How to save money running a restaurant?
When you run a restaurant, it can be hard to make good money. There are so many things to take into account:
- Waste of products because you bought too much and customers did not come.
- Loss of products or utensils through carelessness.
- Higher costs and lower profits because you struggle to calculate the true costs of running the business.
- Theft by employees, etc.
There are many ways to lose money in the restaurant business. The below checklist tells you how to save money running a restaurant.
Of course, there are more than 16 ways for restaurant owners to save money and increase profits.
I advise you to choose at least 3 strategies and test them in your restaurant. Taking only 1 action may not bring great results. But taking action in 3 or 5 areas will definitely improve your profits.
And as time passes, you can start taking action in more and more areas to gain even more profits. This is how to save money running a restaurant.
1. Do daily inventory of key items
This is one of the most basic and highly effective cost controls in the restaurant business. Yet, many restaurant owners do not do this.
Step 1: Identify the top 10-15 products that you spend the most money on.
Step 2: Every day, for each product, count and record the quantity on hand.
Step 3: If you buy that product during the day or receive deliveries for that product, add it to the beginning inventory.
Step 4: At the end of the day, count the ending inventory.
Step 5: Calculate the usage for each product: beginning inventory plus purchases/deliveries minus ending inventory.
2. Manage product usage
Use the data from step 5 (above) to improve product usage management. For example: 1 unit of product A is required to prepare 10 plates of food. Today, you sold 30 plates of food. Meaning that your usage for product A should be 3 (30 divided by 10).
If the usage that you calculated in step 5 is showing 5 instead of 3, you need to take action. The additional usage could be because of careless use of product, it could be casused by waste or by spoiled/rotten product. But it may also be a sign of theft.
Having this information will allow you to take action at an early stage. It will also help improve management of your restaurant.
Note: if you use POS (point of sale) software, you can use the daily product usage report for each product to determine actual usage versus what you have in stock.
3. Ensure maximum usage of your products
Do you know how to use all parts of your food products? Like peelings or leaves that are not used to prepare the main dishes? For example: some peelings can be used to create soups or sauces. Leaves can be used as decoration. Food products that are overripe can be used in sauces and soups. Finding ways to maximise your food product usage will reduce waste.
4. Determine daily product needs
To control freshness, waste and spoilage, you need to know the amount of food to prepare for each shift based on anticipated sales. Knowing how to create great-tasting dishes is the cook’s speciality. But sometimes, kitchen staff may be less careful than you regarding how many food products to use.
If you have too many food products waiting, it leads to more waste and spoilage. It also encourages you, your family members and your staff to have a snack while waiting for food to be prepared. If you do not have enough food products on hand, it creates stress because you will out of supply and may not be able to serve all your guests.
Many chefs may not want to use a recipe because mastery is shown by producing great-tasting products from the knowledge that is in your head. (And not using a recipe also makes it hard for people to steal your secrets.)
But try to get a better understanding of how many food products you need to have on hand to prepare your dishes. Even if this means that you have to prepare all the dishes at your house so that you can find out how many food products you need. This will help to reduce excessive waste.
5. Buy only what you need. And increase profits
We have all made this mistake, whether in business or in our personal lives. Buying too much is one of the most expensive mistakes to make in business. It leads to more waste and spoilage.
It also encourages you – and your staff – to be careless about measurements. Meaning that the cost per dish increases, but you cannot charge the customer a higher price. As a result, your profit is reduced.
A key strategy to learn if you want to know how to save money running a restaurant is to make sure that you only buy what you need.
6. Use procurement orders
If you order from suppliers, always keep good records of the products that you ordered, the quantity you ordered and the price that the supplier quoted to you before buying.
When you are buying, make sure to verify your purchase, especially if the supplier delivers to your business. Match what is at your door with what is on the invoice. Mistakes happen all the time and when they happen, they usually are not in your favour.
7. Use a scale
This tip is linked to the previous one. If you buy products by weight, make sure to weigh products when they are delivered to your business. Or, if you do your own transportation, verify the weight at the supplier’s place of business.
If possible, use your own scale.
Drivers know who uses a scale and who does not. Protect yourself from being cheated by weighing at least certain products. If necessary, do spot checks by weighing at unexpected times. However, the best approach is to always weigh what you buy.
8. Do not accept deliveries during rush hour
Don’t let people cheat you by accepting deliveries during rush hours.
When your mind is distracted, it will be easy to take advantage of you.
Have a policy that does not allow deliveries during rush hour and make sure to communicate this policy to all your suppliers beforehand.
9. Reduce inventory to save money in the restaurant
Many restaurants struggle to do good planning. Food planning, but also procurement planning. As a result, many of them have more food available than necessary.
