Most restaurants close their doors within a year of opening. This occurs in the restaurant sector for a variety of reasons, one of which is restaurant cost management. Because of the low-profit margins in this sector, the owners can’t cut their restaurant costs to sustain their company for very long. In light of this, we have compiled a list of areas where you can cut restaurant costs in order to boost revenues.
To better manage your business costs, you must first understand where all of your money is going, i.e., what exactly are these business expenses which you need to manage to increase your restaurant’s profitability.
Types Of Restaurant Costs
1. Food Costs
Food cost is effectively the total cost of your current inventory’s food purchases. Beverage costs are typically excluded and counted separately, if not always. Food cost is one of the major investments in the restaurant business.
2. Labour Costs
The total of all employee wages, employee benefits, and payroll taxes paid by an employer constitutes the cost of labour.
3. Utility Costs
Restaurant costs also include the cost of utilities such as power, water, waste disposal, heating, and sewage, as well as telephone and WIFI (Internet) bills.
4. POS System Cost
It is the cost of a restaurant management software that you use to make your day-to-day restaurant operations simpler e.g. Billing, Online ordering, Reporting etc.
5. Marketing Costs
All expenses incurred by the business for the purposes of marketing, selling, building, and promoting its brand via online and offline mediums are referred to as marketing costs.
7 Tips For Cutting Restaurant Costs
1. Keep Track Of Food Costs
You need to track your finances and know how much you are spending on buying food products to better manage your business expenses. To keep the food costs to a minimum, you should first know the food cost percentage of your business.
Food cost percentage is the total cost of goods sold (COGS) of a restaurant divided by the sum of its sales into percentage terms.
Food Cost Percentage = (Cost of goods sold(COGS)/ Food Sales)*100 %
A good food cost percentage is between 25-30%. High-end restaurants have a higher food cost percentage.
2. Manage Your Labour Costs
If you are attempting to manage your business costs, labour costs will undoubtedly be a factor. Your labours consume a significant portion of your total capital invested in the business.
But, what if we told you there is software out there that can take care of all your restaurant’s day-to-day operations, thereby drastically reducing your labour costs? Petpooja is a POS software that manages all your operations such as billing, online ordering, inventory management, reporting, etc. efficiently.
By allowing the software to do its job, you and your employees can focus on other aspects of your restaurant operations such as building your brand, providing excellent service to your customers, finding new dishes for your menu, and so on.
3. Menu Engineering
4. Portion Control
To impress the customer, do not over-deliver the amount of food in a dish. This will result in increased restaurant costs and maximum waste. Keep track of how many dishes are frequently left unfinished by customers. It’s time to reduce the size of those dishes.
By keeping a limited menu for your in-house dine-in and even online delivery menu, you can reduce wastage, cut costs & offer what you best cook!
5. Inventory Management
It is essential to track the consumption of goods in your inventory on a regular basis. Keep track of what you buy with the intention of using it and what you actually use. How much of that stock is thrown in the trash every day? A 3-5% difference between ideal stock and actual physical stock is common but not more than that.
6. Buy In Bulk Or From Wholesalers
Bulk buying helps save money in the long run. But at the same time, if you don’t have the space & resources needed to store them, that investment might turn into a loss. You can also join a buying group that enables you to benefit from buying in groups at a lower price. When restaurants band together to form a purchasing group, they significantly increase their purchasing power and their negotiating influence with suppliers and vendors.
It’s an amazing way for smaller, local eateries to compete with big national chains that already have a lot of purchasing power.
7. Restaurant Data Analytics
While restaurant data analytics aren’t some kind of magic fix that will instantly boost your sales, they can provide you with insightful information that helps you make crucial business decisions to cut restaurant costs wherever you can.
With the help of Petpooja, you will receive simplified reporting software that will provide you with a clear picture of your restaurant’s performance without having to read a ton of reports. Click here to know more.
Restaurant cost cutting can be a confusing and tedious process. But, you can make it very simple by digitising the whole process by using good quality POS software for your restaurant.
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