Restaurant owners might think that having a busy kitchen and a full room of customers every night is a good thing, but if this is happening and you’re still only breaking even or operating at a lower profit margin, you’re doing something wrong.
However, if you also feel like you are cutting corners and are only able to break even every month or operate at a lower profit margin, you are not alone.
Most restaurants will have to face such issues from time to time and noticing the earlier signs of such inefficient procedures will save your restaurant thousands of dollars in the long run. From food to operations to labor, you can utilize various cost cutting strategies if you plan appropriately. And if you do not know where to start, we’ve got your back.
Here’s a list of the 10 best cost cutting strategies for your restaurant to help you understand the problem at its root cause, and how you can turn it around to make a profit for yourself without any negative impact on the quality of your food and customer service.
Quoting the famous words of Benjamin Franklin, “if you fail to plan, you plan to fail”.
To implement any strategy successfully, you need to have a solid business plan in place. This is especially true for restaurants, and it should be followed right from the moment where you decide to open a restaurant. But if a solid restaurant business idea was not something on the top of your list when you opened your restaurant, it is not too late to start now.
A business plan is an essential and strategic tool for restaurant owners. In addition to helping you concentrate on the particular actions required for your ideas to succeed, a strong business plan also enables you to meet both short-term and long-term goals. It also helps you stay on top of your goals by helping you stay focused and not wander with new ideas too early in the game as this might lead to expensive mistakes that could set you back by hundreds and thousands of dollars.
Having a strong business plan in place brings us to our second point – helping you find the right investor. Even though bank loans are a good place to start to bring in large amounts of capital, the debt and interests add up over time and it might start eating into your profits.
Here is where strategic investors and partners come to play. In addition to being a fantastic approach to reduce loan risks and debts, working with the right investors who might be established restaurant professionals will allow you to benefit from their depth of expertise. This will guide you to make the right move during crucial business decisions and help with cost savings.
The profitability and attractiveness of your menu items are directly impacted by the menu pricing, which is why it is very important to optimize it.
While charging more might mean making more money per item sold, it could turn away a lot of customers who are not ready to pay a hefty price. In contrast, offering less expensive goods will result in more sales, but lower profit margins. Your pricing plan should be based on an understanding of total restaurant expenses, recipe costing, determining final plate/dish costs, and setting up appropriate menu prices to optimize profit.
It might be easier said than done, which is why having the right tools in place is essential to guarantee the success of your restaurant by cost cutting, thereby increasing profits tremendously. Using a fully automated POS system to learn how to price menu items, monitor sales, and make well-informed business decisions that you can use to alter your menu prices to suit your clientele and yet turn a profit.
Throwing away food feels the same as throwing away money for restaurant owners. If your staff are making multiple rounds to take the trash out, and you are seeing overflowing garbage with perfectly good food, it might be time to take a step back and trim down on those food wastes.
The best and most successful restaurants have systems in place that can precisely estimate how many customers they will have based on past trends, how much of each product they will need to order, and how much of each dish they will need to prepare. They accomplish this by keeping track of and collecting as much information as they can, including anything from the number of visitors arriving every hour to the number of menu items sold each day.
Ask yourself these questions: How do you determine how much to prepare each day? How do you calculate the quantity to order? How do you anticipate how many people will enter your establishment? If you’re just winging or “guesstimating” it, now is the time to stop and reconsider.
Customer feedback is one of the most powerful tools that can literally make or break your business. Involving this in your cost cutting strategy is not only smart but is necessary to make sure that you are not only saving money, but are making more of it by leveraging the power of positive customer reviews.
You can better understand consumers and their needs by simply listening to them. By taking their recommendations to improve your restaurant into account, you can find out where to place funds to earn the best return on investment.
With every piece of information now available on social media, consumers are less likely to believe advertisements and lean more towards the opinions of other customers. This is why it is crucial to maintain a good online presence with lots of positive reviews. Negative feedback is not the end of the world if you learn how to manage it in a timely and professional manner.
