani has grown to 30 stores in 2024. 🤯
But managing inventory needs across markets and locations was tricky. They offer different flavours by country and local demographics but didn’t have a centralised system to manage this inventory in real-time.
Fortunately, Badiani partnered with Nory.
We built an AI-powered CPU (known as the laboratory) to help Badiani overcome these challenges. By tracking inventory and sales in one location — and integrating with their POS system, Vita Mojo — Badiani can now create accurate sales forecasts.
Since working with Nory, Badiani has achieved 96% sales accuracy! They optimise their inventory orders and create efficient labour schedules to meet demand. This means preventing overspending on wages during quiet times, which keeps profit margins healthy.
“Nory’s AI-powered CPU function with automatic orders is exactly what we wished for.” – Faraj, Head of Operations, Badiani UK.
Masa
Masa is one of Dublin’s most popular restaurants, bringing the authentic taste of Mexico to Ireland.
As Masa experienced growth they noticed issues with their restaurant tech stack. It was disjointed, meaning they couldn’t manage labour costs and inventory effectively. It also made it hard to track the rising cost of goods and expenses, which was cutting into profits.
With AI-powered technology, Masa has been able to overcome these challenges. The restaurant centralised all its restaurant operations with Nory, gaining valuable insights into real-time performance.
Our AI-powered technology has enabled Masa to forecast sales within a 3% margin, and control their labour to within 1% of what they’d planned! These insights have allowed Masa to maintain optimal staffing levels to boost profitability. 👏
“Constantly being able to see what your sales are, what your cost of labour is — and trusting that is really valuable.”
Shane Gleeson, owner and founder at Masa.
The future of AI in the restaurant industry: Trends and innovations
Technology is evolving thick and fast, so it’s likely that we’ll keep seeing new trends and changes in how the restaurant industry uses AI over the next few years.
Here are a couple of the things we expect to see.
More automation in the dining experience
With technology streamlining different parts of daily life, diners have higher and more sophisticated expectations when it comes to dining.
As a result, customer-facing technology will likely continue to evolve over the next few years. For example, providing customers with a more personalised dining experience or providing real-time updates on when food will be delivered to the table.
A continued focus on developing AI technology
The benefits of AI are clear for restaurant operators, so it makes sense that tech providers will continue focussing on how to enhance this technology even further. From back-of-house operations to restaurant processes and workflows, we expect AI technology to keep upping its game in the next few years.
In fact, we’re currently working on some new AI features to disrupt the industry even further.
Back in March, we secured $16M in Series A funding to spearhead the use of AI in hospitality. This means that we’re looking at new ways for our technology to support restaurant operators to grow their businesses.
“The industry is facing challenges and complexities like never before. Operators don’t want more tools and apps that digitise every micro-workflow. They need technology that can give them real control over their business, their profitability and their destiny.
Nory is on a mission to help systemise success for the restaurant industry and to stack the odds in their favour. Our Series A funding will help us on our path to building the world’s largest restaurant technology company.”
Conor Sheridan, CEO and founder of Nory.
Use Nory’s AI forecasting to boost your bottom line
AI forecasting is here to stay, and it’s easy to see why. The benefits speak for themselves, from cutting costs, optimising labour schedules, and boosting profit margins.
Sure, there are challenges to consider — like the cost of implementation and ensuring a smooth adoption. But these are just a few hurdles to hop in the grand scheme of becoming a more efficient and profitable restaurant.
If you’re thinking about using AI-powered technology but aren’t sure where to start, give Nory a try.
We understand how overwhelming it is to upgrade your technology, so we make it as simple as possible. We pull all the data together in one system, analyse it, and give you actions or recommendations to improve your business.
FAQs about AI forecasting
What type of AI forecasting do restaurants use?
Restaurants primarily use demand forecasting. These forecasts analyse historical sales data and external factors (like seasonal trends and weather patterns) to make predictions about customer traffic and restaurant sales.
What are the disadvantages of AI in restaurants?
The cost of implementation is one of the biggest concerns about implementing AI for restaurants. Although it can feel like a big upfront cost, the return on investment far outweighs the initial setup fee. Over time, a restaurant can reduce costs and optimise spending to increase revenue and boost profit margins.
Take a look at some of our success stories to see for yourself!
