The restaurant industry is known for its narrow profit margins. Specifically, the concept applies to quick-service and fast-casual concepts. Most restaurants cannot handle their finances effectively, which leads to losses.
Failure to keep costs in check can lead to huge losses and the eventual closure of a restaurant business. It’s possible to save money both in good and bad ways. In the short term, smart investments might save you money, but in the long term, inefficient purchases will cost you more.
So, how can restaurant owners combat this? By Practicing strategic cost-cutting methods.
Take advantage of these six ways to improve your bottom line and delight your customers. Let’s get started.
Controlling and tracking inventory
Keeping track of inventory is key to controlling restaurant prices. Keeping an eye on stocks, stockouts, and consumption rates is essential. You should monitor excess wastage in your restaurant whenever the ideal stock is lower than the actual stock.
Any deviation above that is considered excessive waste or misappropriation. Using an inventory management system in this situation may be beneficial, as it allows you to set reorder levels and automatically monitor variances.
By doing this, the risk of overbuying and underbuying is eliminated.
Calculate each menu item’s cost
This step requires a calculator. Add the total cost of each food item. That takes a while. It is necessary to reduce restaurant costs. Here’s how:
Food cost percentage = Total ingredient cost / Menu item price
The food cost percentage can be determined by comparing the ingredient cost to the product price. If your food costs are 15-30%, your gross revenue should be 70-85%. When food costs exceed 30%, what do you do? Choosing to source lower price ingredients or raising prices are the only options.
Buying catering equipment on credit reduces costs.
Manage your restaurant costs by making minimal cash purchases and using a credit card through the restaurant. Compared to bulk purchases, raw materials or catering equipment purchased in cash are rarely in bulk and can be expensive. It makes sense to purchase them on credit from https://onestopwholesaler.com.
You should consider the Credit Period when choosing a vendor. It allows you to run your restaurant, generate revenue, and then pay off the credit when you collect the money. Most vendors charge a credit period of 15 to 20 days. The vendors should also have an annual contract. Make sure your payment policies are clear.
A restaurant’s relationship with its service providers is crucial to its success. You will be able to maintain high quality and get a better price from the vendor. You can’t achieve restaurant cost control targets without sacrificing a healthy relationship with your suppliers.
You Should Know – 5 Things To Take Care Of While Taking Over A Hotels
Detailed Restaurant Cost Reports
You should also keep an eye on your restaurant business regularly. It is very important to get real-time reports. Monitoring the numbers and generating regular reports can help you identify revenue leakage areas.
Avoid food waste by regularly removing low-sales items and high-cost foods. The purchase-sales report should be audited weekly or biweekly, depending on restaurant size. Look at the monthly sales report for details on how each menu item performs.
Restaurants suffer many capital losses due to accidents and spills. When planning a kitchen, bar, or restaurant layout, be sure to remove obstacles that may interfere with traffic flow. It is important to have a non-skid floor as well.
Manual Process Automation
The automated tablet ordering and rapid billing reduce personnel needs by streamlining the ordering and billing processes. Billing is often labor-intensive, and orders are typically placed by hand. When performed manually, it leaves room for human error.
In general, the restaurant management system reduces the need for manual labor. POS displays the order on the kitchen screen.
Any changes made by the customer after the order will be reflected in KDS. The server will no longer need to retrieve Kitchen Order Tickets (KOT).
Evaluating your staff’s performance
Tracking and measuring restaurant performance will help you determine what your staff is doing well. Determine your staff’s KPIs and make sure they meet expectations.
A restaurant management system allows you to monitor your staff and improve efficiency. This will boost revenue and justify expenses.
Staff members can define their own KPIs. Chefs can reduce food costs by 30%. Servers can have the same KPI, like selling 10,000 units per day. By analyzing POS reports, you can set KPIs for your business.
It will increase productivity and save you money.
Whatever the size of your restaurant, you must lower operating costs. A restaurant’s operating costs are influenced by its theme, food dishes, staff, and management practices. Likewise, the net operating profit ratio must be carefully analyzed.