Cost Reduction Strategies for Restaurants

Cutting restaurant costs without compromising on the quality and guest experience has always been challenging for owners and managers. With the onset of the new normal, restrictions on operations and  increased spending on maintaining sanitation and hygiene have led to a sharp decrease in profits.

If you are searching for the right way to trim your budget, here is how you can streamline your expenses to achieve profitability while also maintaining quality.

Operating cost is simply the sum of all things that involve or require payment. Operating costs for the food service industry involve payroll for the staff, rent and food costs. While some costs are fixed costs, others are variable and semi-variable costs. Fixed costs are the same month over month, variable costs change over time and semi-variable costs are a combination of both.

Operating expenses are the maintenance and administrative costs of running the business on an everyday basis. Although these expenses might not be directly associated with the business, they are essential for operation. Operating expenses for a restaurant include POS, acquiring restaurant tech licenses, paying for utility costs like energy and water, procuring kitchen equipment and undertaking repairs.

Restaurant cost control is an analysis of the business’ financial performance, setting achievable and realistic financial benchmarks. This process starts by setting projections which are then compared to the restaurant’s actual performance. One can then work on improving factors that are leading to differences between the set benchmark and the actual performance.

Understand the restaurant’s cost control to maximize profitability. Identify each and every factor that requires expenses to save money and time in future.

Cost control does not necessarily mean cost cutting. When restaurants face revenue loss, they immediately try to adjust the situation by laying off employees or reducing food quality, advertising budgets and maintenance. Although these moves will help sustain the bottom line, they will eventually diminish guest experience.

Cost control practices are meaningful only when they are well thought out or planned meticulously with an aim to maximize profits, evaluate current processes and optimize the best-in-class experience.

While restaurants certainly need inventory to function properly, they must not overbuy for any reason. To limit waste and spoilage, the inventory on hand must be reduced. With  limited available inventory, the staff will also be able to handle and portion the products better.

Restaurant owners must make maximum use of inventory. This can be done by using scraps to create new dishes for the menu. For instance, use onion skin, carrot tops, chicken bones and celery leaves to prepare a broth. By using every last bit of food and reducing wastage, costs can be reduced to a great extent.

One must do the math for every food item, especially at times when the margins are lean. Adding up the cost of the ingredients makes calculations easier. Check this cost against the menu prices. Find out if the costs are leading to a profit or loss and if there is any way you can adjust the menu to remain profitable. 

Very few restaurant owners and managers can devote ample time and energy to keep track of every penny that is spent. A good software can simplify the process as it integrates inventory, sales data, payroll costs and other operating expenses. Spending on such robust software should be seen as an investment as it saves your money and time in the long run.

Most restaurants source ingredients from various sources, through multiple vendors. But, by working with a single supplier who has the capacity to supply most of the products you need, you can lower overall prices. Enter into a prime vendor agreement that promises lower prices for the stipulated period.

Making employees work in the restaurant every day on a set schedule is not going to be useful as restaurants do not always stay busy throughout the week. Restaurant owners must identify the busiest and slowest times and adjust their work schedule so that employees are not idle, eating into your bottom line.

Since restaurants operate on a razor thin margin, one must be careful with the ingredients. Instruct the staff to pre-portion the ingredients during times when the restaurant is not busy. Portioning ingredients ahead of the preparation time speeds up cooking time and curbs additional expenses due to overly generous portions.

Restaurant operations require a number of highly skilled employees like chefs and bartenders. But, if only one person can do a specific task, labor cost increases. Cross-training employees will reduce the number of staff required. When one employee takes on a range of tasks, money can be saved to a great extent.

The First In, First Out (FIFO) method is a clearly straightforward and effective way of lowering costs. This means that restaurants should 2 utilize the food and ingredients before their expiry date. If the oldest produce is placed in front, the staff will use it up first and reduce the chances of waste.

Energy optimization can be achieved by following just small steps that require no additional effort. For instance, dishes can be soaked before washing, dishwashers can be run only when it is full, etc. Air conditioners can be shut down and windows can be opened when the weather is nice outside. Restaurants can also use energy efficient appliances and lights for saving energy.

Using the food delivery facility has kept many restaurants running even during trying times. Restaurants can either deliver food themselves or rely on third party food delivery apps. Restaurant owners need not invest a lot of money in online ordering systems. Such systems are integrated into free restaurant website building sites.

Go digital, reduce paper usage

Embracing the digital way to organize the kitchen, inventory and finances makes the job easier and cost effective by reducing usage of file folders, reams of paper and so on. Maintaining digital files and taking their backup copies can be done effectively even on a shoestring budget.

This blog would have helped you realize the ideal ways of cost reduction without affecting the restaurant’s operations. If you need more assistance in restaurant digital marketing, get in touch.