How to Reduce Restaurant Food Costs in 2022
Running a restaurant has never been for the faint of heart, and the COVID-19 pandemic has only made staying afloat even harder. Labor shortages, supply chain issues, sick employees, not enough financial assistance, hesitant diners- the list goes on and on and we know if you’re running a restaurant right now this is by no means breaking news.
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With all that in mind, now more than ever, restaurants are looking for ways to lower food costs that don’t take up too much time or too many resources from already stretched thin operations. Thanks to having a sales team made up exclusively of former operators, chefs, and general managers, with 350+ years of collective experience, we’ve picked their brains and come up with a list of six ways restaurants can make a big impact in 2022 based on their experiences and tried-and-true tricks.
We know that as resourceful, resilient, battle-seasoned badasses, many of you restaurateurs may find that there are a few things on this list you’re already doing. In that case, this blog can be a reassurance that either you’re on the right track (who doesn’t love a reminder that you’re doing the right thing?) or that maybe it’s time to prioritize a few of those old practices that have been simmering on the back burner.
6 Ways to Reduce Food Costs
1. Track Waste – In the Kitchen and the Dining Room
Oftentimes, the biggest culprit for out-of-control food costs in a restaurant is waste. And for those who don’t have time to sit down and do the math or don’t have a restaurant management system (RMS) in place to help you track food costs plate by plate, there are a few options that help when you’re in survival mode.
First let’s talk about the two places where waste can occur: in the kitchen and in the dining room.
If you notice certain dishes are only being half-eaten by guests, cut back on the portion size. This may seem obvious, but these flags can easily be missed with all the other fires burning at any given moment. You can try training staff to keep an eye on dishes that don’t make it into the clean plate club or use a separate trash bin dedicated to leftover food from the dining room. You may also consider adjusting product orders if you find that now with smaller portions, you’re starting to throw away excess inventory.
As a chef or manager, just being present in the kitchen during prep can keep a handle on many waste issues. We’re not recommending breathing down your prep cook’s necks (no one likes a creeper) but being a second set of eyes or hands to pull a pan off a burner when it’s about to get scorched or catch if too much meat is being left on the bone while prep is happening helps cut down on waste.
Another important part of managing kitchen waste is having clear recipe yield expectations. Is your batch fry batter for fish and chips meant to make enough for 20 fish portions, but you know you only need ten and are throwing the rest out? Are you supposed to get 15 servings of gnocchi from your recipe, but are only ending up with 10-12? Consistency in yielding expectations (and making those expectations reasonable) makes a big impact. Try using portioned scoops that help with consistent servings over time, or using scales to weigh out portions from batched prep items.
If all else fails, you can try what one of our sales reps who shall remain nameless did: use smaller trash cans. Don’t discredit the effectiveness of a visual tool!
If you have an RMS in place, you can pinpoint and monitor where waste is most likely happening by comparing theoretical to actual food usage, based on sales data compared to inventory counts and recipe yields. For example, a MarginEdge client found that the actual cost on their sea bass entree was regularly 20% high thanks to our software. Putting a scale at the fish cutting station and asking the cook to weigh the sea bass entrees nipped the issue in the bud. It’s hard to tell when the difference is a few grams without checking on a scale occasionally! There’s even a quick hack to shorten and simplify this process with or without an RMS.
2. Take Consistent Inventories (We Know, We’re Sorry)
Maybe full-blown inventories every other week is unreasonable given your current staff resource situation. We get it, and we’re not here to shame you, we promise. But even just doing a daily or every 2 days check for your most expensive or most used items can help big time.
Let’s take beef tenderloin as an example. It’s a popular dish so you know you need at least 30lbs to make it through the week. On Wednesday someone mentions you’re running low, so you order another 15lbs and it turns out that person needs a new vision prescription because you still had 20lbs left. At $31/lb, that’s potentially 5lbs excess coming in at $155 for the week. You add that up over a month and you’re looking at almost $700 in thrown-out food. Sometimes you can even avoid excess costs simply by making sure you get orders in with preferred vendors before their cut-off times.
These little actions all take time, which can feel like too much of an ask in the current labor and supply landscape we’re navigating, but they also all add up. An extra 10 or 15 minutes a day can end up saving hundreds. Burger 21, a national burger franchise, even lowered their food costs by 2% overall thanks to more consistent inventories. The moral of the story is that easier usually isn’t cheaper and you should be regularly scheduling vision checkups.
Pro tip: you don’t have to always count the same things. Remember our sea bass example from earlier? Once you notice an item has high usage, try counting that one item every day for a few days. Is the usage still too high? With this method, you now have a very short window to watch that item closely. Once you get it dialed in, go back to counting it less frequently and focus on the next high-cost item that might have a high variance. How do you eat an elephant? One bite at a time!
3. Track Key Item Costs
Much like with inventories, tracking prices for key products rather than your entire inventory is an effective and less time-consuming way to prevent unexpected rising food costs. The best way to do this is with invoice processing software that compiles product prices from your invoices and plots their movement over time. Some RMSs can also send you notifications when key item prices go above a set limit.
Without an RMS you can do this by hand, but it is definitely more time-consuming- we won’t lie to you. First, identify your top five key items and use a spreadsheet to track their costs each time you place an order. This way you can watch the prices to see if they’re rising and if so, you can try talking with your vendor. Can you order in different quantities to get a better price, or is there a cheaper alternative?
