Forecasting Restaurant Sales
The C’mon Back Restaurant in Puerto Rico is owned and operated by
Theotis Jones. The restaurant just completed its third year of operation.
During that time, Theotis sought to establish a reputation for the restaurant
as a high-quality dining establishment that specializes in fresh seafood.
Through the efforts of Theotis and his staff, his restaurant has become one of
the best and fastest-growing restaurants on the island. To better plan for
future growth of the restaurant, Theotis needs to develop a system that will
enable him to forecast food and beverage sales by month for up to one year in
advance. The following table shows the value of food and beverage sales
($1,000s) for the first three years of operation (the data are also in the file
“Ch5 Forecasting”):
Managerial Report
Perform an analysis of the sales data for
the restaurant. Prepare a report for Theotis that summarizes your findings,
forecasts, and recommendations. Include the following:
- A time series plot. Comment on the
underlying pattern in the time series. - Using
the dummy variable approach, forecast sales for January through December
of the fourth year. How would you explain this model to Theotis?
Assume that January
sales for the fourth year turn out to be $295,000. What was your forecast
error? If this error is large, Theotis may be puzzled about the difference
between your forecast and the actual sales value. What can you do to resolve
his uncertainty about the forecasting procedure?
