How to Manage Food Costs in a Restaurant: Operating Smoothly and Profitably

How to Manage Food Costs in a Restaurant: Operating Smoothly and Profitably

How to Manage Food Costs in a Restaurant: Operating Smoothly and Profitably banner

Anyone who has watched an episode of Gordon Ramsay’s ‘Kitchen Nightmares’—or binge-watched one or several seasons during lockdowns—knows what can happen when restaurant managers don’t properly manage their kitchens. Ramsay often uncovered the equivalent of restaurant-tier food hoarding or a severe shortage of essential ingredients to prepare and serve high-quality meals daily.

In either case, improper management of food purchases and lack of cost management may be detrimental to restaurants in the best condition. Whether restaurant managers have difficulties determining how much food to order or fail to assign the appropriate menu price, improper pricing and inflated costs are among the top reasons why restaurants fail.

As a passionate restaurant owner, hungry to grow your business and develop a loyal customer base with delicious food and a strong reputation, these challenges may devastate the business you’ve worked so hard to create. Here are our tips on how to manage food costs appropriately in a restaurant.

Educate Yourself: Learn the Value of Food Cost Management Early

If you’re a restaurant manager or aspire to become one after earning your culinary arts or other foodservice college degree, it’s imperative that you learn how to control food costs. The cost of food encompasses many complex and fluctuating variables — as such, it is one of the largest and most significant operating expenses for an establishment. However, with proper management, knowledge, and foresight, restaurant professionals can effectively manage and potentially reduce this large line item to operate a restaurant with precision and efficiency.

Let’s explore what it takes for the best restaurant owners and managers to keep their food costs low, staff morale high, customers delighted, operations profitable, and reputation well-respected.

Track Your Food Costs Weekly

According to the National Restaurant Association, tracking food costs and purchases each week can help increase your restaurant’s profits. It is much easier to determine your restaurant’s immediate food costs the more frequently you track your current food expenses. Weekly tracking and reporting ensure the best results, whereas a monthly review leaves too much room for error and daily tracking proves time-consuming.

With this strategy, you can review the previous week’s performance to gain meaningful insights into the menu items your customers regularly purchase. Further, you can quickly identify, adapt, and investigate any inconsistencies, such as an uptick in food waste for certain types of meat or produce.

Closely Manage Your Inventory

Managing your inventory effectively allows you to keep the right amount of food and ingredients in your kitchen — reducing food waste costs and keeping your customers’ favorite meals on the menu. Netsuite states, ‘Restaurants are more likely to find long-term success if they practice effective inventory management.’ You will also discover that it is easier to keep menu item costs lower, improve vendor management experiences,, and ensure customer satisfaction. While managing your restaurant inventory, you should create a checklist with the following tasks:

  • Clean and organize stock shelves, removing items that have passed or are close to passing their expiration date.
  • Count or measure items and record your results.
  • Add labels to any unlabeled stock.
  • Use a par inventory sheet to know what you need to re-order, as it shows the minimum amount of food supply you need to have on hand after each food inventory delivery from suppliers.
  • Rely on your point of sale (POS) system to reconcile food sales records with the inventory on hand.

With this information, you improve your ability to quickly identify and investigate the cause of inventory challenges, such as kitchen waste, incorrect preparation, and wait staff errors.

Perform Sales Forecasting

Customized sales forecasting, using historical restaurant data, can help you improve your restaurant operations and reduce food costs over time. More restaurant owners are investing in automating critical tasks such as tracking and collecting pricing and inventory data to gain more control over food costs. Specialized restaurant management software can help you set a sales forecast by your restaurant’s location and your desired timeframe.

With the data collected, you have the information and tools to predict upcoming sales to make intelligent inventory choices. Even better, it will help you guide your chefs and kitchen staff to ensure food prep that results in less food waste and smarter and more profitable purchases.

Menu Planning: Price Menu Items Properly

Menu planning and pricing are more complex tasks than most new restaurant managers realize when starting their careers in the industry. One, and only one tiny facet of menu pricing, is based on what the market currently determines. In reality, there is much more to it, with many decisions leading up to charging the market standard, including:

  • Do you want your restaurant to focus on value? If so, you might charge less than market pricing or offer a larger portion for the same or slightly higher price.
  • Is your restaurant focusing on pricing to achieve desired profits? With this strategy, you might need to assess which items will sell best on your menu. You can eliminate poor sellers and add ingredients to help achieve your sales goals.

Save on Costs by Re-Engineering Your Menu

Menu engineering, or re-engineering, can help with your restaurant’s ongoing cost-saving initiative. However, according to Netsuite, almost 60% of restaurants avoid using this effective measure. Of the restaurants that do use it, 30% don’t do it effectively enough.

This cost management strategy allows you to use your art and science skills, especially when working with your kitchen manager, to properly design, position, price, maintain, and adjust a dynamic menu to improve profitability. Here are some things to keep in mind when re-engineering your menu:

  • Items that are costly and labor-intensive to prepare
  • Unpopular offerings that result in food waste
  • A dish or two that keeps customers coming back for more

Monitor Vendor Price Changes

Sometimes your vendor might make an invoice or purchase order error, resulting in higher costs that you might not detect right away. unless you focus on this crucial variable. Accidents can happen on both sides — stay organized and detail-oriented on this crucial variable by reviewing your orders with care and comparing them to the vendor invoices. Consider running automated receiving reports to catch and address discrepancies quickly. When you stay vigilant using this restaurant management solution, you can instantly flag purchases that don’t match your contracted pricing. You will improve your financial operations, billing processes, and time with appropriate measures in place.

Watch Portion Sizes

You might have a standard set of portion sizes, such as a cup of vegetables and a three-ounce portion of meat. However, if your kitchen staff isn’t properly weighing and measuring your inventory, you might experience portion distortion, resulting in food waste and lost profits.

Ensure compliance with your set portion sizes by:

  • Buying the appropriate amount and type of utensils needed for your kitchen staff to measure items properly.
  • Providing a list of weights and measurements of various ingredients for your menu items.
  • Training your staff to use the correct serving utensils and dishes consistently.

Waste as Little as Possible

Restaurant managers who don’t control food waste will see negative results in their restaurant’s bottom line. Establish goals and tasks that help your staff prevent food waste, such as:

  • Taking inventory regularly
  • Double-checking food orders for accuracy on-the-spot
  • Focusing on the most popular menu items and ordering according to recorded sales

For foodservice professionals with an associate degree in culinary arts, stand out in this competitive market by earning a Bachelor of Science in Culinary Arts and Food Service Management at Johnson & Wales University. To accommodate your busy schedule, our program is available online. Complete the Request Info form, call 855-JWU-1881, or email [email protected].

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