My advice: keep good records of the number of products you use per week. If this is your first time doing it, keep records for 1 month to get good insights. Then use that information to determine how often you need to order or buy products. Make sure to include a small safety margin in case you get more customers. Maybe 10%.
When you reduce your inventory, you will have less waste and spoilage. You will also see your staff manage products better.
10. Limit access to your inventory
I’m sure that your inventory is protected by a locked door. But have you taken enough precautions to ensure that only 1 person has access?
Be particularly careful with deliveries. Do not tempt people who don’t even work for you.
After you check a delivery, let your employee – or yourself – take it into storage. If not, there may come a day when you find yourself called away for an emergency, leaving a stranger in your stock room.
11. Lock up towels, aprons and napkins to save money
Restaurant owners often overlook the ability to save costs on laundry. It is in fact a very easy way to save money on the running of your restaurant.
One way to reduce this cost is to issue towels and aprons at the beginning of each shift rather than to allow employees to just grab a clean one whenever they want.
This is not to say that you should forget about hygiene!
But when there is scarcity, people are more careful with what they have.
The same applies to napkins, towels and aprons. If they are freely available with no checks, the size of your laundry will be very big indeed!
12. Remove garbage cans from your kitchen
One of the main risks for restaurants is to lose good food products. Either by accident or intentionally. If your staff are not well-trained or if people are careless when preparing food, good, usable (and expensive) food products can end up in the garbage.
Instead of using garbage cans, give each employee a transparent plastic box. Put their name on the box. Any food scraps and products intended for garbage should be placed into that box.
At the end of each shift, quickly check the contents of each box. If you find any good and usable product in the scrap, bring it to your employee’s attention. If necessary, give them additional training on-the-spot.
You can do this for only a few months or all the time.
13. Do regular inspection of any remaining garbage cans
Garbage cans are one of the main areas where a restaurant can lose profit. Even if you replace the garbage cans with transparent plastic boxes in the kitchen, you may still have some garbage cans in the restaurant. Maybe for customers to use. Or in your office area.
Be smart and do regular inspection of any other garbage cans. Because using garbage cans is one of the easiest ways to steal products when you are working in a restaurant. There are so many examples from across the world about how manages finding food products, glasses, plates etc in the garbage.
If you have a bigger restaurant, consider controlling access through the back door. You can either lock the door or – if you have the money – install a so-called “panic bar” that will sound an alarm if somebody opens the door.
All exits should be controlled by a designated staff member/supervisor. Also, you should set specific times for disposal of garbage so that you can inspect what is being discarded.
14. Focus on selling your highest gross profit menu items
Regardless of food cost!
Businesses that I work with often try to increase sales by just selling more products. Without looking at the time, effort or money that it costs to do so. And yes, it may bring in more customers and sales.
But if they had invested that time in getting more profitable customers, their results could have been even better!
When it comes to understanding how to save money running a restaurant, knowing your gross profit is even more important.
Sometimes, selling food that has a higher cost to prepare will also give you a higher profit. For example: steak and fresh seafood may be more expensive to prepare than a simple rice or spaghetti dish.
But if you can sell more steaks and sell fewer cheap basic rice and spaghetti dishes, your gross profit margin will be higher. So, even though you have a higher cost for food preparation, your profit is higher too.
15. Do weekly calculations of cost of sales and labour cost
There is a well-known business saying: what gets measured, gets managed. In other words, when you start or improve measurements in your business, you also improve your profits.
In a restaurant, the biggest costs are food, beverage and labour costs. These costs added together are called a restaurant’s prime cost. Being able to keep this prime cost under control can really help you save money on the running of a restaurant and improve your profits.
The most profitable restaurants calculate their prime cost at the end of every week.
When there is a problem, they can react quickly and solve the issue very fast. Restaurants that are struggling often do not know their prime cost, or only calculate it once a month. Which one are you?
16. Observe the first and last 15-30 minutes of every shift
When employees have less time for a task, they will work faster and get more work done as compared to when they have too much time.
In a restaurant, you can determine whether your employees have too much time by observing their work pace and sense of urgency during the first and last 15-30 minutes of each shift.
If you notice a casual or slow pace, especially during these 15-30 minutes, try to reduce the length of the shift. This way, your employees will spend less time doing what they need to do.
You can also increase the workload to get more things done in the same amount of time.
When it comes to knowing how to save money running a restaurant, there are many strategies that you can try. Start by testing 2 or 3 of these 16 ways for restaurant owners to save money and increase profits to see which results you get. Then add other strategies as time goes on so that you can eventually run a very efficient restaurant.