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5 Quick Ways to Cut Restaurant Costs & Increase Revenue
September 19, 2017
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5 Quick Ways to Cut Restaurant Costs & Increase Revenue

Tired of your restaurant’s shrinking profit margins? Any great businessman or woman knows one fact – when you spend less of your budget, that’s more money in your pocket or in reserve for your business. But there’s a tricky dilemma: how can you keep your restaurant budget reasonable without impacting the quality of your restaurant’s food or service?

Here are five ways you can make your restaurant budget work for you so your expenses can drop and your profits can rise.

1. Track and Manage Inventory

Let’s be honest – inventory tracking is a pain, but it’s a sure-fire way to help you save money and control food costs.

Why? Because the lower you get your food variance, the less food you waste and the lower your total cost of food becomes. Costs are measured, food is tracked and you’ll be on your way to smarter supply ordering and food portioning.

It’s easy to make mistakes when it comes to inventory tracking, but it’s important to stop these mistakes before they happen. For example, buying in bulk is not always the smartest idea! It limits the amount of usable and available space in your walk-ins and back room. Plus, food is more likely to lose its freshness when you buy in bulk, which could result in dissatisfied customers and even more food waste.

The solution is simple: order accurately, track what’s coming in vs. what’s going out, and you’ll lower your variance and your food costs. Ultimately, this will free up money in your restaurant’s budget and save you plenty of headaches.

2. Cut Back on OvertimePay

Overtime is a hot topic in the restaurant industry. Owners and managers want their best employees in the back and front of the house, but can’t always afford to pay overtime.

So, here are your options:

  • Bump up the base pay of your all-star salaried employees above the threshold.
  • Cap hours at 40 for your employees who aren’t necessarily pros. If you feel like you need that employee more than 40 hours a week, either plan for the overtime pay or see option #1.
  • Hire more staff members so that your restaurant keeps the same amount of labor hours without fronting the overtime costs. However, it’s best to avoid this option if possible. With larger staffs come more costs associated with training and turnover, meaning the effort could be entirely counterproductive.

Overtime doesn’t have to be the worst thing for your restaurant’s budget. Just remember to plan diligently so that you can work towards avoiding overtime costs where you can.

3. Work on Lowering Employee Turnover

There are enormous costs when it comes to hiring a new restaurant staff member. The resources dedicated to training, the time it takes to interview a candidate and onboard them, and the effort given towards rehiring someone when that first employee doesn’t work out add up to a lot – anywhere from 16-20 percent of that employee’s annual salary. That means if that employee was only there for a few weeks or months, it may have been a waste of money to hire that person.

This leaves your restaurant with two tasks: hiring more qualified individuals and keeping those people around for as long as you can.

  • Hiring better talent means dedicating a little extra time in the short run for a more lucrative long run. Running aggressive hiring campaigns and holding out for a stellar candidate deters you from hiring a pair of shoes to fill the void in your back kitchen.
  • Keeping top talent around results in a lower employee turnover rate, which helps alleviate those costs associated with constantly losing and re-hiring staff.

4. Markup Wisely

A bigger budget usually means a better budget, right? Needless to say, the funds for your budget come from the sale of food and beverage, so this means you need to find that ideal price point that keeps your budget solid, but doesn’t scare away customers with insanely high prices. The best way to do this is by marking up the right items to the right amount.

A few years back, AOL Finance found that these items are where restaurants see the best markups.

  • Non-Alcoholic Drinks – bump those soda prices up!
  • Wine – the average markup ranges between 200 percent and 600 percent.
  • Pasta, pizza and bread-based dishes – we all know dough isn’t too expensive to make.

Moving forward, aim to find the balance of keeping price-sensitive items reasonably priced while putting that extra markup on items where you can get away with it. This will be enormously beneficial to your restaurant budget.

5. Choose the Right Restaurant Technology

Restaurant technology is essential for all restaurants that want to thrive and rise above the competition. Add a line in your restaurant budget for tech that improves your ROI, efficiency and restaurant operations.

The right restaurant technology platform can even increase table turn times, which means more sales (which means more money in your budget).

Modern point of sale systems also offer features that were unheard of in previous models, like integrated online ordering (which saves money) and sales reporting (which helps you identify your best and worst sellers, which helps you save money).

Fora Financial

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.

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AJ Beltis is a Blogger and Content Marketer at Toast POS in Boston. AJ runs the Toast Restaurant Management Blog and is constantly on the lookout for the latest news in restaurant technology, food trends, and the hospitality industry.
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