Forecasting at Hard Rock Cafe
Hard Rock uses forecasting to predict retail sales, banquet sales and concert sales at each of its cafes in the world. For example, the general manager of each cafe uses the financial report from the previous year’s sales to predict daily sales for their cafes. They also use information from the Local Chamber of Commerce or Tourist Board on any upcoming events like concerts, major conventions and sporting events which are to be held near the location of the cafe tom predict sales for that day (Wallace &Layton 2003). The daily forecast is then broken into hourly sales where an hourly forecast translates into 19 workstations.
The variances between the actual sales and the forecasted sales are then examined to determine why errors had occurred. The cafe also uses forecasting to evaluate managers and set bonuses where a 3-year weighted moving average is applied to cafe sales. A bonus is computed to the managers who are found to have exceeded their targets. Hard Rock Cafe uses forecasting for menu planning. The cafe managers use multiple regression analysis to determine or compute the effects of demand on other the menu items if the price of one item is changed (Wallace &Layton 2003).
For example, when price of an item like cheeseburger changes, managers use forecasting to predict the price impacts on he sale of salads. Hard Rock Cafe could use forecasting to predict the prevailing market trends like inflation, unemployment, consumer preferences and household income. Evaluating the market trends is very important for business survival. High level of inflation is accompanied by a high level of unemployment and low household income which in turn leads to low sales for Hard Rock Cafe (Wallace &Layton. 2003).
By predicting the above factors, the cafe will be in a position to determine what to sell and at what time depending on the prevailing market conditions. Role of Point-of-Sale system in Hard Rock forecasting The point-of-sale system (POS) is used to track transaction data on almost every person who walks through a cafe’s door (Leposky, G. 2009). The sale of each person entered into the system represents one customer and the data is later transmitted to the financial team or the Orlando corporate headquarters’ database.
Mainly, this system is used to forecast sales in the each cafe. Good predictors of sales Consumer price index (CPI), unemployment, market position, consumer preferences, product trends, Household income and economic trends are some variables which can be used to predict daily sales in Hard Rock Cafe. Since the cafes are located in different locations, a market research should at be conducted to obtain information concerning the consumer price index, market position, economic trends like inflation which leads to unemployment (Leposky, G. 2009).
Through the market research, the managers will be able to obtain information concerning the cafes market share, its competitors and the cafes overall public image. This information will be used to evaluate the size and quality of the customers so as to be in a position to determine the consumer’s response to advertisements, brand loyalty and economic viability which could be good predictors of sales in Hard Rock Cafe. Through a market research the managers will be able to determine the level of inflation in the different countries where the cafes are located.
When inflation rate is high, many employers tend to retrench some of its workers so as to reduce cost of production which in turn leads to high unemployment level and a reduced household income. The managers of Hard Rock Cafe should use this information to forecast sales for the company (Wallace &Layton 2003). This is because, high household income would lead to a high consumption and hence high sales and low household income would lead to a low consumption of the cafes products and hence high sales.
Information obtained concerning the economic conditions can be used by the cafes forecasters to correlate the sales obtained from the cafe and General Price Level and inflation. This means that this information is important for the cafe to determine the rate of growth in the market hence being in a position to predict sales. High market growth rate is a good indicator which can be used by the managers to forecast sales from the recent sales history since a high market growth leads to a high consumption rate and hence high sales (King, B. 2002).
Hard Rock Cafe can also analyze its performance compared to other cafes. If the performance is promising then it would mean that the cafe is having a competitive advantage. An unfavorable forecast of such patterns may make the management to change its competitive strategies or make it to concentrate on the strategy which seems to be fruitful. The cafe managers may also use the product trends to forecast sales trend for the cafe products. These patterns include price indexes which are very important for the mangers to the product life cycle (Wallace &Layton. 2003).
The cafe managers can also use this information to separate performance of any similar products and also to evaluate the products weaknesses and strengths. References Leposky, G. (2009). Choosing a Business Location. Accessed November 11, 2009, at http://members. aol. com/amprsnd/location. html William Wallace &W. T. Layton, (2003). Business Forecasting and Its Practical Application. Kessinger Publishing. Pp 1-3. King, B. (2002). 100 America’s most logistics-friendly cities. Transportation & Distribution. Cleveland, P 14-28.Sample Essay of StudyFaq.com