Learning how to reduce food cost in a restaurant is one of the most crucial skills that you can learn as a restauranteur. It directly impacts your ability to make tasty food, make a profit, and (ultimately) remain open. In this blog we’re diving into restaurant cost control.
Understanding the Importance of Food Cost Control
Restaurants are notorious for operating on small margins. Between labor, maintenance, food costs, and rent, it’s not uncommon to pull in less than 15% profit. Many of those costs are fixed; you need maintenance to keep things running, rent for the space, and labor to make things happen — but food costs are variable.
While some things will be constant (butter, oil, and salt, for example), others can be adjusted. Understanding how to reduce food cost in a restaurant is absolutely vital to your restaurant’s long-term health.
Common Food Cost Challenges for Restaurants
When understanding how to reduce food costs in a restaurant, chances are that you’ll recognize a few patterns. While every restaurant handles things differently to some extent, the simple truth is that some mistakes are quite easy to make.
One such mistake is understanding the limitations of your space. Many restaurants attempt to have “a little bit of everything” in an attempt to lure in more guests from a wide variety of demographics — and that’s a surefire way to run up food costs. While we’ll get to ways to mitigate the damage this can do (such as cross-utilization), it’s generally best to keep things simple. Try to stick to a one-page menu that uses a variety of ingredients in multiple ways, and you’ll find that food costs lower.
Another example of common food cost blunders is portion control; more accurately, a lack of portion control. While large servings can be great for the customer, if they’re not monitored in some way, you’ll find that you’re making less than you should on each plate. By controlling portions, you’re more able to predict what you’ll make with each plate.
Key Strategies to Reduce Food Costs in Your Restaurant
With that out of the way, let’s talk about how to reduce food cost in a restaurant. There are three main takeaways.
- Optimize your menu for profitability by understanding how to cross-utilize ingredients, spot high-margin items, and how to update your menu.
- Control portion sizes and reduce waste via official serving sizes (preferably by weight), training, and pre-portioning.
- Streamline your inventory management with the First In, First Out (FIFO) methodology and regular audits.
- Work with suppliers to find the best options for quality, consistency, and value.
Optimize Your Menu for Profitability
Your menu should be the first thing that you look at when getting into restaurant cost control. It’s the gateway to all of your dishes and, as such, makes for a great starting point. Take the time to break down each dish by ingredient and organize them on a spreadsheet (or however works best for your brain). Once you’re able to see everything that goes into each menu item, it’s often easier to visualize where your money is going and, ultimately, evaluate what’s worth it.
In restaurant cost control, we tend to differentiate menu items into two main categories, high-margin and low-margin items. The former are your classic moneymakers — french fries, fried mozzarella sticks, and pizza; they’re the items that cost very little to make and can be sold at a considerable markup. In contrast, low-margin items tend to be your more complex entrees. These are the dishes that we make because they’re incredible, not because they’re easy or affordable to make regularly. While it’s okay to have one or two of these items on a menu, you need to be able to bring in a profit, which is where high-margin items come in.
Cross-utilization is also another aspect of a profitable menu. Cross-utilization of ingredients is the practice of using ingredients for multiple dishes, rather than ordering a bunch of ingredients that are each only used in one dish. While some things (like salt, pepper, butter, or flour) may have obvious and varied uses, others don’t. If you can’t find a way to use the majority of your ingredients in multiple dishes, that means that it’s time to go back to the drawing board.
Control Portion Sizes and Reduce Waste
Restaurant waste is a major contributing factor to restaurant cost control. More accurately, minimizing waste through portioning is vital to food cost control. The simple act of creating specific portions for items can go incredibly far toward minimizing waste and increasing profit margins across the board.
If you aren’t already using them, scales and portion bags are your friend when it comes to portion control. While volume-based portions can work for liquids, solids should always be measured by weight. If you don’t believe me, have four cooks measure the same pasta with a cup container and then weigh them — depending on how hard they were packed, each “one cup portion” will weigh differently.
On that note, training is incredibly important here. Without clear guidelines for what portions are, there’s no way for your staff to properly implement portion control. Because of this, it’s often best to take the time to test out varied portions until you find the right mix of value for the guest and profit margin. From there, you can train staff to portion each item as needed and move along.
Another great way to reduce waste is to use pre-portioned ingredients. This works especially well for proteins like pulled pork, sliced meats, or burger patties. A few slips of deli paper, a few seconds on the scale, and you have consistent, properly-portioned protein at your fingertips.
Streamline Your Inventory Management
If you’re not on top of your inventory, things can spoil or be overordered, leading to waste that simply didn’t need to happen.
Luckily, the FIFO system was invented specifically to control food loss. It’s incredibly simple — use the oldest things first and toss them when they expire. This will require consistency from staff to not just pull the first item they see, but with proper organization, it’s quite easy to maintain.
When keeping an eye on business, you’ll eventually begin to recognize patterns. During slow or busy times, your food costs will vary — take note of that. If you can recognize that things are slowing down, order less in bulk and prep more sparingly; in contrast, if things pick up, you can likely spare the extra prep and cash to buy and prep in bulk.
On the note above, auditing your inventory is incredibly important. Take the time to regularly inspect your entire inventory to see what’s nearing expiry, what’s not being used often, and what you need more of. Once you’re able to categorize items into levels of importance, you can prioritize high-value items and more easily reduce food costs.
Negotiate with Suppliers for Better Prices
Your suppliers are, ultimately, a major part of the restaurant ecosystem. They set the prices, and because of this, they control your food costs more than most. This makes them incredibly important to your long-term success.
Local suppliers are great, because they’re often run by only a handful of people. This makes it incredibly simple to get to know the people who bring your product and, ultimately, build a friendship with them. While you don’t have to become best friends, being friendly goes a long way — especially with locals. On that note, it’s time to talk about local vs national suppliers.
Often, you’ll find that national and local suppliers are in competition for specific parts of the market. You may have farmers that have better, more local produce, but a national chain may have similar (if lower quality) produce for a lower price. In contrast, some local suppliers will be more than willing to cut a deal if it means long-term business. In short, get to know all of your options and carefully compare both the cost and quality of each.
Additionally, common ingredients like fryer oil, flour, butter, and salt should never be bought piecemeal barring an emergency. Instead, invest in bulk on items that you know you’ll use (especially those that store well, like beans, rice, flour, salt, and spices). This allows you a bit of leeway to splurge on seasonal items while still saving some money.
Monitoring and Adjusting Food Cost Strategies
Over time, you’ll find that your strategies for reducing food cost will change. What worked five years ago may not work as well now, and that’s okay. That’s why it’s crucial to regularly monitor your food costs and make adjustments as time progresses. Just remember, change isn’t always bad, but it is often necessary.
Track Food Cost Percentage Regularly
Your food cost percentage and labor cost percentage are two metrics that you should always monitor. They directly affect the bottom line, and because of that, they’re vital. This means that every month (if not every week), you should take the time to dig through your food costs and look for common denominators.
If numbers are down after selling a record number of one particular menu item, consider altering its portioning or removing it altogether. Similarly, if the numbers go up after changing the portioning on another menu item, stick to that portion for a while and see how it goes!
Adjust Strategies Based on Seasonality and Demand
On that note, don’t hesitate to adjust your strategies temporarily. Sometimes new seasons bring new demands, but that doesn’t mean that the old ones won’t return. Instead, embrace seasonality and be willing to adjust to what the market tells you it wants — you’ll find that restaurant cost control is a lot easier if you’re willing to adapt.
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