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Forecasting at Hard Rock Cafe With the growth of Hard Rock Cafe - from one pub in London Hard Rock doesn't limit its use of forecasting tools to sales. in 1971 to more than 145 restaurants in 60 countries today - came To cvaluate managers and set bonuses, a 3-year weighted moving a corporatewide demand for better forecasting. Hard Rock uses average is applied to cafe sales. If cafe general managers exceed long-tange forecasting in setting a capacity plan and intermedi- their targets, a bonus is computed. Todd Lindsey, at corporate ate-term forecasting for locking in contracts for leather goods headquarters, applies weights of 40% to the most recent year's (used in jackets) and for such food items as beef, chicken, and sales, 40% to the year before, and 20% to sales 2 years ago in pork. Its short-term sales forecasts are conducted each month, by reaching his moving average, cafe, and then aggregated for a headquarters view. An even more sophisticated application of statistics is found in The heart of the sales forecasting system is the point-of-sale Hard Rock's menu planning. Using multiple regression, manag(POS) system, which, in effect, captures transaction data on nearly ers can compute the impact on demand of other menu items if every person who walks through a cafe's door. The sale of each the price of one item is changed. For example, if the price of a entrie represents one customer; the entrete sales data are transmit- cheeseburger increases from $7.99 to $8.99, Hard Rock can preted daily to the Orlando corporate headquarters' database. There, dict the effect this will have on sales of ehicken sandwiches, pork the financial team, headed by Todd Lindscy, begins the forecast sandwiches, and salads. Managers do the same analysis on menu process. Lindsey forecasts monthly guest counts, retail sales, ban- placement, with the center section driving higher sales volumes. quet sales, and concert sales (if applicable) at each cafe. The general When an item such as a hamburger is moved off the center to one managers of individual cafes tap into the same database to prepare of the side flaps, the corresponding effect on related items, say a daily forecast for their sites. A cafe manager pulls up prior years' 'french fries, is determined. sales for that day, adding information from the local Chamber of Commerce or Tourist Board on tpeoming events such as a major convention, sporting event, or concert in the city where the cafe is located. The daily forecast is further broken into hourly sales, which drives employee scheduling. An hourly forecast of $5,500 in sales translates into 19 workstations, which are further broken down into a specific number of waitstaff, hosts, bartenders, and kitchen staff. Computerized scheduling software plugs in people based on their availability. Variances between forecast and actual sales are then examined to see why errors occurred. - These figses are ssed for purposes of this cirse thody. Discussion Questions* 1. Describe three different forecasting applications at Hard Rock. Name three other areas in which you think Hard Rock could use forecasting models. 2. What is the role of the POS system in forecasting at Hard Rock? 3. Justify the use of the weighting system used for evaluating managers for annual bonuses. 4. Name several variables besides those mentioned in the case that could be used as good predictors of daily sales in each cafe