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March 15, 2023

What Can I Do To Save My Restaurant Money?


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POS Used

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Running a restaurant is hard - hiring and retaining staff, managing vendors, dealing with price inflation, keeping up with new competition, responding to higher customer expectations - it's a lot! Here are some tips to help you keep costs in check.

1. Know your food cost and review your menu regularly.

Food cost is usually one of the top two controllable cost line items (along with labor). Start by figuring out what your food cost needs to be for your restaurant to be profitable. Next, engineer your menu so you can hit that number. When pricing your menu not every item will have the same food cost margin - some items might have a 40% cost while others have a 20% cost, but if you sell more of the 20% cost items you could average out to your target of 27%.

Look for menu items with a relatively high food cost that don't sell very well - these are candidates to drop from your menu. Next, look at your best sellers make sure the food cost on those items isn't too high. Finally, identify your highest margin items like drinks and desserts and find ways to promote them.

Whenever you make pricing changes make sure you consider what your customers are willing to pay. You can ask your customers directly, and you can also research what other restaurants in your area are charging for similar items.

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2. Negotiate with your suppliers.

Ask your vendors for discounted pricing in exchange for volume commitments. Consider buying from local suppliers instead of national distributors - they actually might be less expensive with better quality. Another way to save money is to switch to less expensive products. However, you need to be careful with these swaps to make sure you don't sacrifice the quality of your menu items.

Finally, consider swapping to products that are slightly more expensive but would save prep time - for example, buying shredded cheese instead of buying blocks of cheese and shredding it yourself. This could increase your food cost slightly but pay off by reducing labor time and cost.

3. Reduce waste where possible.

This means being careful with how food is prepared, stored, and served. Prepare only the amount of food you can sell before the end of its shelf life. This might mean reducing the batch sizes, which can have the added benefit of increasing the freshness of your product. Invest in the right tools to properly portion food, including electronic scales and scoops.

Involve your kitchen staff in reducing waste by asking them to keep track of a waste log during and after their shifts. Make sure all food that going out of the kitchen has a ticket, even if it's going to be comped. This will allow you to better track how much food you're giving away. You might also consider investing in a food and beverage management system that makes tracking inventory and waste easier.

4. Evaluate your hours of operation regularly and make changes where necessary.

Start by comparing your hourly sales to your hourly labor costs and food costs while your restaurant is open. If there are times where you regularly spend more to staff the restaurant and prepare food than you're collecting in revenue it could make sense to close during that time frame.

5. Invest in training.

Labor is usually one of the top two controllable cost line items for a restaurant. Some owners try to control labor costs by cutting employees from shifts, but this can backfire in a couple of ways. First, it can cause guests to have bad experiences due to unstaffing. This has hard costs in comps and refunds, but it also has soft costs if that customer doesn't come back or gives you a bad review. Second, staff turnover is a huge hidden cost in the labor line of the P&L. By staffing correctly and training employees you'll both be able to operate with fewer people and reduce turnover by keeping employees happier.

6. Consider new technology.

There are so many restaurant software products on the market these days it's hard to tell which are necessary and which are just more work than they're worth. Here's a quick overview of some common restaurant tech categories:

  • Point of Sales System. POS systems allow you to manage your menu, place orders, collect payment, and report on sales. Some POS systems also offer additional features like food and beverage management, online ordering, or kitchen display systems.
  • Online Ordering. This includes both third party platforms like DoorDash or UberEats and direct online ordering. Online ordering drives revenue more than it saves money.
  • Food and Beverage Management. These systems help you track inventory, food cost, and waste. It can help you identify areas where you can save money by reducing waste or altering your menu.
  • Kitchen Display System. A KDS digitally displays orders at your prep stations. It can save you money by eliminating paper costs and reducing errors while preparing orders.
  • Task Management. These systems allow you to create checklists for your staff to make sure tasks are completed correctly.
  • Reservation Management System. For full service restaurants who take reservations the ability to accept and manage reservations online is key to maximizing guest visits and throughput

For each type of tech product you need to consider the costs relative to your business's needs and goals. Online ordering has become table-stakes for most restaurants, but you may not need all the bells and whistles of a standalone product if your POS offers a free version. Food and beverage management systems can have a big impact on reducing costs, but they also take a long time to set up and can be expensive. Kitchen display systems and taks management solutions generally have a lower entry cost and could produce more "bang for the buck". Ultimately, you need to choose the tech that fits into your restaurant's flow and integrates with other existing systems.

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