Top tips for minimizing restaurant expenses

By Charli Tanner

Everyone is feeling the financial pinch, and with restaurants facing rising food, utility, and labour costs, they are keeping a close eye on their profit margins. Reports at the end of 2023 revealed that rising costs meant one-third of Canadian restaurants were operating at a loss, highlighting the need for reducing expenses and increasing profits.

It can be a tricky balancing act to manage finances, focus on quality, and up service without making compromises. Fortunately, there are several innovative ways to reduce costs without impacting overall quality, keeping your customers satisfied, and maintaining a profitable business.

Streamline your supply chain

There are many schools of thought when it comes to suppliers, so it’s important to analyze what will work best for your business. Focus on building long-standing relationships with reliable suppliers to negotiate better deals over the long run. Selecting a few key suppliers will reduce the number of debtors you’ll need to pay each month, saving you time and money, as well. And, the more you spend with your suppliers, the more negotiating power you may have as you increase your spending.

Foodwaste reduction

Canadians create over 50 million tonnes of food waste annually, and restaurants contribute to this staggering number. Throwing out food is the equivalent of putting dollars in the trash, so it’s essential that restaurateurs implement solutions to cut costs. This can be done in several ways, by looking at:

  • Portion sizes: Portion control can help curb costs and maintain consistent portion sizes. Pre-portion certain items and use standardized measuring utensils, tools, and scales. Perform spot checks on portioned and weighed items to make sure staff are adhering to procedures.
  • Food storage: Create a strategy for food storage that cuts costs and increases efficiency with the FIFO (first in, first out) method to better manage your inventory and ensure that stock is rotated. Next, monitor cold storage to confirm that industry standards for refrigeration and freezer temperatures are being met. Service equipment regularly to avoid breakdowns and food spoilage.
  • Service: Mistakes often happen during high-pressure times, whether it is an incorrect order placed to a supplier or a waiter who accidentally spills a drink. Cut down on these errors by:
    • Conducting regular staff training on the importance of accuracy and taking care when placing orders or carrying drinks to tables.
    • Managing your restaurant layout to mitigate accidents and spills.
  • Maximize leftovers: You may have waste from produce that can be used in other dishes or sections within your restaurant. For example, off-cuts of vegetables or chicken can be used for stocks or broths. Chilli seeds and other ingredients can be used to create spicy syrups in cocktails. Get creative in the kitchen and freeze fresh ingredients where you can, to limit waste.
  • Track your foodwaste: Monitor what you are wasting every week. Understanding your report data will guide you in your efforts to increase efficiency and minimize future waste.

Menu design and analysis

Your menu is key to managing costs within your establishment. Understanding your offerings and how they are performing among your customers will assist you in determining which menu items are underperforming.

Dishes that are high-cost and slow-moving should be flagged and potentially removed from your menu. Focus on delivering a smaller menu with a good balance of food costs. Reducing the size of your menu will also limit the amount of ingredients you need to store, lowering the risk of waste and creating better cash flow.

Effective scheduling

Even with lower staffing numbers, effective management is key to cutting restaurant costs. Staff wages are one of the major operating expenses in a restaurant. Align your staff rosters with peak business hours and holidays to maintain the quality of service your patrons expect, reducing staff in quieter hours to save on wages.

Cross-training employees has the potential to bridge skills gaps and allow staff members to perform more tasks and duties during quieter periods, negating the need for additional and unnecessary staff on a single shift.

Accurate accounting

Small business owners often make the mistake of not separating business and personal expenses. When running a restaurant, the lines are easily blurred, and this can cost you a significant sum in the long run, especially when it comes to taxes.

Ensure your accounting systems are efficient and that you keep your business and personal finances separate. This will allow you to accurately track your expenses and file business and personal tax returns with maximum deductions and credits.

Energy efficiency

Managing your utility bill can be tricky in a busy restaurant. To reduce operating expenses, set up a plan for budgeting to replace appliances and lighting with more energy-efficient alternatives. Staff should also be trained to turn off appliances and non-essential lights when not in use.

Although upgrading your equipment might be costly initially, it’s worth including in financial projections to save money in the long run.

Integrating technology

Finding a POS system that meets your needs will help to track the performance of your restaurant accurately. Things to look for in a POS system include:

  • A user interface that’s easy for servers to navigate.
  • Back-office features that allow you to input your recipes with integrated inventory management. This can assist staff in placing orders accurately and conducting stock counts.
  • Live data that allows you to analyze daily, weekly, and monthly reports.
  • Automated stock alert system, alerting your team to any items that are low in stock that may need to be ordered.

Additionally, it’s a good idea to implement an online ordering platform or sign up with a food delivery service where customers can order from your menu for off-premise dining. This can expose you to a wider customer base and provide an additional stream of revenue.

Effective marketing

As the industry becomes more and more competitive, it’s important to consider advertising and marketing your restaurant. Here are some tips to attract attention and draw in more guests:

  • Run cost-effective social media campaigns where your ads go live during peak dining hours.
  • Learn how to optimize your use of TikTok, Instagram, and Facebook, or hire a social media manager who can ensure you get maximum engagement at minimum cost.
  • Partner with local businesses or influencers to generate new interest in your establishment.
  • Put in-house loyalty programs in place to keep customers returning.
  • Remind patrons to leave a review online to help build trust and encourage word-of-mouth advertising.

Staff training and retention

Fostering a positive work environment that focuses on employee wellness will increase employee retention, negating the cost of replacing and training new staff.

Train your staff regularly to improve accuracy and employee satisfaction so they feel equipped to perform their duties. Incentivise and reward staff based on their performance. Staff who are motivated are more likely to provide excellent service and food quality to the customer.

Food for thought

Optimizing your business expenses takes time and analysis, but you don’t need to compromise quality or service to cut costs.

By implementing new processes, reducing your operating expenses, and rethinking the way you run your business, you can optimize your restaurant to boost the bottom line while keeping your patrons happy.

Charli Tanner is a content champion for a variety of online publications. She often covers topics that cater to business owners and entrepreneurs with a strong focus on finance for startups, productivity, management, and a few other topics.