Tips on Food Costs Reduction
Most consumers often think that running a restaurant is a pretty lucrative business. However, it is true; it is a constant battle to manage your expenses so that your bottom line does not vanish entirely.
Are you facing a similar problem?
One of the major expenses of any restaurant is the food cost. You can look at your restaurant expenses spreadsheet all day but still have no idea to reduce the money you are spending. If you, as a restaurateur, can manage the food costs, you can expand your bottom line quarter on quarter. However, it is easier said than done. So, we will today share eight things you can do to help manage food costs. Once you follow these actionable tips, it will become easy to expand your margins by reducing the food costs.
No, we aren’t asking you to reduce the food quality. We will share with you concrete steps that you can undertake without compromising on the quality of the dishes you serve.
1. Keep Track of the Food Prices:
Do you keep track of prices of your food?
You cannot run a successful restaurant without keeping track of food prices. Not only that, you also have to be aware of the events in your city and most importantly your country, which can make the prices skyrocket. While this will not help you avoid high costs, it will allow you to plan your menu better so that a single event does not put you into the red.
You might be wondering, how can you do so?
The best way is to use the Internet to your advantage. It will let you know about any disruptions in the supply chain, as well as an impulse in the prices of food. Without even going out of your business premises, you can plan your food procurement costs in a much better way.
2. Manage your Inventory Better:
We’re not asking you to cut down on the inventory. We are asking you to manage your inventory better. Rather than using a manual method, it is a good idea to invest in a good inventory management software.
The inventory management software will allow you to exploit the past procurement and usage trends of your restaurant to predict your future purchases. It will help you in optimizing your food purchases and therefore bringing the food cost down. In addition to that, here are a few other tips that you can follow to manage your inventory better:
- Rather than entrusting the responsibility of inventory management to a single employee, it is a good idea to rotate that responsibility every two weeks. It will help you bring in fresh ideas and it will also train multiple employees to handle the inventory better. In case an employee leaves the restaurant or is unavailable for some time, another employee can take care of the inventory. This also helps them understand the restaurant budget breakdown of your business
- You need to ensure that the inventory storage space is neatly organized and labeled, it will be easier for you to know right away the placement of ingredients and cross-check that with the inventory management system. It will ensure that nothing gets ordered again before it runs out or before it expires.
- Ensure that you are following the first in first out mechanism, which reduces waste significantly.
- Remember to set proper inventory goals in £ to ensure that you can reduce your food costs by optimizing your inventory better gradually.
- Monitor your inventory levels daily rather than weekly or biweekly. Doing so will allow you to optimize it in small steps.
These few tips will not only allow you to manage your inventory better but will also let you know about your inventory expenses right away. Managing everything in terms of £ rather than just using an itemized list will provide you with vital insights regarding the food costs. It will allow you to know where you can cut back on food costs without having to compromise on the quality or the availability of supply.
3. Negotiate with Your Food Suppliers:
The step which we are highlighting now is only valid if you use a proper inventory management system. Once you have done this for at least a couple of months, you will know the quantity of food which you need. Once you know that, it will be easy for you to negotiate with your food suppliers without overpromising on the orders. Thus, it will be easier to negotiate better rates. The savings will get directly added to your bottom line, which will help you improve your restaurant.
Are your food suppliers not budging on the food cost?
If yes, you have another alternative as well. Now that you are aware of the number of turnarounds for your inventory, you can think about buying in bulk. This will only work for non-perishable items. While it might come with an upfront cost, by managing your inventory, the extra margins due to reduced food costs will make it well worth it. However, without vital inventory management insights, you will not be able to buy in bulk.
Thus, you have these two options when it comes to negotiating with the food suppliers to reduce the food costs.
4. Get Involved in Group Purchasing Organizations:
Have you ever thought about joining a group purchasing organization?
These organizations consists of various restaurateurs who pool capital to buy the ingredients which you often need. It helps them in negotiating better and getting bulk prices. Also, another advantage is that you will not have to hold up on the supplies. You can buy what you need precisely. That is why, without putting in extra capital, you can get better prices.
