In this weeks Social Chat, I would like to look at how lowering food costs can put more profit in your pocket. Restaurateurs should be aware of the importance of controlling costs to maintain profit. Food costs can quickly escalate in restaurant management. Unfortunately you don’t control the markets. Rising prices for restaurant staples such as beef, pasta products and tomatoes are adding to the current Canadian menu inflation of 2.7%, as reported by Restaurant Canada, Aug 12, 2015. Troubleshooting problematic food costs is crucial to restaurants being able to offer their customers competitive menu prices and grow profits.
What Is Food Costs
Liquor and other necessities such as linens can also be listed separately in the budget. Doing this provides a detailed look of how much is actually been spent on food and bar expenses. There is no perfect number. But a good measurement for small or independent restaurants is 28% or lower. Large restaurants chains work within 28% – 35%. But if you find that your food costs are around 28% and your profits are low, you need to lower your costs, pronto!
This is not sustainable over the long term. And with a restaurant full of price sensitive customers, the last thing you want to do is raise menu prices. This can possibly steer customers into the waiting arms of your competitors, who not only operate in your restaurant neighbourhood (restaurant row). But sell similar menu items as your restaurant and at a lower price.
Knowing your food costs is also a great way to see where you should be spending your marketing dollars. For example, If your kitchen brings in more than your bar, your in-house marketing should be focused on getting customers to buy more alcohol. If you have any questions about food cost management feel free to send me an email. Also if you have a current issue or something you would like me to address in an upcoming Social Chat, let me know as well. I will answer all email inquires within 24hrs. Now start lowering your food costs and put more profit in your pocket.
Dwayne Reno CEO & Founder
Social Chat Blog
Once a month, Building Block Associates serves up some food for thought with our foodservice Social Chat Blog.