On the surface, restaurants that are consistently full seem like they would be the most profitable, but these restaurants might still appear to be losing money. This is because they could be wasting a great deal of money on unnecessary expenses. There are tons of small steps you can take to save money as a restaurant owner without sacrificing quality or customer satisfaction. Here are 25 of the best and simplest cost cutting strategies.
Reducing Restaurant Food Costs.
The biggest money drain in restaurants is food, and if food costs are too high, you should check first whether the following formula is correct:
The cost of the ingredients / Menu item price is the total.
Finding out how much money you spend on ingredients relative to how much you charge for each menu item is important. Ideally, your food cost should be somewhere between 15 and 30%, which would result in a gross profit of 70 to 85% per item.
By understanding how to lower the costs of food at your establishment, you can reduce your costs and increase your profits. What is food cost control? In other words, it is identifying the price of food at your establishment and learning how to lower it.
Here are some ways to pinpoint the causes of high food costs and eliminate them one by one. Here is how to reduce food costs in restaurant management, without further ado.
1. Eliminate menu items that are high-cost and low-profit.
Shelling out for the most expensive ingredients doesn’t always guarantee a dish is going to sell. Menu items that have high costs but aren’t selling could be bleeding you dry. If people are not interested in it, there is no reason to keep it on the menu. Wave goodbye to these menu items, and replace them with items you suspect your customers would love to try.
2. It is important to optimize your supply chain.
Food supply chains are extremely finicky, especially in the past few years. Finding the right vendors for all your inventory is tough enough as it is, it shouldn’t be complicated by overspending on delivery fees. It’s important to identify areas where your supply chain is losing you money, and to stick with one supplier as much as possible. Paying many delivery fees can get expensive, so if you can find a supplier who provides most of the ingredients you need, try them out, and you may save some money.
3. Customers’ unfinished plates are a huge source of food waste.
Have you noticed that one dish you serve never gets finished? You might as well throw your money straight into the trash if most customers can’t finish their food. Ask your staff if there’s a particular dish that they’re always throwing out leftovers from, and consider adjusting the portion size for that dish. In the end, customers won’t notice, and you’ll stop wasting food.
4. Get creative with older ingredients.
It is pointless to throw away still-usable but slightly less fresh ingredients, as long as they are still safe to use. For example, if the bread you serve at dinner is no longer fresh enough to be eaten as it is, you can make croutons from it. You can repurpose unused baked potatoes to make a hash. You can save money and food waste by being imaginative with older ingredients.
5. A well-organized menu helps you focus on the items that bring in the most money.
A good menu focuses on what you do well, not on satisfying everyone’s taste. In fact, long menus make customers less decisive and less satisfied. Restaurants with short menus are more likely to be successful, in part because they’re able to focus on a handful of dishes and get them right. If you’re best at making pizza, don’t provide options of burgers, pasta, barbecue, salads, and other things. By keeping your menu simple and focusing on the things you do best, you can avoid the problem of excessive choice, and steer people towards the more profitable dishes.
6. Use a food cost calculator to determine how much to charge for your meal.
Keep track of your food costs with a food cost calculator if you want someone else to do the hard work for you. Once this habit becomes ingrained, you will become much more aware of how much money you spend on food, and be able to save more.
7. Do a daily inventory of the items you use most.
Keeping daily inventory is crucial for any restaurateur. Concentrate on the ten items that make up the majority of your food costs and keep track of the quantity of each one at the beginning of the day. After the restaurant closes, count again to see how much of each item you used. An incorrect POS code might be a sign of employee theft or of food being wasted, or it might mean that you are over proportioning. Management software for restaurants can help you keep track of your inventory more easily.
8. Keep the number of suppliers down to a minimum
You can save money on food if you practice one-stop shopping for your supplies. As we discussed earlier, delivery costs will go down and supply chain uncertainty would be eliminated, but there’s much more to be gained by purchasing from just one supplier. By consolidating a relationship with a supplier, you can get better prices on large quantities of products or bulk order discounts.
9. Pre-measure ingredients for menu items.
Employees being overly generous with ingredients can become a real problem, especially if the ingredients are expensive. An extra pinch might not cost you if it’s pepper, but if it’s truffle, you’re losing money. To avoid this, pre-portion your ingredients, at least for more expensive menu items. This will also help to speed up service.
10. Hunt for seasonal ingredients.
Restaurants benefit from using seasonal ingredients. First, using seasonal ingredients ensures freshness and flavor, improving customer experience. Second, food is cheaper when it’s in season, which lowers food expenses. Third, you can entice your customers with a changing seasonal menu, which will keep them coming back to see what’s new each season.
11. Make sure to employ FIFO.
Using the “First In, First Out” (FIFO) method is an effective way to lower food costs. This means that the first ingredients to land on your shelves should be the first ones used. By labeling everything with its expiration date, you can make sure that your food doesn’t expire before you get a chance to use it. Place the oldest produce at the front so that your staff uses it first. That’s all there is to it!
