Operating and managing a restaurant can be a daunting challenge, one of your biggest obstacles is your budget. Restaurants operate on razor-thin margins - re-evaluating inventory, purchasing strategy and menu pricing strategy to offset operational costs throughout the business is a must in this industry.
Some of your operational costs are uncontrollable - rent increases, minimum wage increases & third-party deliveries. In this month's edition of Money in the Bank, we have put together a quick guide to help you identify and manage your controllable costs!
5 Tips to Manage Costs
Apply these tips and suggestions below to increase the profit of your business.Restaurants operate with high overheads and potential for unnecessary wastage, if not carefully managed. We have identified 5 areas where you can reduce and, potentially, do away with some of these costs altogether:
Labour costs: One of the largest expense categories by far is the cost of staff through wages and benefits. These costs are considered variable and can be easily controlled by forecasting your labour needs. Most point of sale systems will allow you to run reports to identify the days and hours where you have the highest sales and number of tables so you can shift staff accordingly. Remember to keep an eye on time cards - employees could be clocking out early or late and claiming extra pay they are not really entitled to.
The second-largest variable expense for any restaurant is Food & Beverage costs, it is important to stay on top your food and beverage costs, two ways to control your costs are:
- Consistently analyze and negotiate with your vendors for the best quality and price possible.
- Back of House Management: Once you have secured better pricing from your vendors, turn your attention to your staff, teach your prep-cooks cutting and prep techniques that will keep your food fresher for longer and maximize the amount of product that goes into a dish to reduce wastage.
Marketing & Advertising Expenses: If you want to reach your profit goals, you should promote your business and encourage people to come and try your products, marketing and advertising costs can eat into your budget if not carefully monitored, some marketing and advertising costs include:
- Menu: One of your most important marketing tools is your menu, and it dictates many of your restaurant's other expenses, keep a close eye on your best and worst sellers with our POS system to quickly eliminate unnecessarily menu items to improve stock management.
- Table Tents.
- General advertising: Cut any advertising channels that aren't working, and reinvest it in another channel - if newspaper advertising isn't working but social media is then spend less on newspapers and more on social media. Try a new marketing channel altogether if you feel none of the existing channels are working.
Late fees, Tickets & Fines: Late fees, loan payments, fines stemming from noise complaints, health code violations, and overselling to patrons, can quickly add up!, Reduce these unnecessary costs, with a little organization, planning and training of staff to ensure everyone is compliant.
Electricity Costs: Every year the cost of electricity goes up, and with rolling throughout South Africa due to ageing powerplants, this is one area you will need to focus on, making use of smart technology, like electric thermostats to control heating, switching to energy-saving bulbs or LEDs can rapidly reduce your power consumption and prevent unnecessary strain on Eskom's infrastructure.