Running a restaurant is expensive. High fixed and working costs like labor expenses, inventory expenses etc. make maintaining costs difficult. With COVID-19 having a massive impact on the restaurant industry, maintaining restaurant costs has become more important than ever.
The sudden outbreak of the pandemic and it's large-scale effect on restaurants has brought about the realisation of the importance of optimizing restaurant costs in order to stay afloat during unprecedented circumstances like these. Although difficult, minimizing restaurant costs is definitely not impossible.
Here are a few ways you can reduce your restaurant expenses:
1. Create a budget - and stick to it
This one might seem like a given, but many restaurant owners do not consider having a strict budget important to their restaurant operations. Having a structured budget is the first step towards optimizing and minimizing your restaurant costs as it helps you to gain a proper understanding of your spending - are you stocking up on too much inventory? are your labour costs too high? The only way you can gather clarity into your spending is through a budget.
Of course, just having a budget is not enough. Make sure you keep track of it, make necessary adjustments, and adhere to it. Sticking to your budget will prepare you and help you in overcoming any unpredicted circumstances.
2. Optimize your inventory
Raw materials and other restaurant stock make up for a huge chunk of your monthly expenses, so it's a good idea to keep a check on your inventory to make sure that it as optimized as possible.
Inventory management is an important tool that can help you manage and reduce restaurant expenses. Make sure to take inventory as frequently as possible, at least once a week, and organize the inventory properly to recognize any over-stocking that may be leading to food wastage and increased costs. Intricate practices like measuring and weighing each product can help you make your inventory management more effective by providing an accurate record of your produce.
Specially in unprecedented times like these, it is crucial to take a look at your inventory and minimize or temporarily stop stocking a few materials that might be not be necessary.
3. Reduce food wastage
Food wastage is not just limited to your restaurant's inventory, it goes far beyond it. An average restaurant wastes upto 75,000 pounds of food annually, and for a restaurant, food in the bin=money in the bin. Apart from inventory management, there are a few other practices that can help you reduce food cost, as follows:
- Try to use every ingredient to it's maximum potential. Often restaurants tend to discard off any "off-cuts" or "extras" leftover after cooking, that is a big mistake. Work towards incorporating these extras into your menu - have vegetable off-cuts? Create a delicious vegetable stock, and so on.
- Create structured prep lists for each person working in the kitchen that strictly defines all preparation rules to make sure that there is no over preparation or wastage of materials
- Reuse anything that can be reused. Use stale bread to create breadcrumbs, or bruised fruits to make a cocktail - nothing goes in the bin
- FIFO: Always use the "first-in, first-out" rule with produce. Label each product to make sure the oldest ingredient gets used first to save them from spoiling.
4. Reduce food costs
When you’re in the restaurant industry it’s not unlikely for your main products to also be your biggest financial drain. That's because without practicing food cost control methods at your restaurant, it is very easy to start slipping into the red. A few small changes in your restaurant, such as managing inventory, controlling portions in the kitchen, calculating food costs regularly, and menu engineering can have a massive impact on your finances.
The best practice is to run the food cost calculator on every menu item to get an insight into the profitability of your menu. Make sure to do this regularly - ingredient prices change often and with it, your profitability.
5. Make your staff your biggest asset
A well trained task-force may seem like an added expense, but in the long-run, it significantly contributes towards optimizing your expenses. Train your staff to perform at their very best - this will help streamline your FOH & BOH operations. Another important aspect to focus on is employee morale. Make sure to keep spirits high, specially during difficult times, by offering them any support they need and recognizing their efforts. Employees with high morale are less likely to leave, therefore leading to a reduced employee turnover and lower employment costs.
6. Embrace technology
We live in the digital age, technology has taken over and automated various manual processes, making them easier and highly optimised. Restaurant operations are no different. Many technologies, including online reservation systems, restaurant management softwares, inventory management softwares, digital menus, modern POS systems etc. have made restaurant management streamlined and a lot more efficient.