With an RMS, you can track all product prices just as easily as key items giving you greater flexibility and insight with the same amount of effort. Food prices can change quickly depending on a number of external factors as we’ve seen over the past year like supply chain shortages and illness outbreaks in food processing plants, which brings us to our next tip: optimizing your menu.
4. Keep Your Menu Seasonal and Nose to Tail
“Nose to tail” cooking is not a new concept – far from it. The practice of using every piece of an animal has been a tried and true, oftentimes necessary way to get the most out of your food. Purchasing larger cuts like primal cuts or whole animals when it comes to chicken, or other poultry is more often cheaper than buying the animal already broken down.
In December of 2021, the average price for whole chicken amongst MarginEdge customers was $2/lb, compared to chicken breasts at $3.87/lb and wings at $3.42/lb. The added bonus for purchasing whole or larger cuts for animal proteins is that the bones can be used for stocks, and trimmed fat can be rendered down for cooking or confit.
At Wasabi, a sushi joint, the GM was frustrated by all the small cuts of fish that were being thrown away because they were not “pretty” enough for the sushi – despite being just as fresh and tasty. He got the brilliant idea of combining the scraps, mixing them with spicy sauce (the same sauce as spicy tuna!), and serving them in a bowl as “spicy sashimi”. By cutting the pieces down to bite-size and mixing them in a sauce, the visible imperfections disappeared. And guess what else disappeared? More than a full point off food costs!
In a typical $15k day, Wasabi ran a 25% food cost – $3,750. The food cost on spicy sashimi however was $0, because the fish was originally headed to the trash (ok maybe there’s a few pennies for the spicy sauce). It’s now one of the most popular dishes and they easily sell $500 – $1k worth per day. Adding the additional sales to their typical $15k gives them $16k in sales divided by the same $3,750 in food costs, et voila: 23.4%! Using the scraps gave Wasabi 1.6% straight back to their bottom line. Are you sure your trash can doesn’t have anything you can cook?!
What if you’re a vegan restaurant? Leaf to root still applies! Consider using every part of the vegetable. Like carrots for example- you can use the green tops in a pesto, juice, salad, etc. Pretty much any vegetable trim (even onion skin) can be used to make the most amazingly flavorful broths and stocks. Instilling a mindset of using the whole product will also help limit waste in other parts of prep because it can become a general practice in your kitchen.
If nose to tail or leaf to root doesn’t fit into your concept (chicken livers aren’t for everyone), designing your menu around seasonal produce is another great way to save on food costs.
Depending on where your restaurant is, there may be a bigger cost-benefit to the following seasonality. For example, more northern climates like New York or Michigan might have trouble getting big, juicy strawberries in January, whereas Californian restaurants have access pretty much year-round. For example, on average for MarginEdge customers, a pound of strawberries was $3.21 in July and $4.72 in December. As we mentioned previously, tracking prices with an RMS can also alert you when product prices drop so you can take advantage!
Another option is purchasing B-grade produce that can be used for flavor infusions (like in booze), purees, or other applications where appearance isn’t as important. While managing a restaurant, one of our sales reps used to purchase B grade peaches in bulk in the summer and infuse them into whiskey that would be stored year-round. If you have the resources, starting a canning or pickling program is another great way to take advantage of bulk summer produce prices. It’s not for everyone but is another tried and true food preservation method restaurants can use to maximize low costs throughout the year and limit waste from spoiled food.
5. Analyze Your Menu
Once that seasonal, nose to tail (or root to leaf, we haven’t forgotten about you vegans) menu is built out, the final piece of the puzzle for lowering food costs is figuring out which dishes aren’t cutting it through menu analysis.
This process is most easily done through an RMS because of two key factors: they do the math for you, and they use the most recent product prices from your invoices. No one wants to raise menu prices, but it can be incredibly important to keep on top of in 2022 with how quickly product prices change.
If you don’t have an RMS in place, the best practice would be to start with your most purchased dishes which you can find from your POS data. Then determine if your best-selling dishes’ food costs are less than 35% or lower. If they are, you’re doing great, if they aren’t – this blog discusses four types of profitability categories and more details on how to optimize each of them. Don’t let the funny, culinary school names fool you – making those stars shine can really impact your profitability and in turn your food costs. If you’re not ready to remove dishes with food costs above that 35% threshold (or whatever number works for your restaurant), you can also move them to a less prominent place on your menu and feature your lower food cost plates more.
6. Get a Restaurant Management System
Each of the five ways to reduce food costs in 2022 mentioned above can (and should) be used together to optimize multiple areas for managing and improving food cost percentages. While the manual versions of each are doable, they still take extra time and don’t provide the same benefit as an RMS. Daily routine back-of-house tasks can and should be automated by an RMS, which saves your team time and prevents burnout.
Digitally processing invoices takes care of manual data entry and gives you automatically updated product prices which means you don’t have to track prices in a spreadsheet. And by integrating sales data from your POS and product amounts in recipes, you can manage and even play around with plate costs for optimization (and don’t have to worry about your spreadsheet crashing or accidentally deleting anything!!). Not all RMS solutions are created equal, but your best bet is to find one with all-inclusive pricing so there are no added surprises at the end of the month.
After the rigamarole restaurant workers have been through in the last 2 years, that is one of the best investments you can make for your restaurant long term. And we know you don’t need anyone telling you how hard it is to do what you do as restaurateurs (which we seriously love you for), but with the current state of the union, we hope you find some of the methods on this list particularly helpful during a particularly – um – complex time.