The restaurant industry is competitive, and when it comes to surviving and thriving in most markets, controlling costs and operational expenses is key. The most expensive single area that can be impacted to help increase profitability are food costs, and we’d like to share seven ways your business can focus on economy, to help you grow.
- Constantly Calculate Your Food Cost Ratios
Pricing is a mathematical equation that starts with two important factors; what the menu item actually costs to prepare and deliver to the customer, and what the customer views to be a fair and competitive price for the meal.
Balancing the two ratios is an ongoing challenge. Naturally, consumers would like to pay as little as possible for a quality meal. However, when your customers know that they are receiving a delicious and nutritious meal, it is easier to justify the price threshold you need to protect your profit margins.
Because food costs can vary due to competitive production factors, supply and demand, increased shipping and delivery and other factors, the exercise of calculating food cost ratios on all menu items should be done on a monthly basis.
Visit Toast for a good resource page and free Food Cost Ratio Calculator. The article is informative and will take you through a step-by-step process of accurately measuring your food cost per serving and how to maintain a record of trends to plan your meat and produce purchasing more efficiently.
- Digital Tablet Menus and Signage
We have all been to restaurants and witnessed how digital tablet menus and signage are being increasingly used by both fast-casual and fast-food establishments. What are some of the savings that business owners can expect by switching to this type of menu?
When wait staff take an order verbally, there are always a percentage of the customer orders and preferences that are not communicated accurately to the kitchen. The result? The customer sends back the entrée and items, and the kitchen must prepare again (from scratch). This results in a loss of production time and doubles the cost to the restaurant owner.
Studies have shown that the digital kiosks for ordering on the table reduce order error by as much as 60%. That is a big improvement. Not only that, but it helps reduce verbal order time at the table, and customers enjoy seeing a digital menu of all their options. It is also easier to display specials and flash-sale items to customers.
- Maintain an Accurate Inventory
Theft is an unfortunate but very real aspect of food service management, and it can get expensive for business owners when staff over-indulge in food (during their shifts), or in some of the extreme cases, when kitchen workers leave the premises with supplies.
Security is a priority for any establishment, not only in the customer service area but in the staff areas and food preparation centers. Many restaurants include inventory as a once daily record keeping activity that sous chefs are required to complete at the end of their shift. This helps to reconcile the daily volume of meat, fresh produce and other ingredients with the sales receipts for the day. It also makes it easy to detect when food delivery orders are shorted (have all deliveries reviewed by a staff member for accuracy before accepting the invoice).
- Leverage Seasonal Menu Specials
Certain cuts of meat and entrees have a more seasonal appeal. For instance, during the hot days of summer, restaurant guests are less likely to order a pot roast entrée than they are a fresh grilled steak with a side salad. Or a fire grilled scratch made burger.
When selecting your meat and ingredients, consider the seasonality of your order and look for opportunities to purchase discounted ingredients during the time of year when that produce is more readily available. Tweak your menu to capitalize on specials that will offer you a boost in profit margin, thanks to the reduced cost of in-season produce.
- Choose Prime Vendors and Wholesale Partners
When you have a relationship of integrity with your wholesale partners for meat and produce, you can rely on their advice regarding quality products. Using the same wholesale vendor can also help you earn a volume discount as a weekly or monthly customer.
Don’t let price alone dictate which wholesale food providers you use. It’s not a good deal for your business if the meat that arrives is at or close to expiration date. Or if there are food safety issues and concerns that can jeopardize the health of your customers and create a legal liability problem.
Choose meat and produce food suppliers that have an established reputation for quality and service and ask them for advice on cost saving or seasonal products and opportunities for you to innovate higher profit margin entrée items.
- Reduce Waste
From the menu items to you prepare to the way you process your ingredients, there are many important steps to help your restaurant reduce profitability loss associated with food waste. A new study conducted by the USDA in 2018 revealed that the restaurant industry loses $2 billion dollars in profits annually because of food waste.
Since food costs can account for 25% to over 30% of your overhead daily expenses, it’s important to develop a strategy that involves tight inventory control and proper food handling procedures. What else can your business do to cut food waste?
- Freeze bulk orders in portions that are sealed for freshness and portioned for fast food preparation.
- Train sous chefs to cut meat and other fresh food ingredients in ways that promote freshness and reduce spoilage. Review food safety and storage requirements frequently with staff to avoid waste.
- Don’t over-prep ingredients. Do an analysis on typical ingredients required for each food preparation station and avoid bulk pre-preparation that can cause spoilage.
Some items such as desserts can be high-cost, and as they approach their Use By date, you can offer a daily special to move those items at a reduced cost. This also works for restaurants who have bakeries where day-old products can be sold retail to visiting customers to help recoup production costs.
- Create a Team Strategy with Your Staff
How many times have you asked for extra condiments, and had a restaurant drive-thru server provide you with a handful of expensive dipping sauces, creamers or other order add-on’s? This is one small example of how employee behavior and attitude can dramatically impact your bottom line as a restaurant owner.
Hiring qualified and responsible staff is part of the success strategy for any business, from fast food to luxury restaurant establishments. But many restaurants do not provide adequate training or go to the extra effort to foster a team effort, when it comes to saving on costs.
Having a weekly meeting or monthly meeting with your staff to review sales statistics can actually help. Demonstrating some of the costs, and where their diligence can help can create a new attitude that will save you money. Employers that provide recognition for cost-saving ideas or rewards for employees who routinely set a good example by putting the restaurant’s business goals first, benefit tremendously.
Remember that incentives don’t have to be expensive! It can be a point system accruing for paid days off, an Amazon gift card or some other tangible that expresses recognition and appreciation for staff that demonstrate innovation, and that extra effort.
Balancing costs and protecting your profit margin means investing the time and effort to closely monitor the food you buy, and how it is used in your food service establishment. If you would like more information about the quality meats available to our commercial customers, contact our team at Miami Beef®.