Cost Reduction Strategies In Restaurants | 5 mins read

7 Top Cost Reduction Strategies in Restaurants

7 top cost reduction strategies in restaurants 1618444121 6044
Hanh Truong

By Hanh Truong

Introduction to Cost Reduction Strategies

Many different expenses will affect a restaurant's profit margins. From rent to food and labor, restaurateurs need to have control over their spending to protect their bottom line. As reported by IBIS World, 67% of single location full-service restaurant costs are associated with wage and purchase expenses. Therefore, many food service businesses today are finding ways to innovate their operations to save money and maximize return. This includes implementing cost reduction strategies in restaurants.

Cost Reduction Strategies in Restaurants

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Restaurants, bars, and other foodservice businesses of all sizes should take steps to maximize their profits by reducing costs. These establishments can save money and preserve quality by implementing the following proven strategies.

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Reevaluate Ingredients

Food supply costs attribute to a large portion of a restaurant's spending. In fact, according to statistics, 32.5% of an eatery's costs are allocated toward buying food and beverages. Depending on its preparation method, source, and seasonality, the price of ingredients may be higher. If a restaurant's food costs are exorbitant, management teams should consider changing the ingredients of certain recipes. For example, they can substitute products with a less expensive alternative.

Additionally, if an item is out of season, its cost will rise. Restaurant operators should follow food trends and have menus that reflect the season. This will minimize the need to purchase large amounts of overpriced produce and vegetables, enabling the business to reduce food costs.

Actively Track Spending

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Restaurant management teams should actively monitor their business spending. This entails tracking labor costs, inventory management, and calculating sales. Organizations can streamline this process by utilizing the latest business management software. For example, restaurants can use employee scheduling software to ensure their brick-and-mortar locations are properly staffed.

These tools employ labor forecasting to ensure that managers are not over-scheduling or under-scheduling their staff. This means they can reduce labor costs and prevent unnecessary spending. Additionally, employee scheduling solutions simplify labor budget tracking. With this feature, managers can analyze trends and project sales to make money-saving decisions and cut costs.

Save Money

Along with cutting costs, restaurant executives should focus on saving money. One way to save money and control costs is to forecast future events and prepare. For example, a food truck start-up can save money by projecting which hours they will get the most food sales. They can then prepare accordingly and buy the optimal amount of ingredients for the anticipated sales. By doing so, the food truck manager will prevent overbuying inventory and minimize food waste.

Another cost control technique is to reduce employee turnover and improve retention. Recruiting, onboarding, and training new hires can be costly for businesses. Therefore, managers need to invest in their current employees to avoid those extra expenses. This entails offering incentives and employee benefits to boost morale.

Online employee scheduling software that makes shift planning effortless.
Try it free for 14 days.

Create a Budget and Work With It

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Restaurants can reduce their expenses from the start of their operation by establishing a budget. With a well-defined budget, management teams can make purchases that fit within the restaurant's means. This will prevent costly instances, such as accidentally buying silverware and furniture that exceed price limits.

Additionally, a budget will help guide restaurant operators to locations with feasible rent and leasing options. Owners can have smarter negotiations with spending maximums in mind. This also bodes well for negotiating contracts with suppliers and vendors.

Keep an Eye on Waste

High volumes of food waste are indicative that a restaurant is overspending. If a restaurant is discarding a lot of food, kitchen supplies, and other products, managers should assess their spending. They should make note of all goods that are thrown away and either limit replenishment or cease purchasing them.

Also, if many restaurant guests are leaving behind leftovers for certain dishes, then portion sizes should be decreased. By doing so, the restaurant can use fewer ingredients and reduce restock purchases. Additionally, minimizing food waste will help the environment and ensure sustainability.

Buy From Second Hand Stores

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When furnishing a restaurant's brick-and-mortar location, owners should look into second-hand stores. These establishments will have restaurant supplies, tables, chairs, and silverware at a lower cost, compared to other suppliers. Start-up businesses can also purchase their commercial restaurant equipment, like ovens and refrigerators, at wholesalers and auctions. These options will allow operators to equip their restaurants with the rights tools for a low price.

Restaurant operators can attend industry trade shows to find deals in kitchen equipment and furniture, as well. These events will introduce new business owners to suppliers that will provide them with what they need at prices that fit their budget.

Conduct Market Research

Market research is the practice of gathering key information about an industry and its consumers' needs and demands. Executives in restaurant businesses need to conduct market research to better understand their customer base. They can then use this insight to creature business strategies that target dining demands effectively and cost-efficiently.

A restaurant owner should also research suppliers and vendors in their industry. Coupled with market research, executives will be informed of the best market price for ingredients. They can then find third-party partners that they can rely on. In the long run, having trustworthy suppliers will be beneficial for cost reduction. This is because managers will not have to deal with missing shipments, faulty products, or late deliveries.

Key Takeaways to Cost Reduction Strategies

  • When operating a restaurant or foodservice business, owners and operators will experience a variety of expenses, including rent and inventory.
  • To save money and maximize profit margins, restaurant owners should implement cost reduction strategies.
  • Some cost reduction and cost control methods that businesses can utilize are business management solutions, budgeting, and market research.
  • These strategies will help restaurant businesses of all sizes reduce food and operational costs, as well as preserve their quality in customer service.

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