Webinar: The Food Cost Reduction Secrets Of Multi-Branch Businesses

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10 Ways To Reduce Food Cost – 2024 Edition

Food Cost
Food costs represent an average of 30% of a restaurant’s expenses, meaning it represents a solid chunk of where a restaurant operator’s money is going. Reducing food costs can therefore have a high impact on a restaurant’s profitability, which is why it must be considered. 

But cutting food costs is hard when everything lies in the details – and in the data. So what are the techniques that can be used to achieve one’s goal? And how can technology support this goal?

This article covers all you need to know about decreasing food cost: from how to calculate and track food costs, to the techniques you can apply today to see immediate changes, to how technology can help you achieve your goals faster and easier. 

Table of Contents
  1. Why Managing Restaurant Food Cost Is Key
  2. How To Calculate Your Food Cost
  3. 10 Ways To Reduce Restaurant Food Cost
  4. How To Track Your Food Cost
  5. Think Further: Reduce Food Cost With A Proactive, Digital, Data-Driven Strategy
  6. Conclusion
  7. About Supy




1. Why Managing Restaurant Food Cost Is Key

Margins are smaller than ever in the hospitality industry. Cutting costs has become the no.1 priority for many – if not all – restaurant businesses. Ingredient costs have been going up due to economical factors, namely inflation and supply chain issues, and trends show that prices are likely to continue going up. 

But cutting costs shouldn’t come at the cost of quality, and finding the right balance is a tricky, but perfectly doable task. If these costs are not tracked and controlled, a restaurant owner may end up in the undesirable case of selling dishes at a loss. 

This is why calculating, tracking, and improving costs is key to the success of your restaurant.




2. How To Calculate Your Food Cost

Calculating your food cost is a task you’ll be doing on a regular basis throughout your career in hospitality. You may opt to do it manually whereby you’ll list the amount of ingredient you bought and its price. You’ll then divide this cost for the quantity needed for your recipe. Once done for each ingredient, you’ll add up these costs and ta-da! You now know the cost of your recipe.

You could accelerate this process using our Food Cost Calculator.

Food Cost Calculator

Measure The Cost Distribution Of Your Dishes

Food Cost Calculator
You could eliminate it completely by automating it using a restaurant inventory management software. 

Once you have calculated your food costs, the next step would be to reduce these food costs to maximize your profitability. The following steps take you through the different techniques you can use to reduce your food costs.




3. 10 Ways To Reduce Restaurant Food Cost

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.

Supy Webinar

The Food Cost Reduction Strategies Of Successful Multi-Branch Businesses

Supy Webinar : The food cost reduction secrets of successful multi-branch restaurants

 

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

Parallel Stock Count

Count your stock 2X faster, and 3X more accurately

Stock Count Inventory mobile app

 

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.

  • Are you over-ordering items that are expiring before you’re able to sell them ? 
  • Is your chef wasting a lot of quantities by not prepping items with as much precision as required ? 
  • Are dishes coming back to the kitchen because customers aren’t satisfied ? 

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.

  • Beef bones are a great opportunity to make bone broth
  • Vegetable leftovers are great for a vegetable stock or soup !
  • Turn meat trims to sausages.
Managing your food waste and learning to not let any potential waste behind is key to reducing waste, and therefore food costs.  


4. Buy In Bulk ! When you’ve identified the turnover rate and consumption amounts of your ingredients – especially non-perishable items – you should negotiate better deals with your suppliers. One of those types of deals is buying food items in bulk at a reduced price per unit. Have a talk with your supplier to understand what kind of offers they have and what kind of discount you could benefit from.  Working with a restaurant inventory management software will help you figure out your turnover rate and volume of stock items needed.



5. Know Which Supplier Is Best To Do Business With

Different suppliers treat you in different ways. Some may respect their trade deals with you, some may not. Some may give you generous discounts and FOCs, others may not. Opting for a restaurant procurement software and tracking the performance of your suppliers are key to understanding who’s best to do business with and is likely to give you the most profitable deals. Better deals lead to a lowered food cost, which is good for business.

Track The Performance Of Your Suppliers

Monitor discounts, delivery dates, FOCs, & price fluctuations In real-time

 

6. Bring Prep Work In-House Many food businesses outsource the food prep task, such as buying deboned chicken or pre-cut vegetables. This helps your team save precious time, but it comes at a cost. If your business practices this, and if your team has some free time, then you should consider bringing in the prep tasks in-house in order to purchase cheaper ingredients, which ultimately lowers your food cost.  7. Control Your Portions
how to reduce food cost

 

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.

  • When food comes back, these ingredients could have been used to make a second portion !
  • When plates are big, customers may opt to share it rather than get a second dish, and that’s a missed sale for you.

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):

  • Ensure proper training: does your staff know how to use the software and measuring tools at their disposal?
  • Clear guidelines and recipe book: is your team comfortable using the recipe management software you’ve put at their disposal? Do they know where to find recipe guidelines, and do they know which are the measuring tools and where to find them?

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:

  1. Reduce ingredient portions.
  2. Negotiate better deals with your suppliers to reduce ingredient cost. 
  3. Replace ingredients with cheaper alternatives.

All About Recipes

Discover how to set up, track, and optimize recipes with a recipe management software

 

9. Use Menu Engineering

Food Cost

 

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 : 

  • Little control over the quality of the produce.
  • Inflexible delivery times. 
  • You need to pay a membership fee to be a part of these groups.

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.




4. How To Track Your Food Cost

As the saying goes: you can’t improve what you can’t measure!

Tracking your food cost over time may seem daunting, but it doesn’t have to be. With the right tools, restaurant operators can be supported with automation and data to make decisions, save hours of manual work, and cut costs. But… it is key not to leave all the work to machines. Human input is still key to maximize accuracy.
Keep in mind that restaurant operations are quite complex, and the reality may not follow what’s on the paper. Wastage is sometimes not accounted for. Invoices are not always registered accurately. This all leads to Food Cost Variance. Variance is further increased when opting to manage your operations on spreadsheets.

This is why opting for a specialized back-of-house software can be a game-changer to your business. Software like Supy provides you with not just the digital tool to input data accurately and regularly, but to also track your costs in real time using built-in dashboards.

Built-In Cost Analysis Dashboard

Monitor your costs across branches, in real time

Cost Analysis dashboard - restaurant software analytics




5. Think Further: Reduce Food Cost With A Proactive, Digital, Data-Driven Strategy

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: 

  • A Unified Data Architecture
  • A Democratized Data Entry
  • Real-Time, Data-Driven Decision-Making

 

  1. A Unified Data Architecture

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.

  1. A Democratized Data Entry

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.

  1. Real-Time, Data-Driven Decision-Making

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.




6. Conclusion

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.




7. About Supy

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.

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