Restaurant Expenses: How to Manage the 5 Leading Costs
While owning a restaurant might be your dream, it is not always easy. The costs associated with a restaurant will often blindside new owners. How can you keep up with restaurant operating expenses and still make a profit? The key is balance and proper planning. We will walk you through the leading expenses for restaurants and how to manage each of them.
Labor costs include paying all employees in the restaurant, including servers, hosts, kitchen crew, and management. There are different opinions on how much of your revenue should go toward labor, but a good rule of thumb is to keep it under 30 percent.
Restaurants almost always have slow periods of the year—often during holidays and during the winter months. To keep the labor costs less than 30 percent of your total revenue, you’ll need to adjust your staffing to fit the needs of your business during those times. By optimizing the amount of labor in your restaurant, you’re also optimizing your bottom line. In addition to this, you may want to utilize technology that will help you create better schedules and a more efficient kitchen, eliminating excess labor.
The cost of goods sold includes all food and beverage sold at your restaurant. Try to keep this under one-third of your total revenue by utilizing the following methods:
- Labeling items by date and using older items first
- Comparison shopping
- Adjusting your menu to include dishes that utilize many of the same ingredients
- Not overstocking items
- Eliminating low-performing menu items
One of the key factors in reducing the money spent on goods is food waste management. The less you waste, the more you typically save.
Filed under administrative costs, office supplies like paper can add up quickly. When restaurants choose to print tickets rather than utilizing technology like kitchen display or table management systems, it can be initial cost saving that is quickly eaten up by replacing paper and ink.
In addition, kitchen printers aren’t able to more efficiently organize the kitchen, including the coursing of meals and routing items to the right place. Transitioning from paper to more adaptive technology can do more than lower the cost of paper—it can affect a host of other areas.
Occupancy expenses are the rent, property taxes, and utilities you pay for hosting your restaurant. Location is a big consideration when opening any restaurant—buildings with higher foot traffic may be much more expensive, and it’s up to you to decide how worthwhile it is to pay the extra costs associated with prime real estate. You should give this particular operating expense a lot of thought as it can potentially make or break your restaurant.
Marketing includes anything a restaurant uses to get guests through the door, including:
- Social media presence
- Reservation and wait list apps
When it comes to restaurant wait list apps & reservation systems, take a look at both the flat rate per month and the guest rate. If you’re paying up to a dollar per guest seated using the app, consider changing to something more budget-friendly. In addition, there are several marketing techniques that your restaurant can use to boost your community and online presence.
Managing your restaurant’s expenses may seem like a lot to juggle but it is essential to keep a thriving business. Take time to consider each operating expense and evaluate how to manage each of them.
About the Author
Emily Wimpsett was a Content & Social Media Specialist at QSR Automations. Emily was born and raised in Louisville, but considers herself a die-hard University of Kentucky fan. For college, Emily attended Indiana University Southeast and obtained a degree in Communications with a track in Advertising. In her free time, Emily enjoys just about every water related activity, but she is partial to kayaking and whitewater rafting.