High start up and operational costs can oftentimes make running a restaurant feel like a bottomless money pit. As a result, restaurant owners are constantly looking for new methods of saving money without having to skimp out on quality.
One of the first methods restaurant operators turn to is usually trying to lower their food cost. While this strategy might work for a while, ultimately a restaurant's food cost should only account for about 25% of total expenditure. Meaning, the other 75% of money flowing in and out of a restaurant also needs to be considered and optimized.
Below is a typical restaurant cost structure for a medium quick service restaurant.
Restaurant Cost Structure:
- Marketing - 10%
- Rent - 10%
- Labor - 15%
- Overhead - 20%
- Food Costs - 25%
- Net Profit - 20%
As seen above, average food cost shouldn't go above 25% of your total restaurant costs. If you've already taken the time to pinpoint the causes of your high food cost, and experimented with food cost saving ideas, your efforts aren't entirely wasted.
There are numerous other outlets within your restaurant to save money. Namely, labor, overhead, and marketing. This article will go over a few simple changes you can make at your restaurant today that can make a world of difference in terms of savings.
Involve your employees
Cutting costs at your restaurant begins with involving your employees. If you keep them in the dark about what needs to be done, you can't expect anything to change in the long run. Involve them in the process, let them know exactly how much is being spent on day to day operations, and what they can do to help lower those numbers.
Once they are a part of the process, they are more likely to do what they can to help the restaurant.
Run a more efficient restaurant
A number of changes can be made around your restaurant to easily cut costs.
When possible, only operate the dishwasher when its full. Turning it on when there are only a few plates to clean is a waste of money and water. Setting a dish washing schedule based on peak hours can drastically improve your savings.
Another method of cutting costs is to switch all your conventional light bulbs to LED ones. Despite being slightly more expensive to purchase, in the long run they will cut down electricity costs and replacement costs.
LED bulbs also radiate a lot less heat meaning you will save on AC costs.
Your restaurant will most likely have a walk in freezer. Every time you open the door to the freezer, you are letting cold air out, which requires more electricity to cool again.
Instead of going in and out many times over the course of a day, try to get as much as you can in and out every time.
Cutting costs at a restaurant isn’t just restricted to the kitchen and dining room, it also extends to the bathroom. Replace your conventional toilets with low flush toilets to cut back about 80% of wasted water.
Get rid of poorly performing dishes
After running a restaurant for a couple of months, you should quickly be able to gauge which dishes are doing well and which aren’t. Get rid of the ones that don’t sell. Having to buy ingredients for dishes that don’t sell can be a drain on your finances with no long-term gain.
Rewarding employees for cutting costs seems a bit counter intuitive, but rewards don’t always have to be monetary. For starters, just pointing out that you noticed them doing something that is in the company’s best interest can do wonders to their productivity and motivation at the work place.
If you don’t already have an employee of the month program, now would be a great time to start one. Although a non-monetary reward, the recognition of their good work is sometimes more than enough to keep employees motivated.
Rethink your menu
If you haven’t already done so, calculate the food cost of each item on your menu. This will not only help you understand the profitability of each of your dishes but also what prices to give each dish. Cutting cost isn’t just about saving money, it also involves making sure everything is as profitable as it can be - i.e., menu engineering.
Get rid of redundant staff
You probably have more staff at your restaurant than you need. Take the time to evaluate each of your staff members for efficiency and effectiveness. You will be surprised how many of your employees aren’t contributing much to the day-to-day operation of your restaurant.
Tip: A table management system that tracks waiters and restaurant staff is a great way to monitor which of your employees are performing their daily tasks and which aren't.
While customers love a restaurant that serves freebies before a meal, this is a restaurant operator’s nightmare. Despite keeping customers coming back for more, these freebies just act as a financial drain.
Instead of offering freebies to every table, instead only serve it to tables that ask. This also applies to water. By giving guests free water, you are essentially eliminating the chances of them ordering something that costs money. By holding back on the free water, they are more likely to order a cocktail or a soda to quench their thirst.
Practice portion control
When cutting costs at your restaurant, no stone should be left unturned, and this means portions need to be standardized. A little extra food on each plate might seem like nothing, but when you are serving 100+ plates per day, this really starts to add up.
Come up with a system to standardize your portions, in the long run your customers will not notice the change but your wallet definitely will.
Are you spending a ton of money on paid marketing and advertising? While this is essential for a restaurant to get visitors, a similar effect can be achieved for free using social media. With the help of Instagram, Facebook, and Twitter, restaurants can now reach their customers in a way they were never able to before. And at zero cost.