Reducing Restaurant Labor Costs
The labor cost percentage is calculated by dividing your labor costs for a given period by the total revenue from the same period. Labor costs are one of the greatest expenditures for any restaurant owner. Here is how to reduce them.
12. Avoid employing too many people.
Having too many employees can be costly for restaurants. You don’t want to end up paying employees to stand around doing nothing. Identify your slow periods to ensure you have just enough people on the floor for everyone to stay busy. Be careful not to overdo it, make sure you have enough staff during peak hours to avoid the opposite effect.
13. Hiring the right people is critical to the success of any organization.
The right people can help you keep labor costs down in your restaurant. What does it mean to be the right person for your staff? You should seek out employees who are a good match for your restaurant’s culture and will assimilate immediately. These employees will work more efficiently, saving you from hiring multiple people to do the same job.
Don’t allow someone’s lack of experience to dissuade you from hiring them. If they seem suitable for the job and are willing to be trained, you may be able to take advantage of them. To reduce labor costs, employ people who are eager to work with you and want to be there for the long haul.
Finding solutions to other operational issues to cut costs
In restaurants, there are two ways to reduce costs without affecting the food or labor.
14. Reduce energy consumption.
There are simple ways to decrease energy consumption that require no extra time or effort on your part. For example, pre-soak dishes before washing them and only run the dishwasher when it is full.
Make sure to open the windows and turn off the AC when it’s nice outside. Replace all incandescent bulbs with efficient ones and consider purchasing energy-efficient appliances. These sorts of things can make a big difference in your electric bill.
15. Take advantage of free marketing opportunities.
You don’t have to slash your budget to advertise your restaurant. There are tons of free or low-cost marketing strategies you may use. Utilizing social media platforms such as Facebook, Instagram, and Twitter can help get your brand out without spending any money. You could also learn how to promote your establishment on our blog.
16. Consider purchasing used appliances and equipment.
Buying used is one of the best cost reduction strategies in restaurants. You don’t have to purchase everything new. Save money and become more environmentally friendly by finding great appliance deals. Lots of restaurants and other foodservice businesses have closed down, leaving behind barely-used appliances for sale. You can also repurpose vintage or thrifted furniture such as tables and chairs.
17. Keep expensive alcohol locked up.
Unfortunately there’s no avoiding the reality of employee theft. The most frequently stolen items are expensive spirits. Keeping nice bottles locked up is the best way to prevent this from happening. You may keep the key yourself or give it to the manager for safekeeping.
18. Go for reusable products over single-use.
Sure, it can be easier to use single-use products than to maintain reusable ones. However, some are pointless and wasteful. For example, bulk dispensers are better than individually wrapped salt and pepper packets or wrapped straws. You can cut down costs by getting linen napkins and washing them instead of continuing to order disposable ones. This also has added benefits for the environment.
19. Go digital to reduce paper use.
Keeping track of your kitchen inventory, finances, and files digitally will make your job much simpler. Not only will it save you money on file folders and reams of paper, but it will also save you time. Regularly backing up your digital files will save you money and increase your peace of mind.
How can restaurants reduce expenses during COVID?
These cost reduction techniques in the food industry are extremely helpful during the COVID-19 pandemic.
20. Provide a free online ordering service.
A large number of eating places are relying on food delivery to survive these hard times. For the time being, investing a great deal of money in an online ordering system is out of the question. GloriaFood is a great example of this type of service.
21. Optimize your restaurant’s delivery menu for customer satisfaction.
There are certain dishes that simply do not travel well. It would be better to offer a limited delivery-only menu with fewer items. This would mean fewer ingredients, which leads to less money spent and less prep time. You can then serve more customers in less time and earn more money at the end of the day.
22. Support your employees.
Everybody is suffering during this recession, particularly restaurant workers. In order to keep employee morale high, let them know that they can approach you with any issues, and make an effort to celebrate their achievements.
If the worst occurs and you have no tables to serve, ask your front-of-house team if they would be willing to help out for a bit. They will likely be grateful for your effort to keep them rather than letting them go since you will most likely need them to stay.
23. Attempt to negotiate with your landlord and suppliers.
You can negotiate the price of ingredients based on extraordinary circumstances like the COVID pandemic if you have a good relationship with your suppliers. The same is true for rent or even utilities.
Is negotiating a package deal with your utility company something you’ve tried? You may be able to leverage your long tenure as a customer by signaling that budget constraints might force you to switch providers.
24. Form waste-reducing habits.
Having too many freebies, such as condiment packets, napkins, and plastic utensils, in takeaway bags can cost you a lot of money. To avoid this, replace these habits with ones that require us to pay more attention when packing a delivery bag. For example, ask if the customer would like utensils included when they place their order. Train your employees to do this to incorporate it into everyday practices.
25. Consider reducing the hours of operation.
Keep your restaurant open only during your peak hours for now, if at all. This approach, while not optimal, may help you save money during the outbreak. You may also reduce dine-in hours and focus on deliveries for the remainder of the day.
No matter what, keep your cool.