By incorporating the right technology, restaurant owners can significantly reduce their costs. For example, a restaurant management software can give you an insight into your restaurant's busy hours so that you can take staffing decisions accordingly.
7. Optimize your menu
Having an extensive menu with a large variety of items can be more harmful than advantageous for your restaurant, as it leads to a larger list of raw materials, larger inventory and longer preparation time. Try to trim down your menu to dishes that diners actually enjoy. Remember, quality is always better than quantity.
You can also take-up menu engineering, a process that entails carefully analysing the profitability & popularity of individual menu items, which can help determine the items that can be trimmed down, therefore creating an optimized menu.
8. Make the most off low-cost marketing
Though spending a large chunk of your budget on marketing is not always a bad idea, it's easy to go down a slippery slope and spend too much on marketing. Many low-cost marketing practices can promote your business significantly. Social media platforms like Instagram & Facebook and other marketing activities like email marketing and blogs help you reach a wide audience at a fraction of the cost. Make sure to maximize the effectiveness of these platforms, specially during times when the budget is tight.
9. Negotiate with your suppliers
Most restaurants depend on a limited number of suppliers for their regular inventory needs. Maintaining a good relationship with your regular suppliers can enable you to negotiate your raw material expenses, specially during unusual circumstances. Ask them for a discount on your frequent orders; if you have a long standing relationship, they are likely to agree on the basis of goodwill.
You can also order in bulk but have staggered shipment of your produce to get a lower price on the basis of volume and also avoid it from going bad. Not every distributor offers this option, if yours does, take advantage of it.
9. Become energy efficient
Being energy efficient doesn't just save the planet, it also saves your pocket. Switch to less energy consuming appliances, even the smallest bits count - from light bulbs to the heavy-duty kitchen appliances used all day. Energy efficient appliances will almost always come at a higher initial price, but will save you a lot more money in the long-run. You should also be wary of energy leakers - appliances that consume energy even when switched off, and make sure you follow proper protocol to minimise the leak as much as possible.
10. Be wary of overstaffing
Labor costs are one of the highest working costs of a restaurant, and for good reason. There is nothing worse than an understaffed restaurant during rush hour. However, restaurant managers need to be aware of their staffing needs to avoid any overstaffing that may be leading to an unnecessary increase in expenses. It's important to understand your restaurant's peak & non-peak hours and distribute staff accordingly. Staff schedules should be made to meet the demand of anticipated sales.
If your restaurant is popular during lunch on weekdays, staff a few extra employees for the lunch shift, but reduce the number for the dinner shift. If your restaurant is busier during weekends, have limited staff during the week. This will help you minimize your labor costs without affecting your standard of service. A restaurant management software can provide you an insight into your restaurants' peak & non-peak hours. Cross-training staff to perform various activities can also help reduce the number.
11. Build Economical Habits
Most of the time, the devil is in the details. Restaurants lose a lot of money on things that usually miss the eye, like handing out extras to customers - extra condiments, extra tissue paper, extra bags. It's easy to not pay attention and just toss 5 packs of condiments in a single order, but it leads to a significant increase in expenses in the long term.
Train your staff to be more economical with their habits - self-packing a limited amount of condiments for every package and providing extras only when requested, being aware of what is getting thrown away, not using anything more than required etc. These small trimmings can save your restaurant from going over-budget.
10. Be prepared
The biggest lesson that restaurants must take from the current COVID-19 situation is the uncertainty of the future. As a restaurant owner, it is extremely important to be prepared for any unusual circumstances that may disrupt the restaurant's operations. Although uncommon, it's always best to have proper guidelines to be followed during such unprecedented situations to help the restaurant survive the storm and also support its employees as much as possible.
Restaurant expenses are hard to control and can be tedious, but the effort put into minimizing these costs can be the difference between a restaurant staying open or shutting its door during difficult situations. It's always the tiny details, things that are often neglected, that make all the differences. Even if you think that your restaurant costs have reached maximum efficiency, spend some time to make sure that you are not missing out on any details.