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3 Effective Ways to Control Your Restaurant’s Costs: Protecting Your Margins is More Important Than Ever

3 Effective Ways to Control Your Restaurant’s Costs: Protecting Your Margins is More Important Than Ever

We get it. The restaurant business has always had razor-thin margins, but today’s challenges are ones many of us have never experienced all at once. High inflation rates, supply chain disruptions, labor shortages, and increasingly unpredictable customer behavior compound daily, shrinking those margins even more. When your restaurant faces lean times such as these,  your best defense is to control costs to boost revenue. The question is, what does this look like for your  business? Does it come from shorter operating hours,  different ingredients, or higher menu prices? Maybe a combination of these? 

While these tactics are certainly options, they’re only  short-term fixes that can have a longer-lasting negative  effect on your reputation, customer retention, and your business in general. There is a better approach.  

Here are 3 ways to cut your restaurant’s costs and strengthen your business no matter what challenges may come down the road. 

1. Understand changes within your cost centers  

From labor to ingredients to supplies, the cost of doing business is up across the board. It used to be the goal for restaurants was 60% prime costs, 30% of which accounts for food. Not anymore. According to  recent data from accounting firm KitchenSync, the  cost of olive oil, alone, has nearly doubled in the  past 2 years. Labor costs are also up roughly 15%  and account now for closer to 35% than the 25% to  30% standard. And yes, it is possible to reduce your spending, and still be the healthy restaurant near me people find in Google.

And while turnover has always been an issue for the  restaurant industry (even pre-COVID), those rates are  still increasing today. Every lost employee equates to  even more money spent on finding and training new staff.  

With costs fluctuating daily, waiting for monthly P&L statements is no longer an option. You need to  evaluate sales, labor, and cost of goods sold (COGS)  

weekly at the very least, but ideally daily. Knowing  what your actual costs and revenues are in real-time  enables you to budget smarter. This hard data can  show you where spending is needed most and where  you can afford to save.  

2. Keep everyone on the same page 

Sales and cost data are usually tracked by multiple  people in your business, depending on it’s size. Supply  purchases, POS sales, inventory, invoices, and product  orders all impact your margins. Not having this  information at your fingertips when making budgeting  and purchasing decisions can be detrimental to your  bottom line.  

An industry specific solution like MarginEdge nestled between your POS and QuickBooks Online  solves this issue. It combines data from all sources into one place, ensuring your data is mapped consistently.  This approach gives you direct visibility into all the information impacting your business without needing access or training on your company’s accounting system.  

One simple interface can give both you and your  accounting team access to the same information at  the same time.  

With this kind of actionable data in your hands on a daily or weekly basis, you and your team can make real-time decisions, keeping your margins healthy. Managers can better evaluate why and where they were off in sales and what that means for the rest of the period, identify sources of waste, and come up with ways to take  meaningful action to keep COGS down.  

3. Upgrade your accounting software 

If you want to try either of the previous strategies, upgrading your accounting software is a must. The right  tech stack can bring together all your sales, COGS, and labor data together – seamlessly. Automation is a real game changer for the industry, as it greatly reduces time spent on crunching numbers and enables access to reporting needed to keep costs under  control. It reduces the number of hours your team spends on chasing down and analyzing data from multiple  sources, resulting in lower labor costs – enabling everyone to focus more on revenue-generating activities.  

If you currently have more than one system tracking inventory, developing costing for recipes and menus, collecting POS data, invoicing, etc., consider upgrading to an integrated solution. Look for one that is built out of  integrated agile/specific applications that pass data back  and forth seamlessly and automatically. It’s crucial to have your tech stack integrate with a financial management system that’s easy to understand and report from, and can  supply the information you need wherever you need it.  

Start Controlling Costs  

MarginEdge, is a platform made by restaurant people, for restaurant  people. Combined with QuickBooks it empowers you to manage your business down to the line-item detail with seamless invoicing, cost analysis and management, as  well as customizable inventory entries. 

Chef Geoff’s Deluxe Hospitality team ensures vendors adhere to agreed-upon pricing with real-time invoice tracking for every order. They get alerts when order totals don’t add up or prices go up without notice, giving them real-time oversight of both inventory and purchasing. This keeps costs down for the hundreds of ingredients the group uses across its nine restaurants.

Burger 21 uses weekly inventory data and continuous purchasing data that maps invoice data by product (not by individual vendor item), combined with daily POS sales data to cut food costs by 2% throughout all its franchises. This data has been so powerful to the franchise’s bottom line, they now conduct weekly inventories.

Denizens Brewing Co. took the time and labor out of entering data, expenses, and reporting by upgrading their accounting and inventory management using MarginEdge + QuickBooks Online. Not only do they get true, real-time data that directly impacts their margins, the new automation reduced the amount of time spent on paperwork from 2 days to 2 hours.

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