Most restaurants are unable to manage their finances and suffer loss as they are not able to keep up the cost. With Restaurant Cost Control, you can identify the area of your expenses and take preventive measures to keep a balanced ratio between the expenses and finances.
Effective Restaurant Cost Control Strategies You Can Apply
Two major expenses in any restaurant are FnB and Labor. Here’s how you can track, manage and control the costs effectively.
1. Ensure Food Cost Control by Tracking & Managing Inventory
The foremost step of restaurant price control is controlling and tracking the inventory. It is important to keep track of daily stock and actual consumption all day long. Checking the variance between the ideal and physical stock will help you identify about the wastage happening at your restaurant. A variance between 3-5% is standard and more than that implies too much wastage occurring at your restaurant.
A smart Stock and Inventory Management System can help to monitor the variance, gives real-time reports and enables to set the re-order levels for the individual stock items. Therefore, it helps you order the items only when they reach a certain re-order level and eliminates the risk of over-ordering or under-ordering.
2. Buying Raw Materials on Credit
Minimalist cash transactions and purchasing through credit can control restaurant costs. The raw materials purchased in cash are less in quantity and can be expensive as compared when purchased in bulk.
Buying the raw materials on credit is a good idea as it allows you to run the restaurant, generate revenue and later paying the credit for money. Check the credit period before choosing the restaurant vendor. Though it takes around 15-20 days but differs from vendor to vendor. Remember the ground rules of payment, ordering, and receiving. You can join a ‘Purchase Group’ to significantly lower your restaurant costs.
Furthermore, you can have an annual contract with the vendors. It would help to bargain a better price with the vendor as well as maintain consistency in the quality of the raw materials.
As the restaurant operations and service providers are dependent on each other, so it is important to maintain a good relationship with them.
3. Identifying the Stock Requirements through Yield Management
Reducing the food costs by giving attention to detail is often overlooked but it is critical known as Yield management. It is an important part of food cost control as it gives an idea of how much raw materials need to be used to prepare a food item. The raw materials should be ordered keeping the yield of items in mind. While placing the order, make sure you know about the portions a particular order of raw materials delivery.
4. Following Portion Control to Control Wastage
Big portions or overproduction are the signs of wastage that can lead to increasing food costs. There should be tools that can measure the portions which controls the price as well. Portion size is essential as over-serving of food as it can lead to high price and wastage.
A tracking chart can be made which is based on the following parameters.
- Food Returned by the Customer
- Food Burnt in the Kitchen
- Food Spilled in the Kitchen or Floor
- Extra Portions that get thrown away
When these parameters are measured, it can help to take corrective actions based on the results. Food being returned by the customers means you need to improve the taste and quality of the item or start reducing the portion size served. If food is regularly being burnt in the kitchen then you need to train your cook better or consider purchasing better kitchen equipments.
5. Controlling Labor Costs by Reducing the Employee Turnover
To reduce the budget spent on labor and restaurant cost, you need to lower employee turnover. Hiring a restaurant staff member needs a lot of resources and efforts such as recruiting and training them. However, if an employee leaves the job in the initial weeks, all the resources you put go in waste.
So, make sure to focus on quality hiring as it ensures favorable conditions which can stick around for a long time. Spend good time in hiring and assessing the candidate’s profile while hiring them. Also, provide a good pay and rewards to them so that they can be motivated to working at your restaurant.
6. Automation of Manual Processes
Accepting and placing the orders and billing are labor-intensive task. Doing these manually can lead to manual mistakes and it also consumes time. Applying a smart restaurant management system can automate the entire ordering and billing process and reduce the need of resources needed to perform the tasks.
A restaurant management system that comes with a Kitchen display system can reduce the dependence on manual labour which will reduce the expense on the labour. Once the order is placed, it will reflect on the kitchen-screen in real-time.
Moreover, if the customer changes the order then the changes will reflect in the KDS in real-time too.
7. Staff Performance Evaluation
It is essential to monitor and measure the restaurant staff performance by identifying the areas where they are doing well and where they could improve. Check the key performance indicators of your staff and track them to see if they are doing their duties as per the expectations.
A restaurant management system allows you to take care of the people management by monitoring the staff performance and provide you with the data to train them better for good efficiency. Thus, this will help to improve your revenue as well as justify the costs.
To measure your staff performance can help you control your labor costs from the following details-
- Number of Tables Covered
- Worth of Items Sold and Unsold
- Tracking the discounts offered
Another significant area where restaurants lose out on a lot of money is internal theft. The lack of automation leads to rising costs. The internal thefts which happen in restaurants can’t be identified easily. In order to control it, assign roles and permissions for each activity and keep a strict check of the daily reports.
Also, restaurant management software can also fight the odds of theft of your restaurant. The anti-theft module helps to manage your staff activities and keep a check on the loopholes present in the operations of any restaurant.
Keeping a regular track of the overall restaurant business allows you to have good control over your business and identify the areas of revenue leakage and also keep a lookout on sales-purchase reports.
The sales report should be audited weekly or monthly basis depending on the size of your restaurant. Also, you need to monitor the monthly sales report which gives you details of the sales performance of individual menu items. To reduce the wastage, remove the low-selling, high food cost menu items every now and then.
The other various areas where the capital waste occurs for any restaurant are the spillage or accidents. It is good to have the kitchen/bar/restaurant layout free from any obstacles for traffic during the peak hours. The floors of the restaurants should be anti-skid to avoid accidents.
So, implement these tips to match with your restaurant budget and follow these control measures as these would surely help to lower restaurant cost control.