Properly managing restaurant monthly expenses is vital to maximize revenue. The financial health of a restaurant heavily depends on restaurant expenses and how to allocate funds. With this in mind, it's vital to use cost reduction strategies in restaurants.
Luckily, there are numerous ways to lessen restaurant monthly expenses. From using restaurant tech to cross-training the staff, we're about to cover quite the variety!
Restaurant Monthly Expenses: Components
There are many restaurant monthly expenses that each business owner will incur. Even though they may add up to be a pretty penny, they're what keep the business in motion. And as you invest wisely in a restaurant, the more profitable it can become.
Want a brief overview of the most popular restaurant monthly expenses you'll face as an owner? See below:
- Labor expenses: Restaurants require a great deal of labor to operate. Some of the most common labor expenses include payroll, benefits, and insurance.
- Insurance: For legal purposes, restaurant owners must pay for insurance each month. Some of the most types include general liability insurance, property insurance, food safety insurance, liquor liability insurance, and workers' compensation.
- Rent or mortgage payments: Every month, restaurant owners must pay for the occupancy space. Whether you rent or own the property, this will be a monthly fixed expense.
- Equipment lease or rental payments: Rentals and leases are often cost-effective ways to onboard restaurant equipment. If you choose to go this route, you'll incur a monthly expense to keep each solution in-house and in service.
- Equipment maintenance and repairs: Using high-quality equipment is ideal for restaurants. However, these tools can get damaged or malfunction. In case of last-minute emergencies, budget a certain amount of money each month to cover repairs or replacements. Beforehand, always check your product's warranty.
- Food ingredients and beverages: You can't operate a food service business without food and beverages. From single ingredients to bottled beverages, there are numerous items you need to keep in your eatery. On average, your reorder point will usually take place each month.
- Utilities: Gas, water, and electric bills can cost a small fortune. They're expenses that are vital to any brick and mortar business. So, you must budget for them all upon launching your business.
- Restaurant marketing costs: If you choose to invest in paid marketing campaigns, you will incur a monthly ad spend. Things like scheduling platforms and photo editors may also charge a monthly fee.
Now that you're aware of all the restaurant monthly expenses you'll have to regularly pay, it's time to learn how you can reduce each one. After all, saving as much money as possible will constantly increase profits. Read below to find seven cost reduction strategies in restaurants.
7 Cost Reduction Strategies In Restaurants
From using innovative restaurant technology to reducing food waste, there are many ways to lessen monthly costs. Regardless of your restaurant's financial standing, there are solutions that can suit your needs.
Below, you'll find seven effective cost reduction strategies in restaurants. So without further ado, let's dive in!
1. Reduce Food Costs With Restaurant Inventory Software
Restaurant inventory management tools can help you save so much money. They let restaurants stock up on ingredients quickly and efficiently.
With an automated and integrated solution, it'll become a breeze to take inventory. They enable managers to schedule orders, create catalogs, and pay in a single place. The best part? There's a much lesser risk of overspending on inventory.
Without technology, it's common for managers to guesstimate the amount of ingredients they need to repurchase. But with a tool like BlueCart, they can put these calculations and orders on autopilot.
2. Reduce the Cost of Labor
The labor cost of a restaurant can add up super quickly. Plus, these are expenses that you'll outlay every one to two weeks. With this in mind, it's important to monitor the ways that your team impacts the business.
Fortunately, there are many ways to lessen the overall labor cost. For example, tableside devices and self ordering kiosks can reduce the amount of tasks the staff must complete.
Even though advanced solutions might be a hefty expense upfront, they'll likely pay for themselves in the end. Just make sure you estimate various projections prior to making the investment(s).
3. Conduct Menu Engineering
Menu engineering is the process of reviewing sales trends in reference to the menus. It's a common practice that can help reduce the restaurant monthly expenses. Typically, the restaurant manager or owner is the one to handle this task.
The goal of menu engineering is to decipher which items do not sell as much as others or at all. Then, the restaurant staff can distinguish if there are any ingredients that they can stop purchasing.
For example, if a restaurant has lobster bisque on the menu and rarely sells it, they can eliminate costly items like lobster from future orders from wholesale seafood vendors. It also creates more room in the kitchen to stock up on profitable ingredients.
4. Minimize Food Waste
Food and ingredients cost restaurants quite a bit of money. By eliminating the amount of food that goes into the trash, you’ll be able to sell more. In turn, you’ll increase cash flow. From daily menus to smaller menus altogether, there are numerous ways to lessen food waste at your restaurant.
5. Conduct Organic Marketing Efforts
Marketing expenses can be one extreme or the other. Some restaurants spend nothing on marketing efforts, while others invest thousands. Luckily organic marketing can be completely free.
If you're looking to reduce restaurant monthly expenses, consider what you're paying to market the establishment. If this is an area where you invest, try reducing some of your efforts. Whether it be opting for free scheduling tools or making fewer ads, there are many ways to decrease the marketing budget.
6. Create a Custom QR Code
If you enjoy changing up the menu types on a regular basis, QR codes can help you save money. When restaurants make changes to the menu, the best thing to do is print out new copies. Doing this will prevent any confusion amongst customers.
However, printing out new menus can result in an additional cost. By using a QR code, staff can make as many changes as they want. The digital menus will update in real time, saving you the time and money of printing new copies.
7. Use Energy-Efficient Equipment
Equipment usage can result in very steep bill payments each month. When sales arise, or it comes time for replacements, opt for energy-efficient appliances.
Appliances like stoves, ovens, and refrigerators eat up a ton of electricity. By using better products, you can cut ample restaurant monthly expenses. Plus, it'll be better for the environment.
Frequently Asked Questions About Restaurant Monthly Expenses
Getting a clear idea on how to reduce restaurant monthly expenses can be a challenge. Want a brief overview of everything listed above? See below for more details:
What are the Most Common Monthly Expenses for Restaurants?
Several of the most common restaurant monthly expenses include:
- Labor expenses
- Rent or mortgage payments
- Equipment lease or rental payments
- Equipment maintenance and repairs
- Food ingredients and beverages
- Utilities, like gas, electric, and water
- Marketing and advertising costs
How Can You Reduce Restaurant Monthly Expenses?
There are so many ways that a business owner can reduce restaurant monthly expenses; some of the most popular techniques include:
- Using software to better manage inventory control
- Cross-training employees upon hiring them
- Reducing the size of the team
- Conducting menu engineering
- Investing in energy-efficient appliances
- Onboarding tech solutions to do more with less
- Only conduct organic marketing efforts
How Important Is It for a Restaurant to Track Its Monthly Expenses?
Restaurant owners should track monthly expenses, as they can add up rather quickly. Restaurant monthly expenses can make up a large portion of an eatery's budget. With this in mind, it's important to ensure that they don't exceed the monthly ceiling. If they do, they can hinder profits and revenue KPIs.
What Are Some Tools that Can Track Restaurant Monthly Expenses?
An integrated solution that connects to the restaurant POS platform can help track monthly expenses. For example, check out BlueCart Pay to learn all about how you can pay all vendors in a single platform.
How Often Should I Adjust Restaurant Monthly Expenses?
Track and monitor restaurant monthly expenses on a monthly basis. Then, review trends on a each quarter. However, if you find that there are dips in sales or surges in revenue, it's always a good idea to check your metrics.
It's no surprise that restaurant monthly expenses can take up the majority of your budget. However, if you save money as you can and invest in innovative solutions, you'll be able to save a shocking amount. Just try one cost reduction strategy at a time to make sure that you're aware of which ideas are most effective.