Before starting a restaurant, one mostly focuses on the capital required to open the business. One of the significant mistakes that first time restaurateurs make is forgetting to consider the running capital that is necessary until the restaurant reaches the breakeven, and starts generating profit. And even after the breakeven point, if you do not hold the leash on your expenses, you will hardly be able to see or enjoy your profits. The major areas where many find hard to reduce their restaurant expenses are, the food, labor, theft, and pilferage, and in the paying of rent and electricity every month. Using a variety of planning, monitoring, and evaluation techniques, you can continually manage these expenses to ensure you remain profitable without sacrificing or compromising on quality.
Here is a detailed guide to Food & Beverage Control that will undoubtedly prove useful in managing your restaurant expenses.
Tips To Control your Restaurant Expenses
Your restaurant can run into loss unless you manage your restaurant expenses efficiently. The major areas where the restaurant expenses are the highest are:
3. Theft and Pilferage
4. Rent, Electricity, and Marketing
While you cannot reduce your costs more than a certain level, you can take measures to keep them in check. Here are some quick tips on how to control your restaurant expenses.
1. Price your Menu Right and Reduce Wastage
Since food is the most basic and an essential raw material that is required to run a kitchen and the restaurant per se, you may incur a lot of expenses if you don’t check on the purchasing and the usage of them.
Steps on how you can reduce the restaurant expenses that you incur on food are:
- Calculate the Cost you Incur Behind each Dish: Knowing how much you invest in preparing a dish is fundamentally crucial since you must price your menu items to ensure that your items are priced higher than your input cost. This will help you to garner a marginal profit and not run into a loss. You need to follow five simple steps to calculate your food cost, and they are:
- Make a list of all ingredients used in the recipe and state what the weight and measurement of each component used.
- You need to look for the total price of each item, not taking into consideration about the prices of the exact amount of the ingredients that goes into the dish.
- Divide the weight/ measurement of each ingredient used in the recipe by the weight of the unit it is sold in and multiply it by the price of the unit as a whole. This will determine the cost of each ingredient used in a particular dish.
- Once you have the individual amount of each ingredient that goes into making a dish, you can easily add all these amounts. This step will help you determine the cost of the entire recipe.
- Divide the cost of the entire recipe by the number of portions that it serves. This will determine the value of each serving.
- Design your menu the right way: Once you have the amount you will have to spend on preparing each dish, you can fix the price of the dish keeping in mind the profit margin you are expecting to garner. If then you see that your menu prices are higher than what your usual targeted clientele would like to spend, then you know that that dish is not meant for your menu. This clearly shows that you must keep in mind who your targeted clientele are. If it is the college and university students, you must keep the prices pocket-friendly. Or else, you will merely buy raw materials for those high priced menu items, and no one will order them. This will, in turn, increase your food cost and your overall restaurant expenses. Also, once you have curated the menu, you must review it on regular intervals, there will always be some of the other dishes which might not perform well, the best way to deal with them is to scrap them!
- Reduce Generation of Kitchen Waste: You need to have tight control over your stock and inventory. Check the inventory both at the beginning and at the end of the day. By doing this, you will gain an understanding of when to reorder to save your kitchen from running out of stock or to avoid ordering the items that are already available in stock. You must also label the ingredients which need to be used first, depending on the expiry date of the products. In addition to this, your restaurant staff must be trained in productive ways that will reduce the generation of kitchen waste. Your chefs must be trained to follow the recipes strictly, this will ensure that the quantity in the dishes is consistent, and this will also reduce the generation of waste on the tables of the customers. Keep these points in mind and reduce the wastage of your raw materials which in turn will reduce the kitchen waste generation.
2. Control Theft and Pilferages
The restaurant industry is notorious for theft and pilferage. This is more so in restaurants where the restaurant owners are unable to visit the restaurant on a daily basis. In such an instance, it becomes easier for the restaurant staff to carry on with their misappropriation behind the cash counter and in the kitchen. One of the most effective ways to control such events is by installing a restaurant management software that will help you to receive real-time reporting of all the activities of the restaurant from anywhere.
Such software will notify you about the number of bills generated in a particular day, the discounts or offers provided, will provide you with daily and monthly sales report, and reports regarding the actual stock and the ideal stock at the beginning and the end of the day. You can also receive alerts when anything uncanny happens in your restaurant, and accordingly, you can follow up with your manager and the staff and find where the root of the problems are. This will help you have tight control over all your restaurant operations from anywhere and you will not have to leave your restaurant in the hands of the manager in your absence.
3. Reduce Your Labour Costs
Since it is the employees who are the driving force in your restaurant, one usually tends to hire the best ones and that too in bulk. However, you need to focus on the quality of your staff and not on the quantity, and that is where you increase your restaurant expenses. Some of the best ways to control labor costs are:
- Hiring Seasonal Staff: Instead of keeping a large staff force all around the year, what you can do is employ seasonal staff who will help you manage the extra crowd that comes in during the festive season.
- Cross-Training Them: Cross training is beneficial if you want to run your restaurant with limited staff. This will also ensure that you have a band of dedicated all-rounders. This training will come in handy in situations when one of your employees are absent on an important day or during the peak rush hours. Train your prep cooks to prepare menu items and managers and bus staff to serve dinners to help out during rush periods.
- Scheduling Them Right: Mix your staff. You should not have all the experienced ones during the busy hours and the amateur ones during the slow hours. This will not help the inexperienced ones to grow and take up serious responsibilities when the senior employees are absent. Hence it is imperative that you schedule your young talents with the experienced ones so that you can train them on the go.
- Keep your Staff Happy: Retention of employees in a restaurant industry is a tricky affair. And if you can’t retain your employees, all the energy and the resources that you have spent on training them will go to waste. Poor pay can lead to the frequent turnover and poor customer service. Consider paying high-quality, trained staff more and teach them to know how to sell specials, upsell appetizers, desserts, and drinks, remember regular customers and their preferences and work with your kitchen staff to get orders in and out quickly. Work with a benefits provider to offer voluntary benefits, which you don’t pay for, but which give employees the chance to purchase health insurance and other benefits at group rates.
4. Keep an Eye on the Other Costs
There several other monthly restaurant expenses that you must try and cut down on. Out of these, rent and utilities are the fixed costs over which you do not have much control. However, you can still keep a check on them.
- Rent: Buildings with higher foot traffic may be much more expensive. Paying rent, property taxes, and utilities for such an establishment can drive you crazy. You should give this particular operating expense a lot of thought as it can potentially make or break your restaurant. So, if you don’t have a considerable amount of standing investment which will help you pay your rentals until you reach your breakeven, it is recommended to select an establishment whose rentals are within your reach.
- Electricity: It is highly recommended that you invest in energy efficient appliances and equipment. Switching to energy efficient light bulbs and installing low flow faucets are inexpensive ways to save money over the long run.
- Marketing: While assigning a budget to your restaurant expenses, often marketing gets ignored. A good thumb rule is to allocate one-tenth of the sales to the marketing of your restaurant. You can begin by getting flyers and pamphlets distributed to attract the local customers. Social media is also a great medium to reach out and engage with customers. Try out these zero budget marketing tips that you can use if you are low on budget.
Follow these actionable insights and see how effectively you can cut down on your restaurant expenses and the hidden costs that are burning a hole pocket. Once you do so, it will help you to bolster your overall profit. So, what are you waiting for, implement these tips and see how your cash register oozes with cash.