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How to Reduce Costs in a Restaurant

If you’re finding that despite a bustling dining area every evening, your profits aren’t reflecting the same success, it could be that your expenditures are more than they should be.

And with rising inflation, cost-cutting is a greater priority than ever for businesses in the hospitality industry.

In our latest blog, we delve into ways to reduce costs in your restaurant without skimping on quality or the customer’s experience.

Ways to Save on Food Costs


A major expenditure in many eateries is the cost of food and drink ingredients. But how do you know if you’re spending excessively?

A simple food cost formula can give you an idea:

Total ingredient cost / Price per menu item

From this, aim for a food cost percentage between 15 and 30%. This ensures that for every dish you sell, your gross earnings are between 70 and 85%. Utilising food cost control is pivotal in understanding how to reduce costs in a restaurant.

Practical steps to reduce food expenditure


Assess your menu


Seek out items that cost a lot but aren’t popular. Streamline your offerings by eliminating these and focus on turning your tried and tested crowd-pleasers into menu staples.

Rationalise suppliers


Identify any inefficiencies in your supply chain. Reducing the number of providers can save on delivery costs. Using local, seasonal ingredients not only supports the community but can also be cost-effective, especially if you can cultivate relationships with local suppliers.

Monitor plate wastage

If you find that your customers are frequently leaving large amounts of leftovers, your portion sizes might be too big. Addressing this can reduce wastage and save money. For costlier dishes, pre-measuring components will ensure consistent costs.

Specialise your menu


A concise, specialised menu leads to quicker decisions for patrons and reduced kitchen complexity.

Leverage food cost tool


Regularly using a food cost calculator can make monitoring expenses easier. Keeping your expenses tracked is always good business practice, and regular stock checks to tally the quantities of key ingredients to identify wastage or theft will maximise inventory management.

Purchase seasonally


Ingredients in season tend to be fresher and cheaper. Base your menu around ingredients that are easier to come by. Customising your menu according to the season also gives items exclusivity.

Adopt the FIFO principle

“First In, First Out” ensures you use the oldest stock first, reducing wastage by ensuring that as much product gets used as possible.

Effective Labour Cost Management


Labour can be another significant expense. Here’s how to optimise:

Match staffing to demand


Overstaffing during quiet periods can be costly. Conversely, understaffing during peak times can harm the customer experience. Tools like Time Manager monitor time and shifts, and sends that data to your POS system so you can see where demand is needed.

Hire wisely


Emphasise cultural fit and trainability over experience to cultivate a committed workforce. Equally, make sure your staff are given adequate training and opportunities to create relationships that will maximise their ability to work together.

Other Operational Savings


  • Be energy savvy – simple changes, like using energy-efficient bulbs or managing air conditioning, can add up.
  • Capitalise on free promotion – marketing can be a costly investment, but there are certain cost-free or cheap strategies you can use to increase your footfall.
  • Purchase second-hand – opt for used appliances or furniture where possible.
  • Secure premium stock – prevent theft by securing high-value items like premium spirits.
  • Limit complimentary items – reduce costs by moderating the provision of freebies like napkins or condiments.
  • Digitise operations – digital inventory and financial systems can reduce paper costs and ensure that expenditures are managed more efficiently. An effective EPOS system which allows you to manage a range of costs from suppliers to staff enables you to view cost and income reports and highlight where the best savings opportunities are.

Running a successful restaurant is a balance between offering quality experiences and managing costs.

While the pressures of inflation and the dynamics of the industry pose challenges, there are numerous strategies at a restaurateur’s disposal to maintain profitability without compromising on the essence of their establishment.

Whether it’s fine-tuning the menu, sourcing ingredients judiciously, making the most of EPOS technology, or cultivating a dedicated workforce, the journey to operational efficiency is a continuous one. As demonstrated above, there’s no need for drastic measures or cutting corners. Instead, with mindful management and a proactive approach, restaurants can thrive both in terms of customer satisfaction and the bottom line.

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