Forecasting at Hard Rock Café

FORECASTING AT HARD ROCK CAFÉ

DON CLENDANIEL

DANIEL WEBSTER COLLEGE

Abstract

Answers to questions one and four in the case study for Hard Rock Café’s forecasting.

Question 1

Hard Rock Café uses three types of forecasting. These are long term forecasting for capacity issues, intermediate-term for supplies such as food, beef, and raw materials, and short-term for sales (Heizer & Render, 2011).

Three Forecasting Applications

One forecasting application used at Hard Rock is daily and hourly sales. Sales in the food industry vary by hour in perfectible patterns. Lunch and dinner sales are high while sales at 3:00 PM are typically low in most restaurants. Restaurants near attractions, retail, or industry location often follow sales trend similar to those of the establishments around them. Sales forecasting is important as it serves as the baseline for several other forecasts such as food, labor, and cash flow. A variance in the sales forecast to actual sales needs quick attention, in that several other areas will be affected. If sales fall below projection, revenue is decreased and cost is increased as unneeded labor is paid, and stock is wasted or contributing to shelf cost. If sales exceed projection, the result could be a decline in service as customer time in queue is increased and food is not available.

A second forecasting application used by Hard Rock relates to labor. Labor is related to sales in that $5,500 of hourly sales translates into 19 workstations (Heizer & Render, 2011). Labor in many businesses represents the largest single controllable expense. Forecasting labor needs based on sales is critical to overall profitable operation of the restaurant. If labor is not forecasted and schedules correctly, profits are decreased or quality suffers. Another labor forecast used by Hard Rock relates to managers’ bonus pay. Hard Rock pays bonus to managers based on a three year weighted average structure (Heizer & Render, 2011). This is important...