Controlling Costs and Returning to Restaurant Profitability

Making smart, effective decisions around your food and labor costs as you continue with take-out and delivery options and begin to open your dining room can help you emerge from the economic shutdown with improved processes on a path to profitability.

For example, your daily sales numbers show you which menu items are the most profitable and popular as well as the times when the most orders are placed. Using this data, you can pare down your menu to include only star items and predict the number of employees needed to assist during the busiest order times.

The current state of the restaurant industry provides you the opportunity to redefine old procedures to better track where your food costs are going and optimize your workforce. Below, we discuss how strategizing your food and labor costs can ultimately bring your restaurant back to profitability.

Controlling food costs

Controlling food costs begins with a smarter menu. Now, more than ever, is the time to optimize food costs by limiting your menu options, creating contract prices with your vendors, and tightening the way you handle your inventory. These three focal areas can impact how you handle food costs long term, which will help maximize your restaurant’s profit through your recovery and beyond.

Use Menu Engineering to Determine Popularity and Profitability

Providing a limited menu can reduce additional food costs and emphasize the items that serve as heavy lifters for your restaurant. Such a menu can be created through menu engineering, where you assess which items are the most profitable and popular. Along with these items, referred to as “stars,” determine and include the top two or three most popular kids’ menu items. These top items will draw customers in and should be listed first in their respective sections on the menu. You can even segment your numbers to determine your most profitable and popular takeout and/or delivery items.

Differentiating between your most profitable and popular items will also establish which items are not as successful and, ultimately, weighing down your food costs. These items should be removed temporarily but can be reevaluated as your restaurant continues to offer dine-in options. For items that are in between, such as bargain food items, raise the price of each item to determine if that item should be a keeper or not.

Maintain Visibility with Your Vendors

Transparency with your vendors is important during this time. A drastic decrease in demand for raw goods has caused vendors to have an overload in their warehouses and a high need for moving those items. By building a relationship with your vendors, you can make them aware of your food needs and negotiate lower contract prices for those items. Contract prices will guarantee the cost of your food items, allowing your vendors to move their raw goods and your restaurant to save on food costs.

As you receive vendor invoices, use a system that can track purchased item costs so that any contract violations can be discovered. Reviewing these numbers frequently can help you hold vendors accountable to the prices they are quoting. Don’t forget to view item price verification across all of your stores, as that will also determine if all locations are receiving the same contract price. Tracking these prices over time can ensure that your restaurant is spending only the allocated amount for an item and not a penny more.

Manage Your Inventory

The key to gaining the most out of your inventory is how you reduce variances and tighten processes. The four main factors that would lead to variances between actual and theoretical food costs are waste, errors, portioning, and theft.

Fine-tuning your inventory processes can provide a clearer picture of where your food costs are going. Food items that are wasted for any reason can be easily entered on a waste log, which can be posted in every workstation. Assigning the task of completing weekly stock counts to two employees instead of just one can help limit the errors made in counting inventory. Lastly, setting requirements around food portioning and monitoring employee meals can decrease any inconsistencies in daily food production. This is the perfect time to redefine these processes for your restaurant and enforce a new system to help control food costs.

Managing labor costs

Re-evaluating labor costs can also have a drastic impact on your restaurant’s profitability. The four areas listed below focus on how to leverage smart labor metrics, such as forecasting, to optimize labor costs and enhance your customer experience.

Make Informed Labor Decisions

Using smart labor tools, such as forecasting and reporting, can help predict the number of employees needed each day based on recent sales and labor data. These tools can make scheduling more purposeful and balance burdened and unburdened labor in the most cost-effective way.

As the week goes on, you will need to re-evaluate the schedule and readjust your forecasts based on the amount of sales coming in. The current situation of the restaurant industry is ever-changing, so re-evaluating labor should be performed on a frequent basis.

Achieve the Labor Budget While Maintaining Great Customer Service

Recent sales data can help predict the number of employees needed per day, but it’s also important to find the right balance between providing a great customer experience and understanding the needs of your team. The right amount of attention should be given to every customer receiving a food order but having few, overworked staff can cause orders to be delayed. Continuously assessing both the customer experience and the energy of your staff can help you better predict the number of employees that need to be scheduled each day.

Optimize Your Workspace

If your restaurant is currently open only for take-out and/or delivery, reorganize your restaurant’s space to create effective workstations for answering phone calls, packaging food items, and organizing orders by pick-up and/or delivery time so that the workflow is smoother and social distancing practices are being followed. Setting up an effective layout can allow all workstation transitions to be fast and efficient, rather than spending minutes running around the store to complete an order.

Enhance and Strengthen Managerial Roles

The decrease in staff has resulted in the need for managers to be cross-trained so that they can jump in and help wherever needed. While this may not have been a need before, this provides your managers the opportunity to learn optimal performance in all areas of the restaurant and practice new procedures that help to control food and labor costs. From this experience, they can feel more empowered in the work they do and how they lead others.

Conclusion

While this is a challenging time for all restaurant operators, the current situation also poses the opportunity to strengthen your restaurant operations. By setting up new processes and procedures around tracking food costs, building connections with your vendors, enhancing your workspace, and reevaluating optimal labor, you can return your restaurant back to profitability in the long term.

If you would like to be able to easily track data and gain insight into your operations, consider a comprehensive, restaurant-specific management solution. Restaurant365 incorporates restaurant accounting software and restaurant operations software into an all-in-one, cloud-based platform. It includes tools for inventory controlschedulingfixed asset management and more. For more information, schedule a free demo.

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