Just like every business, running a restaurant needs capital. The capital investment can be long-term like furniture and kitchen equipment or short-term like salaries and maintenance charges. Only once do you start planning on owning your own restaurant, is when you understand that the restaurant industry is one of the those that produce profits after a long time. There are multiple restaurant expenses that need to be managed to break even in this business.
As per a study, more than 50% of restaurants do not survive past one year. It could be horrible service, bad food, lack of proper marketing, faulty restaurant location or even lack of necessary capital investments. Sometimes, owners splurge extensively on restaurants without really weighing the ROI on their investment. And so, before opening a restaurant, the owner should analyse all types of expenses which occur while running the business.
Various Types Of Restaurant Expenses
Be it a small restaurant, cloud kitchen, bar or a renowned franchise, there are certain expenses that are common in all of them. And so are the ways these expenses can be managed.
1. Inventory and Menu Management
The best way for managing restaurant expenses is by setting a budget. For any and all restaurants, the largest share of the capital is invested in maintaining and managing kitchen inventory. Analysing the inventory expense and regulating it when needed would avoid splurging. This includes your raw materials and equipment needed for its storage. Essentially, the theme of your restaurant and the preference of the target audience is the biggest deciding factor in menu creation. The best way to manage investment is by understanding the per item inventory cost of raw materials and the average customer demand for the said item. For example, if chocolate chip cookie is your best seller then you would already keep in stock all the inventory needed to bake extra batches.
By understanding the inventory turnover ratio, the owner can channel capital when and if needed rather than hoarding stocks. This would cut down on wastage, spoilage and storing expenses. Finding suppliers who provide quality products at reasonable prices is also important. Every owner wishes to use the high-end best products in their kitchen. But this only adds to the expenses. And so, the target should be to acquire products that are essential and in setting a budget.
2. Salaries and Labour Cost
Salaries are another primary capital investment. In every business, there are many expenses that can be cut or avoided. But salaries and labour costs cannot be cut or delayed. Your employees are the biggest asset and so if they are not satisfied at their job, they are more likely to switch. And that is more likely to increase if there is no job satisfaction. Time to time appraisal, employee perks and insurances, bonuses and tip management are aspects that need to be managed by the owner. The restaurant might have trouble breaking even, but salaries cannot suffer because of it. Employee theft is also a major expense in restaurants.
A great way of cutting such expenses is by reducing your labour turnover ratio. Another way of saving money is by providing on-job training and cross-training of all the activities to your staff. For new owners assessing staffs’ work can be a difficult job. This can be managed by integrating PoS into your restaurant management. The PoS system actively records all the activities, billings and sales made by the staff while on duty. With the help of PoS owners can not just assess their work, but also understand loopholes in staff management and improvise accordingly.
3. Repairing and Maintenance Expenses
Not just opening a restaurant but even maintaining it is an expense. Along with the bigger expenses like furniture and equipment, there are many miscellaneous everyday expenses that, if not kept in check, can accumulate into a large chunk of capital being wasted. For this, it is important to keep track of each and every expense made in the business. Be in electricity costs, water bills, printing expenses and even the petty cash. It is obvious that the restaurant cannot reduce energy consumption during the restaurant operating hours. But the usage can be reduced during the opening and closing times.
Managing your restaurant in a sustainable method by reducing wastage and extensive consumption helps save money. Replacing your physical menu with cloud-based QR codes placed on each table can save on printing and re-printing menu cost. A great way of monitoring these expenses is with weekly or monthly assessments of accounts. Training your staff to manage miscellaneous expenses makes them conscious about wasting or misusing resources.
4. PoS Technology
Many restaurateurs would agree that employing PoS for their restaurant management is not an expense, but an investment. Every restaurant needs billing software that not just manages bills but helps the owner manage the entire business with the help of; be it sales, staff, inventory or reports management done without much hassle.
A great way for optimal usage of PoS technology is by training your staff is getting the best out of the software. This way, the owner does not need to micro-manage everything in the restaurant because the software would efficiently take over that task. The PoS must provide the owner with detailed reports about every aspect of the business. With effective reports, the owner can be carefree and focus on growing their business.
5. Branding and Marketing
No matter what the restaurant model, the marketing and branding of your business are very important. The main aim of restaurant marketing is to create a presence in the market. There are many aspects and ways through which you can market your restaurant. At the current time, digital marketing is the ideal way to create brand awareness. By creating a website and social media account, you can create an open channel of network for your restaurants.
Managing a restaurant, handling customers and creating a growth strategy is an overwhelming tasks. But if all these aspects are not kept in touch then that would lead to the failure of the business. Hope this blog was helpful. For more restaurant industry-related updates, subscribe to our newsletter and follow us on Instagram!