4 Tips on Managing Restaurant Overheads

As a restauranteur, if you knew that thousands of dollars were hidden in your venue, would you take the time to hunt for it? Some don’t. The overheads that you ignore is money that can be collected or lost. All smart owners pay close attention to business overheads. Here are four clever ways to manage essential costs of operation to maximize profit and command success.

#1. Utilities

Utilities are a massive expense for restaurants and venues. Depending on what country you’re in, the costs of essentials like energy and water must be carefully considered by any hospitality business. Many government sites offer services to show you what energy company offers the best price in your area, which is a good place to start. Compare promotional offers between companies to figure out how you can save.

When it comes to water, you don’t have the same choice. The prices set by your local council are the prices that are available to you. But there are things you can do at the coal face to reduce water usage and save. This same approach can be applied to help you save further on energy costs.

Invest in things like pre-rinse spray valves, appliances with high energy and water ratings, and energy-efficient lighting and sensors to save money on power and water. Investment in high-quality, low-energy equipment can be a big cost for a business. Renting is an alternative that allows you to claim your appliances as a tax deduction without having to worry about how your appliances depreciate in value over time.

Enforce practices that reduce the overheads of these necessities. Only wash full loads of dishes. Keep ventilation clean to reduce the output of range hoods and air-conditioners. Sustainable practices can feed back into profits by attracting new business. Research from the National Restaurant Association shows that 58% of consumers favor green restaurants, and that number is growing.

#2. Order

You will do anything to give customers the best experience. Guess what: When you are ordering from your supplier, you are the customer. Suppliers compete for your business. Meet with suppliers and get them to showcase their products for you. Ask about promotions, loyalty programs, and bulk order savings. Compare prices. Hold your preferred food and beverage suppliers to account for a contract that protects your interests.

Ordering is an adaptive process. If your initial assumptions on the quantities of orders are wrong, adapt. Waste is a killer for any business. Throwing out spoiled food is the same as throwing away money.

#3. Menu

Up to 80 percent of venues don’t cost their menu, and 5 percent of them are doing it wrong. These figures are staggering when you consider that the equations behind menu costing are how you plan for profit. Menu costing is a fiddley and time-consuming process, but it is an unavoidable factor in your success. Every food and drink item on your menu must be factored into your budget. In fact, when drafting a marketing strategy for your restaurant, make sure to lay special emphasis on your menu.

Menu Items

Work closely with your head chef to design a menu that fits your target market and that reduces waste. Seasonal ingredients are cheaper and connote freshness, which appeals to customers. Your menu should also contain as few perishable ingredients as possible. A large menu with a wide range of fresh fruit, veg and meat makes waste more likely. The same goes for beverages. Products like juice and wine spoil. Don’t stock a range of juice or offer wines by the glass that won’t sell.

What’s the Best Thing on the Menu?

After you have a practical menu, find out which is going to be your strongest item. This is where menu engineering comes in. The principles behind menu engineering are designed to implement informed analysis and decision making for business owners. First, calculate the profit on any given menu item with one of two methods: divide the menu price by the cost of ingredients (food costing method) or subtract the cost of ingredients from the menu price (gross profit method).

The second method is often preferred because it shows the gross profit as a dollar value. But for markets where consumers are more price conscious, where you can’t rely on selling high volumes of expensive items, the second method is more appropriate. The most profitable items then inform how you design your menu. You can encourage your customers to choose certain items. Highlight sections, bold text or use elaborate descriptions of food. You can also apply the serial position effect, which shows that people are psychologically more likely to focus on the first or last item in a list, to sell you most profitable items.

Apply these techniques for more insight into your business and control over your success.

#4. Staff

It is pointless going through these processes if you don’t have a solid team supporting you. Outline best practices and communicate these processes to staff. Weekly meetings with managers are important, as are monthly meetings with the whole staff. A monthly meeting is a platform for feedback and an opportunity for team building. This will help you decide which staff you want to invest in. The importance of happy and experienced staff can’t be understated. They won’t make costly mistakes, and they will care about reducing costs to make the business successful. A good staff is an extension of you. They switch off lights. They prevent waste. They are the business that succeeds.

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