The main reason most restaurants are not able to manage their finances and suffer losses is that they are not able to keep their restaurant costs in check. Restaurant Cost Control is essential as it allows you to identify the area of your expenses and take corrective and preventive measure to keep a healthy ratio between your expenses and finances. Read a detailed resource on Food and Beverage Cost Control in restaurants here.
In this article, we will discuss how you can track, manage, and control restaurant costs.
Tips to Restaurant Cost Control
Follow these seven simple yet highly effective tips to reduce your restaurant costs.
1.Tracking and Managing Inventory to Control Food Costs
The first step to restaurant cost control is to track and control your inventory. This may seem a tedious task, but also essential if you want to reduce your costs. Have an annual contract with the vendors. The Purchase Department should negotiate the price with the present vendor about the products which was procured in the previous year and should bring the rates down. It is advised to conduct an inventory check regularly, perhaps once a week for effective restaurant cost control and track what is being used the most. This step will also enable you to save while ordering raw materials and during managing your yield. You need to order inventory accurately, keep a track of inflows and outflows in your restaurant, and you’ll lower your variance and your food costs.To know more on inventory control, refer to a detailed article on Inventory Management for Restaurants.
2. Purchasing Raw Materials on Credit to Reduce Costs
You can control your restaurant costs by going for minimalist cash transactions and conducting all your purchases through the restaurant’s account on credit basis. Usually, the raw materials purchased in cash are less in quantity and can turn out to be expensive as compared to when you purchase it in bulk.
Purchasing the raw materials on credit is a good idea as it allows you to run your restaurant, generate revenue, and then pay off the credit from the money made. Consider the Credit Period before deciding your restaurant’s vendor. It is usually around 15-20 days but differs from vendor to vendor. Remember to establish the ground rules of payment, ordering, and receiving. Join a ‘Purchase Group’ if possible to significantly lower your restaurant costs. In a purchase group because of the sheer number of buyers, the suppliers often lower the prices.
The operations of the restaurant and their service providers are critically dependent on each other so it is very important to maintain positive and healthy relationships between them. You must remember that while putting a certain amount of pressure on the suppliers is necessary and inevitable, your restaurant cost control targets can not be achieved at the cost of a healthy relationship that you may share with them.
3. Controlling Labor Costs by Reducing Employee Turnover
Another tip for reducing your budget spent on labor and restaurant cost control is to lower your employee turnover. One of the most critical areas where every restaurant owners should pay attention is retention of employees. It is a real challenge to hire a quality employee with the right skills. Hiring a restaurant staff member needs a lot of resources starting from the interviews to getting them on board and to provide them with training. But in a case, if an employee leaves your restaurant in the initial weeks only, all your resources that you had put in hiring the person goes waste. So while hiring new employees in your restaurant, your primary focus should be on quality hiring and make such favorable conditions so that they stick around for a longer time. Spend time in hiring and properly assess the candidates’ profile when hiring them. Read this detailed article to control the labor costs in restaurants.
4. Restaurant Cost Control through Yield Management
You can implement Restaurant Cost Control and reduce your Food Costs significantly by simply giving attention to a slight detail that is often overlooked, yet just as important, namely Yield Management. Yield management is an integral part of food cost control as it gives you the idea how much quantity of raw materials would actually be used to prepare a particular food item. The raw materials should be ordered and purchased keeping the yield of the items in mind.
For example, the amount of raw meat delivered to your restaurant, and the amount of raw meat that can be consumed in a dish are different. While placing the order, you should keep in mind how many portions would a particular order of raw materials deliver.
Another way to control restaurant cost is to understand the use of your ingredients and then order them accordingly. Most ingredients are not too different in quality but because of the grade difference the price gap is a lot. Understand if you really need a top level ingredient for your dish or if one grade lower ingredient would also be fine to order accordingly and save some money, for example if you are making guacamole do you really need grade 1 avocados? The only difference between grade 1 and grade 2 avocados is the outer part which does not make a difference in guacamole, so you can very well put a grade 2 avocado in the dish.
5. Controlling Wastage through Portion Control
Over production, big portions are the signs of wastage which lead to escalating food costs. You should have tools to measure the portions and stringent process to control the size of the portion. Right plating of the food is also essential as over serving of food can lead to high food costs and also wastage. Find out how to Portion Control can Reduce Your Food Costs and Improve your Restaurant Revenues here.
Another way in which you can reduce costs by training your staff about maximum recycling and smart waste management in the restaurant. Learn how to manage the waste in your restaurant here.
We suggest creating tracking chart based on these parameters:-
- Food Returned by the Customer
- Food Burnt in the Kitchen
- Food Spilled in the Kitchen or Floor
- Extra Portions that get thrown away
By keeping a regular check on these you can not only control wastage because of your portion sizes but also monitor other sources of wastage that will cost you money.Track these wast generation sources to keep your restaurant costs in check.
6. Controlling Internal Thefts and Pilferage
One of the major areas where restaurants lose out on a lot of money is internal thefts and pilferage. The lack of automation and reporting often leads to rising costs. There are multiple ways internal thefts happen in restaurants, and the restaurant owners are not able to identify the point where the thefts are happening. For example, dishonest staff members can alter the number of sales that happened on a particular day and pocket the billed amount for themselves. One way to control this is to assign roles and permissions for each activity. Find out the other ways internal thefts happen at restaurants and ask how to control them here.
7. Daily and Weekly Reporting to Keep a Track of the Costs
Another important tip that you have to follow is to keep a regular track of your restaurant business. This can only happen when you keep a regular record of the operations being undertaken by your restaurant. By keeping a track on the numbers and regular reporting the managers will be able to control food costs, Labor Costs and simultaneously keep a lookout on sales-purchase reports.
The purchases-sales report should be audited on a weekly or fortnightly basis depending on the size of the restaurant.
Along with it, there is also a need to conduct monthly sales report where you could examine the monthly sales done for every menu item served by your restaurant.
Apart from this, the major capital bleed in any restaurants is accidents and spillage. Make sure your kitchen /Bar /restaurant layout should be free of any obstacles for traffic during the peak hours. Floors must be anti-skid in nature to avoid accidents.
Implement these tips in your restaurant’s budgeting and cost control measures and let us know how they worked out for you in the comments below!