A Restaurateur's Guide to Controlling Restaurant Cost

Controlling restaurant costs often proves to be the most challenging task for restaurateurs. While managing labor, food, and equipment costs, you also need to take into account the price increase for everything. One way out of it is to create a QR code menu and digitize your restaurant as a whole.

This article will also explore various cost control measures you can take to manage your restaurant costs, so let's start.

What is and isn't considered cost control?

Before discussing how to control the restaurant cost, let's understand what cost control is and isn't.

What is cost control in restaurants?

Cost control refers to analyzing a restaurant's financial performance and achieving maximum profits.

Restaurateurs usually set certain benchmarks for financial performance and determine whether they have achieved them in each financial review. The difference between the projections and the actual performance is also measured in these reviews.

Restaurant costs include menu items, wages, equipment, etc. Understanding and controlling these costs is the biggest leap in maximizing your restaurant's profits. It will also help you focus on areas that you might otherwise neglect.

What isn't cost control?

It is often the most misunderstood concept in the restaurant industry because people often confuse it with cost-cutting.

Whenever a restaurant's profits drop, management immediately resolves to cost-cutting measures, such as reducing product quality or slashing the marketing budget.

While these measures seem to work initially as profits increase, they're detrimental to the business in the long run. Ultimately, they make customer experience less exciting and marketing less competitive.

Cost control is a much more sophisticated process than the simple cost-cutting patchwork. It involves a thorough evaluation of all restaurant processes, their cost implementation, and similar decisions instead of making knee-jerk cost-slashing decisions.

How much do you need to open a restaurant?

Opening a restaurant requires a significant investment, ranging from $95,000 to $2 million. Several factors contribute to the overall cost, including construction, rent, furniture, permits, and the like.

Here is a breakdown of the cost of opening a restaurant:

• Rent: $159-$178 per sq. ft.
• Utilities: $1,000-$1,200 per month
• Interior Finishes and Equipment: $20,000-$400,000
• Exterior Finishes: $1,000-$40,000

How can a restaurant control its costs?

As we already mentioned, running a restaurant is a complex affair. When facing financial strain, most end up cutting costs when they should opt for cost control instead.

The following are the most practical and rewarding measures you can take to control your restaurant's costs.

Adopt digitization

If there's one thing that can truly change the way you manage restaurant costs, it is by going digital.

Almost everyone owns a smartphone, so customers demand convenience in their dining experience. QR codes have become ubiquitous, with the number of scans reaching 27 million in 2023. This tells us that more and more restaurants need to adopt this technology. In fact, around 66% of restaurants already offer QR code menus to improve customer access.

Besides QR codes, restaurants should also invest in smart restaurant management systems to simplify and automate regular operations.

These systems automate everything from ordering to billing, raising kitchen tickets, and much more. This will save restaurant labor costs and give them an efficiency boost.

Reduce restaurant food cost

Reducing food wastage sounds like a simple principle on paper, but many restaurants fail to follow it and incur extra costs.

According to a report, restaurants in the United States alone waste 11.4 million tons of food annually, roughly equivalent to $25 billion. The National Public Radio (NPR) reported that 15% of all the food waste in landfills comes from restaurants. It isn't just unethical; it also means wasting much of your money.

Here is how you can control restaurant food cost and avoid wastage:

• FIFO Method: The First In, First Out (FIFO) method is a pretty simple yet effective way to save food. It means you use the ingredients that came first and move to new ones only when the former are finished. It ensures that you use all your ingredients before they reach expiry dates.
• Portion Control: Portion control is an important part of food cost management. It means that the staff shouldn't become overly generous and give customers more than the assigned portion.
• Menu Calculations: Calculate the costs of your menu by adding up the costs of all the ingredients and other resources that go into making a dish. Once you calculate it, determine your profit margins upfront. Keep updating the per-dish costs as prices fluctuate.

Manage restaurant labor cost

If we could name two pillars on which a restaurant stands, they'd be the food and the staff. Restaurant labor costs are pretty significant, and controlling them is critical to ensure healthy profit margins.

For that, you must train them to be efficient with resources and follow specific norms. These could include switching off appliances when not in use, covering tables, keeping count of portions, and the like.

You should also avoid overstaffing, as it definitely results in unnecessary restaurant cost overruns. The easiest way to know if you're overstaffed is to see if you have employees sitting idle during rush hours. Training employees takes a lot of time and resources, so minimizing employee turnover is critical.

Save on utilities

Utilities like decor, refrigerators, electricity, and water are often the most expensive investments for any restaurant. Managing these costs is essential to maintaining healthy profit margins, but you need not do it aggressively. Take one step at a time and focus on the costs of managing one utility before moving on to others.

For instance, you can use scented candles instead of fresh flowers. This will save you the money you spend on fresh flowers every day and reduce energy costs by combining candles with dim lighting.

Not to mention, it will uplift the overall aura of your restaurant and make it a fine dinner destination.

When purchasing appliances, go for pre-loved ones, as you can get them much lower than their retail prices. If you check various marketplaces, you can secure a product in great condition without the hefty price tag.

Regular reporting

Keeping track of your expenses is the key to managing them and ensuring they don't go overboard. Real-time monitoring and reporting of your income and expenditure helps you manage your restaurant's economy and identify leakages.

Here, the purchase sales report is an indispensable tool to understand the restaurant's financial performance. It shows you the detailed sales analysis of each menu item, which can help you decide if continued investment is worth it.

You can audit this report every fortnight and identify loopholes in your purchase-sales system.

Secure insurance cost

Protecting your restaurant requires buying a quality insurance plan, but paying too much for it doesn't make sense either.

Here are a few tips that can help you control restaurant insurance costs:

• Safer restaurants get lower premium rates, so have a robust safety program in place and train your employees about safety protocols to minimize accidents.
• Hire safe employees. For instance, if you're hiring someone as a driver for deliveries, check their previous driving record.
• Paying upfront usually costs less than paying throughout the year.
• Review your insurance plan annually to accommodate the changes throughout the year.

Why should you use a digital menu ordering system?

As you have read, going digital is one of the best investments you can make for your restaurant. Launching a digital menu ordering system is among the most important digital initiatives. Let's see how it makes your life much easier when digitizing your restaurant.

Updatable digital menu

When digitizing your restaurant, the first thing you should focus on is a user-friendly QR code menu. This helps you present your menu the way you like, tweaking the colors, pictures, patterns, and whatnot. You can put it anywhere in your restaurant, be it a table, poster, counter, or any other spot where it's easily accessible.

Customers only need to scan the QR code with their smartphones and end up on the digital menu. They can order their favorite foods and make payments with a few clicks. Why make them wait in queues when you can do it simply?

Provides sales analytics

Sales analytics are critical to managing restaurant costs. Without them, restaurant owners have no idea if their menu items are turning in profits or losses. On a dedicated dashboard, you can check the ingredients usage, customer preferences, peak hours, sales numbers, and much more.

Manage your restaurant cost with an interactive restaurant software

If you have launched a restaurant, cost controls should definitely be on your list. However, doing it without the aid of technology is a tall order.

A digital restaurant system is the perfect solution for your cost control worries. Their user-friendly interface helps you create an advanced digital restaurant menu QR code for your restaurant. You can include prices, descriptions, and other information in these menus and update them in real-time.

With its deep analytics, you can track the performance of individual items in your menu and make data-driven decisions to control costs and increase profits.

Check out reliable QR code menus today, create digital menus, and control restaurant cost to boost profits.

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