Managing restaurant expenses

One of the biggest challenges that restaurant owners face is managing their costs effectively. When faced with a competitive food service environment, maintaining a balance between quality of service and cost control becomes a key component of success. In this article, I will highlight key strategies that will help restaurateurs optimize their raw material, staff, and operations costs to achieve financial stability and long-term success in the food service business.

Optimization Of Raw Material Costs

One of the biggest challenges for restaurants is managing raw material costs. Food ingredients represent a significant cost in any public catering establishment, so their rational use is crucial.

• Negotiations with suppliers: Regular negotiations on trade agreements allow you to get more favorable terms for the purchase of raw materials, which leads to lower costs.

For example: getting more favorable terms for buying meat from a local supplier can lead to savings of up to 10% per year.

• Menu Optimization: Analyzing the popularity of dishes allows you to adapt the offer to the preferences of customers, eliminating less favorable positions and minimizing waste.

For example: avoiding infrequently ordered meals can help reduce waste and increase margins.

• Portion Control: Standardization of serving sizes helps to reduce excessive consumption of raw materials and reduce costs.

Effective Management Of Personnel Costs

Hiring costs make up a significant portion of the restaurant's budget. Proper personnel management can lead to significant savings.

• Schedule Optimization: Efficient scheduling of work schedules allows you to avoid excessive costs associated with overtime and unnecessary employment.
• Training and development: Investing in staff development leads to increased productivity and employee loyalty. In addition, staff training, such as customer service or sales methods, and complaint resolution leads to increased productivity and employee loyalty. Well-trained staff can serve guests more efficiently and correctly, which affects the increase in the average bill, and therefore the entire turnover of the restaurant.
• Motivation and rewards: Incentive systems can encourage employees to perform better, resulting in better cost management. Implementing a reward program for achieving your sales goals can help you increase your revenue.

Effective Management Of Operating Expenses

In addition to raw materials and staff costs, restaurateurs should also pay attention to other operating costs, such as rent, utilities, or marketing.

• Contract Negotiations: Regular reviews of contracts with service providers and leases can lead to significant savings.
• Energy saving: Investing in energy-efficient technologies can reduce utility costs. Investing in energy-efficient technologies, such as LED lighting or low-energy kitchen appliances, can reduce the restaurant's operating costs. For example, replacing all incandescent lamps with energy-efficient ones can save up to 30% per year.
• Service Management: Regular maintenance of the equipment minimizes the risk of unplanned repairs.

Marcin Dyrda, Founder and CEO of GASTRONOMY, an expert and practitioner of public catering, specializing in the management and opening of public catering facilities. My experience allows me to conclude that "If you can't count something, you can't control it”.

Key Financial Indicators

Monitoring key financial indicators is extremely important for effective cost management in a restaurant. This allows restaurateurs to track operational performance, identify areas for improvement, and make informed business decisions. Below are the key indicators and their optimal values, which should be used when managing expenses in a restaurant:

1. Food Cost Percentage (FCP):

• The ideal FCP is between 25% and 35%.
• FCP is the ratio of the cost of raw materials to total sales. A high FCP may indicate poor management of the warehouse economy, waste, or a high cost of producing dishes (menu items).

2. Labor Cost Percentage (LCP):

• The optimal LCP is about 30% -35%.
• The LCP determines the percentage of expenses related to employees ' salaries relative to total sales. A high LCP may indicate inefficient scheduling of work schedules or staff inefficiency.

3. Prime Cost:

• Prime Cost should not exceed 60% -70% of total sales.
• Prime Cost is the sum of the cost of food raw materials and labor costs. Its control is critical to maintaining proper gross margins and ensuring that restaurants are profitable.

4. Break-even Point (BEP):

• Knowing BEP allows you to better plan your pricing and marketing strategies.
• BEP is the point at which operating expenses are balanced by sales revenue, which means there is no profit or loss. BEP awareness allows restaurateurs to better plan their business and make decisions about pricing and promotion.

Monitoring these key financial indicators allows restaurateurs to effectively manage costs, optimize their business, and achieve long-term success in a competitive food service environment.

Effective cost management in a restaurant requires a systematic approach and constant analysis. Optimizing the cost of raw materials, personnel and operating costs is crucial to maintaining the financial stability of the enterprise. Adopting efficiency-based strategies can contribute to success in a competitive food service environment.