When you take customer feedback into account, you are not only providing your customers with a wonderful dining experience but also increase repeat business and improve the perception of your company based on their comments and opinions.
Cost cutting on operational and overhead expenses is one of the most significant benefits that online ordering offers restaurants. When you move your business online, restaurants can save a lot of money on rent, labor, and on the upkeep of a dining area, such as electricity, cleaning, and maintenance. This can directly reflect on your menu prices and cost cutting translates to happier customers.
Some of the other benefits of online ordering includes giving customers more time to browse the menu, hence increasing check sizes. When customers have more time to browse the menu, they can think through their choices and customize their orders with add-ons. This can free up your staff from spending a lot of time attending to customers during rush hours which might result in incorrect orders or miscommunication.
Instead, your precious manpower can be put to good use somewhere else in your restaurant, such as putting out the best customer service to those who are present at your establishment.
While being present on third-party food aggregator sites gives your restaurant the much needed platform to be visible to a larger audience, it comes with its own costs and expenses. To help you with cost savings, and to add an additional revenue stream, consider investing in building your own ordering platform.
When you run your own ordering platform, you get to take home 100% of your profits. You could also gather insightful data about your customers to create a more personalized guest experience, which might not be possible in third-party platforms. An internal ordering platform that is integrated with your restaurant CRM and point-of-sale is the best way to capture the unique details of your customers, such as their favorite meals, add-ons, customizations, the time of the day or week they order and so on.
This data can help you develop a better rapport with your loyal customers, turn first-timers into repeat sales and make sure that you are getting the most out of every order rather than relying on traditional marketing techniques that might be costly and inefficient.
Understanding your employees is just as crucial as understanding your company. They are the ones that directly manage your stores and are responsible for your revenue.
With restaurants having some of the highest employee turnover rates in any industry, restaurateurs can no longer afford to manage their staff poorly. The more staff you employ, the harder it is to manage all of them while making sure that all of your staff are satisfied with their job sales and are incentivized accordingly.
However, not all is lost for restaurant owners who want to do better for the staff who make business possible everyday. Thanks to features like real-time sales reporting, managers may more easily precisely assess the effectiveness of their workforce.
Simply take a look at your staff data to understand which employee has made the most sales, which employee stayed longer to wrap up work, and which employee is more prone to making mistakes in their orders. This can help you provide the right incentives, training, and resources to make them more efficient at their job roles.
Due to the extensive reach of internet marketing platforms, you may bring in more customers while keeping the ones you already have. Online restaurant marketing is more accessible and less expensive for restaurants as well as customers.
If your customers have any concerns or feedback, they have the option to contact you using social media sites like Facebook, Instagram or Twitter instead of calling the restaurant directly only to be put on hold, which leaves a bad impression. You can better understand your guests and provide satisfactory services by giving them a place to voice their opinions online. A satisfied consumer will naturally become an advocate for your company.
Operating your restaurant using a fully automated POS software helps you keep track of every sale that occurs in your restaurant. Amongst other things, it helps you streamline kitchen operations, manage your inventory, online ordering platforms, running sales reports, and even your customers’ loyalty programs.
Active management is the key to a successful restaurant. A top-notch restaurant management system will provide you the capacity to oversee restaurant operations, no matter where you are. You can obtain market data through sales reporting, which can help you make sound business decisions. Continuous business growth depends on knowing your consumers’ purchasing patterns and tracking sales performance statistics and a POS software provides you with just that.
Sometimes, the demands of the restaurant business grow rapidly beyond what you can manage manually. That is why it is so important to spend money on a POS system that can offer you and your staff the technical assistance required to maintain smooth daily operations.
Restaurant Cost Saving Strategy: The Takeaway
And there you have it – the 10 best cost cutting tactics for restaurants that will increase revenue without compromising on your customers’ dining experience. Restaurants need to be careful with their money more than ever because of the ongoing labor and material shortage worldwide. With a little bit of planning, creativity and automation, you can utilize these cost cutting techniques in your restaurant to reduce expenses and increase revenue, while keeping your pockets happy and your customers happier.