May 17, 2023

5 Ways to Manage Food Cost

Restaurant owners always put most of their resources into increasing sales and revenue. They are mostly right, but it is not enough to make the restaurant profitable.

Besides making money, how to control the food cost is also important, as it is the significant expense to a restaurant that directly affects their profit margin.

Here are some suggestions to manage the food cost -

1. Track Food Prices

Tracking food prices allows restaurants to identify cost fluctuations and take appropriate action. If prices increase significantly, the restaurant can analyze the reasons behind the price change, such as supply chain disruptions or market trends. This information helps restaurant owners to make wise decisions to control costs, such as finding alternative suppliers or adjusting menu offerings.

Talking about adjusting menu offerings, tracking food prices is also useful in recipe and menu development. Restaurant owners can create menus with ingredients with stable or lower prices, in order to reduce overall food costs. It also helps identify opportunities for introducing seasonal or local ingredients that may be more cost-effective.

2. Inventory Control

Good inventory management can help a restaurant to maintain the appropriate quantity of ingredients and supplies, minimize food waste, avoid overstocking and obsolescence, and ultimately, reduce the food costs, as well as the overall profit.

An effective Cloud-based Inventory Management System can provide restaurant owners with transparent information about the quantity and expiration date of each ingredient and supply. By integrating it with the Point-of-Sale (POS), restaurants can even track the inventory in real-time. When an order is placed through the POS system, the inventory levels will be updated automatically.

With real-time visibility on inventory, restaurants can arrange replenishment in a more accurate and timely way, which can definitely help restaurants to minimize the risk of over-ordering or under-ordering, resulting in more efficient use of resources and cost savings.

3. Sales Forecasting

With integrated systems such as Point-of-Sale (POS), ERP and Customer Relationship Management System (CRM), restaurants can obtain sales data and customer preferences for analyzing the sales patterns and predict future demand.

This helps restaurants to better plan its inventory purchases and production, and ensure that the restaurant has the right amount of ingredients and supplies to meet customer demand.

Accurate demand planning helps restaurants to avoid over-ordering or under-ordering of ingredients, and eventually lower unnecessary costs and waste.

4. Search for a New Vendor

Once you find your own favorite vendors, you will start relying on them, and stop doing market research, and result in no longer being aware of market prices. You will directly accept the prices quoted by your vendors, even if there is a raise, as you “believe” that it is just a normal adjustment of the market.

However, it is not true!

Even if you want to stick with your current vendors, being in contact with their competitors will help you get a better price from your vendors.

Restaurant owners are also recommended to review the offers and performance of their vendors at specific times, say every half year, to ensure that you receive the best possible offers from your vendors.

5. Set a Daily Special

Restaurants can use daily specials to reduce the food waste (aka food costs). When you notice that some ingredients are going to expire, or have been sitting in your storage room for quite a while, create a dish out of them and place it on your daily specials.

Inform your staff to encourage your customers to try out the daily specials. If everything goes well, you would be able to eliminate food waste (again, aka food costs), and eventually, increase your profit.

Using Technology to Manage Food Cost in Your Restaurant

You may be aware that good food cost control is always backed up by good inventory control. Therefore, an effective inventory management system is always important to a restaurant. Want to know more?