Running a profitable restaurant is hard. With small profit margins, controlling costs is crucial. This article will outline a 4-step approach to significantly reduce expenses in your restaurant without negatively impacting food quality, service levels, or staff.
Implementing these strategic cost control measures can increase your profit margins by up to 15%. That money can then be reinvested into growing your business. Keep reading to learn how to add thousands to your bottom line!
Step 1: Identify Your Most Wasteful Areas
First, dig into your finances to reveal where your restaurant is bleeding the most money. Maintain detailed records of all costs for at least one full month. This allows you to spot problems. Look for waste in:
Food Costs
Ingredients
- Overordering ingredients
- Ingredient loss due to spoilage/expiration
Kitchen Operations
- Over-prepping ingredients
- Cooking mistakes that must be discarded
Portion Control
- Over-portioning meals
- Customer plate waste
Theft
- Employees eating food without paying
- Inventory vanishing from storage areas
Labor Costs
Scheduling
- Too many staff scheduled during slow business hours
- Employees working more hours than customer volume warrants
Organization & Efficiency
- Staff duplicating duties or standing idle
- Inefficient kitchen workflow
Controllable Operating Expenses
Purchases
- Buying more restaurant and office supplies than necessary
- Overpaying for goods due to lack of comparison shopping
Utilities
- Old equipment and appliances wasting energy
- Thermostats not set optimally
Once you identify your hot spots for waste, you can take targeted action to control costs.
Step 2: Trim Food Costs
With food costs chewing up 25-35% of revenue for most restaurants, this should be a prime target for expense cuts.
Negotiate Better Deals with Vendors & Suppliers
- Get quotes from different vendors for the same products
- Use them as leverage to get 5-15% lower rates from current vendors
- Ask about further discounts for bulk purchases, prompt payments, etc.
Standardize Recipes
- Create specific recipes for every menu item listing exact amounts of ingredients needed and proper cooking methods
- Minimizes overbuying and over-prepping ingredients
- Reduces food waste from kitchen mistakes
Control Portion Sizes
- Weigh or measure all menu items to ensure proper portioning
- Reduces customer plate waste which hurts profits
Improve Inventory Management
- Track all ingredient usage and waste daily
- Update orders to match needs based on recipes and sales trends
- First In, First Out (FIFO) rotation controls spoilage from expiration
Proper food cost controls can save 8-12% on this major expense.
Step 3: Optimize Staffing & Labor Efficiency
Labor is likely your biggest controllable operating expense, often reaching 30-35% of revenue. But there are many opportunities to improve staffing efficiency:
Track & Predict Sales Patterns
- Analyze sales data from the past year
- Identify peak hours for each day of the week
- Schedule more staff for the lunch and dinner rushes
- Have fewer staff during slower mid-afternoon stretches
Cross Train Employees
- Train all staff on different roles like server, host, busser, etc.
- Makes it easier to move workers between sections to meet demand
- Provides flexibility to adjust to sales fluctuations
Adopt Scheduling Software
- Considers past sales data, budgets, and employee skills when creating schedules
- Greatly reduces labor hour waste from overstaffing or understaffing
Standardize Kitchen Processes
- Define specific duties, workflows, plating guidelines, etc. in kitchen
- Ensures efficiency and consistency between staff and shifts
Proper labor management tactics can save 8-15% on monthly staff costs.
Step 4: Reduce Controllable Operating Expenses
Finally, look at other controllable expenses that eat into profits:
Renegotiate Supplier Contracts
- Get new quotes for linens, paper goods, cleaning services, etc.
- Leverage them to get 5-10% discounts from current vendors
Adjust Thermostats
- Program temperatures to slightly adjust during closed hours
- Avoid wasting money heating or cooling empty dining rooms
Upgrade Equipment
- Replace old kitchen gear and lighting with energy efficient models
- Saves significantly on electricity and gas bills long-term
Buy Supplies Strategically
- Order items like cleaners, utensils, office supplies in bulk
- Cuts per unit costs by 20-40%
- Partner with other restaurants to buy larger volumes
Careful management of operating expenses can reduce these costs by 10-15% every month.
Conclusion
Controlling costs in your restaurant takes effort but delivers big rewards. Follow this 4-step approach to strategically target waste across your business. Trim expenses without affecting food quality, service, or staff morale. The savings directly boost your profit margins, allowing you to re-invest in growth and success.
FAQ’S
The three biggest costs are food ingredients, labor, and occupancy expenses like rent. On average, food is 28-35% of costs, labor including payroll and benefits is 28-35%, and rent is 8-12%
The three biggest costs are food ingredients, labor, and occupancy expenses like rent. On average, food is 28-35% of costs, labor including payroll and benefits is 28-35%, and rent is 8-12%
Excess food waste is the biggest source of monetary losses. Between overbuying ingredients, over-prepping food, and plate waste, most restaurants lose 6-10% of revenue to food waste.
Careful tracking of current ingredient levels paired with recipe adherence and portion control can reduce food costs by 10-15%. First in, first out rotation also minimizes spoilage from expiration.