There are a few other advantages of joining such organizations as well. These includes:
- You can skip out on the middlemen and directly purchase from the source.
- Buy locally, which means that you can buy the freshest produce available.
Moreover, if you have a sizable purchasing power, there is no upfront fee for joining such organizations as well.
5. Train Your Staff Better:
You might be thinking, how is staff training associated with food cost?
There is a connection. If you observe the utilization of materials and other ingredients through your restaurant, you will notice that a significant portion of wastage occurs when employees are handling the supplies. Due to this very reason, better training your staff can certainly help you reduce wastage
- Make sure that employees are familiar with the storage and preservation method of various foodstuffs.
- Ensure that the employees can take the delivery of ingredients and foods without you being around.
- Train your staff on how to handle perishable foods better.
- Teach them to use the ingredients according to the portion size.
These four simple training tips will help you in cutting back on food wastage by at least 20%. Also, you can conduct such training sessions once every six months, which means it will not cost a lot either.
Better training can certainly help you bring down your food costs and provide you with a competitive advantage.
6. Do not Ignore the Hidden Food Costs:
Were you aware of the hidden costs of running a restaurant?
In terms of food costs, these are often associated with the ingredients which you pay the least attention to. Some of those ingredients include:
- Frying oils
When was the last time you took their cost into account?
Many restaurateurs ignore their costs altogether because they are quite affordable on a stand-alone basis. However, these ingredients are widely used in every restaurant. It means that while they might be affordable on an individual basis but cumulatively, they can account for up to 10% of the food costs.
Don’t you think you should try to reduce this cost as well?
We’re not asking you to reduce their quality but to negotiate a better deal with your vendors for such items. Since you might be purchasing them in bulk already, it is better to try and negotiate a better deal. It can easily add .5% or 1% to your restaurant’s bottom line. Since many restaurateurs simply ignore these, they constitute the hidden costs that you have to deal with while running your restaurant. When you optimize these hidden costs as well, you are bound to keep the food costs down and expand the bottom line.
7. Indulge in More Prep Work:
Do you prefer to buy raw ingredients or prepped ingredients for your restaurant?
Many restaurant owners prefer to buy pre-prepared ingredients for your restaurant. However, if you want to manage your food costs, it is a good idea to buy raw ingredients. It will help you bring down your costs.
On the flip side, your staff might have some extra work on their hands to process raw ingredients. However, even after considering the staff costs, you will be able to save money on food costs when you buy raw ingredients.
You might be thinking, what are some examples of such ingredients? Worry not! We will share with you such examples as well.
- Instead of buying ready-made hamburger patties, you can buy the raw ingredients and make the patties in your restaurant.
- Instead of procuring juliennes of lettuce, it is a good idea to buy lettuce in bulk and cut them in your restaurant.
- Similarly, you can purchase raw chicken as well, and after that, cut it according to the delicacies which you want to add to your menu.
These are just some examples of ingredients that you can buy raw rather than in the ready-made form. It will help you cut back on your food costs and will also provide you with more value for your money.
8. Work on the portion size:
One thing which you need to keep in mind is that food wastage adds a lot to the food cost of your restaurant. That is why rationalizing portion size is a good idea.
You might be wondering, how can you do so? There are a few simple steps to determine whether the portion size in your restaurant is adequate or whether it is large than required.
- Monitor the plates which are coming back to the kitchen from the patrons. If they have excessive leftovers or if the majority of them have leftovers, it means you need to think about rationalizing the portion size.
- Monitor the demand by customers to pack their leftover meals in the takeout containers. If this demand is higher, that once again indicates that the portion size is more than required.
These two insights will let you know whether you need to think about rationalizing the portion size or not. You need to keep in mind that there is a delicate line between rationalizing the portion size and not providing value for money to your patrons. That is why rationalizing the portion size on a gradual basis is important.
Bringing down the food costs of your restaurant is not as difficult as it seems. When you use the eight methods to do so, you can be sure that you can easily save money on food costs and add the same to your bottom line. These tips will get you through your restaurant monthly expenses You can achieve all of this without affecting the experience of the patrons or food quality. It is time to make your restaurant efficient with the help of our guide above.