Food costs represent 25% to 35% of a hospitality business’s overall cost, and can often reach 40% in casual dining restaurants. Reducing that cost will certainly boost profitability, and thankfully, several techniques and strategies can be employed to help you achieve your goals.
1. Check Your Inventory Regularly
Knowing what goes in and out of your inventory and at what rate is key to identifying consumption patterns in your restaurant. If items are lingering, expiring, and thrown out, then you should consider ordering less of it. This represents food waste, which adds to your costs. If an item goes in and out so fast that its shelf is empty, then you may need to order more of it. This represents missed sales opportunities for you.
But stock counting is a tedious, manual, and long process when done manually. A strategy you should use to overcome this is to opt for a restaurant inventory management software.
2. Reduce Food Waste
According to a study done by the Canadian Government, 38% of produce and 21% of daily and eggs become food waste. And all that food waste is food you missed on selling !
Reducing food waste starts with a deep understanding of your restaurant operations and your sources of waste.
Monitoring your food waste sources and addressing them is key to reduce your waste, and ultimately, your food cost.
3. Make The Most Of Your Ingredients
Many restaurant operators miss out on delicious dishes without knowing it.
Are your dishes too big? See if customers leave their plates half-full or often ask for the rest to be taken home. Having big portions is a massive contributor to high food costs and also, to missed sales.
So if your portions are too big, consider reducing the portion without reducing the price. This will slash your food cost, boost sales, and boost your profits.
Keep in mind that portion control also takes place in the kitchen, and your chefs should have consistency in mind. Several tactics can be used to ensure consistency over time and across your branches (if you operate more than 1):
You may also try to pre-prep portions prior to service. For every 250g steak, you should have 50g of pepper sauce. You can buy reusable flasks, or perhaps opt for a ladle that serves this precise amount.
Set up tighter portion control in order to reduce your food cost.
8. Know Your Recipe Cost
How much does it cost to produce a given dish? And does this cost remain stable or does it fluctuate?
As a restaurant operator, you should determine exactly how much it costs you to make a single portion of a given dish. This cost will likely vary over time due to fluctuations in ingredient prices – which vary due to economic factors. It is therefore key to set food cost targets and to stay on top of the profitability of your dishes. This is where a restaurant inventory management software comes in.
Once you know the cost distribution of your recipe, several cost-reduction tactics can be activated:
9. Use Menu Engineering
All dishes aren’t equal. Menu Engineering helps restaurant owners identify which dishes are performing and which aren’t, with the intent of guiding them towards what changes need to be made.
Menu Engineering helps identify 1 particular type of dish that needs to be addressed: Dogs, which are menu items that are not profitable nor popular.
By identifying which of your dishes rank in this category, restaurant operators can try to replace these items with more profitable, more attractive dishes.
10. Join a Coop !
If you’re unable to buy in bulk yet are after those low prices, consider joining a group purchasing organization. These organizations will package the needs of many restaurants and send them as bulk orders to suppliers in order to get an attractive rate on ingredients.
But, you’ll have to keep in mind that this kind of purchasing strategy comes with its cons :
Ultimately, you’ll have to weigh the pros and cons of your purchasing strategy to decide if the advantages of joining coop outweigh its disadvantages.
We’ve established that cutting food costs is hard and that there are several ways to reduce them. But cutting food costs doesn’t need to be reactive, and could instead be proactive.
Opting for a digital, data-driven strategy opens the doors to numerous automation, workflow, and alerts & notification systems. Subscribing to a restaurant inventory management system would help restaurant operators not only save hours of manual work, but stay on top of their business by gaining real-time insights into the health of their operations, and especially when food costs, ingredient price fluctuations, and recipe profitability.
To act proactively, it is imperative that restaurant owners ensure they have the following covered in their digital strategy:
Standardizing the way your items, ingredients, and suppliers are named across your branches is key to aggregating data related to food cost across your business, and to analyze it on different levels (groups vs branch).
Opting for a restaurant inventory management software that enables you to compare the price fluctuation of a bottle of ketchup across suppliers and over time can help you in making clearer and more impactful decisions to cut costs.
This eliminates the need for a middleman hired to manually bring the data together, which in turn eliminates the waiting time for executives to access clean data.
Having a regular entry of accurate, reliable, up to date data is immensely valuable to your business. Empowering each member of your staff to enter data feeds your system with real time information that in turn empowers decision-makers with actionable, reliable insights.
This can be done with a mobile inventory application that’s easy to use by all. By adding an in-depth user permissions software with drafter and approver roles, you also ensure that the data input is reliable.
By opting for a restaurant inventory management solution built for the modern user, meaning with ease of access and ease of use, the obstacle of data entry is taken away, thus enabling any member of your team to enter wastage, invoices, and stock counts on the spot.
Democratizing the data entry across your business ensures reliable, up to date information about your food costs, which in turn enables decision makers to identify and address discrepancies faster.
Having clear, actionable insights at your fingertip is key to driving your business forward. With built-in alerts, notifications, and restaurant performance dashboards included in your restaurant inventory management software, monitoring and taking action on food costs can be done in real time.
Costs are going up and margins are going down. To survive in the hospitality business, restaurant owners must be in control of their costs, especially food costs, which account for 30% of their expenses.
But cutting food costs is hard. Thankfully, there are several techniques at their disposal, namely portion control, reducing waste, and setting clear recipe guidelines, which you can apply to cut costs, without sacrificing quality.
You should, however, embrace technology to help you support your goals through data and automation. Technology should be part of a digital strategy to help you embrace a proactive approach to food cost cutting, namely by ensuring a unified data architecture, a democratized data entry, and instant decision-making capabilities.
Supy is the data-driven restaurant inventory management platform built to help multi-branch hospitality businesses cut costs. With a suite of 6 interconnected modules covering all aspects of a restaurant’s back-of-house operations, Supy ensures a fluid and constant flow of data within your business, thus empowering restaurant operators with data-driven decision-making.