Five Ways Restaurants Can Maintain Profitability in an Environment of Rising Costs

Maintaining a strong bottom line is a constant challenge for restaurant owners. In an environment of rising food and labor costs, boosting menu prices and passing along the increased costs to customers can be a tempting option for owners. Of course, raising menu prices is sometimes unavoidable. Still, pricier menus are often not an ideal solution: they can cause customers to seek out alternatives, and can drive down both short-term and long-term business.

Fortunately, restaurants that are looking to better manage costs have at their disposal a number of other strategies. Here are five alternatives for how to maintain—and even boost—restaurant profitability without pinching the pockets of your patrons:
  • Improve Portion Control: Chefs are on the front line of helping better control costs.  Ensuring there are clear guidelines as to how much of an ingredient should be used to prepare a dish helps to minimize variances from expected food costs. Managing portions also provides customers with a sense of consistency each time they visit a restaurant.
  • Minimize Waste: Developing menus that enable restaurants to use all parts of purchased meats and vegetables helps to reduce waste. Further, ordering food only when needed not only reduces spoilage, but also minimizes storage costs. Restaurants should also train staff to actively observe and track customer trends, such as what food is left uneaten on plates at the end of the meal. If there are certain parts of a menu item that are not regularly being eaten, consider eliminating them. Additionally, rather than automatically providing customers with free bread, chips or condiments, have a waiter ask customers if they would like such items, or serve them upon request.
  • Flexible Menus: With many key suppliers located in states currently experiencing drought conditions, most restaurants now face higher commodity prices. To help stay ahead of unpredictable agricultural and economic conditions, flexible menus with substitutable items allow restaurants to quickly respond to fluctuating prices and more efficiently balance costs. They also help to ensure that the freshest possible foods are being supplied and prepared.
  • Diversity in Suppliers: Although working with one or two key suppliers can be easier and more predictable, restaurants should constantly monitor their suppliers’ prices and regularly compare them to other vendors’ prices. Competitive pricing is a key component of maintaining a strong bottom line, and buying direct—rather than purchasing from a middle party—can go a long way in reducing costs.
  • Hire the Right People: A team of the right people with the right experience is essential to a restaurant’s profitability. Hire employees that are open to being cross-trained for various positions, empower them to take initiative and recognize their superior performance. This fosters a sense of community amongst the staff and generally leads to higher employee morale, which in turn decreases turnover. Happy employees are also more productive, and tend to provide customers with better quality service.
With food, labor and overhead costs on the rise, restaurants need to be able to quickly and nimbly adjust their management and operational strategies. Proactively monitoring efficiencies across all parts of an operation is essential to long-term profitability and success. How does your establishment manage costs?