Food and Beverage Cost Control for Your Restaurant’s Bottom Line
The aim of every restaurant owner is to turn their establishment into a bustling hub of good food, good times, and most importantly, good business. Effective food and beverage cost control allows your restaurant to be competitive in the marketplace, while serving your customers an exceptional culinary experience. This all starts with your menu, whether it’s your food menu or your drink list. Your menu is what drives business to your door, so you’ll want to make sure your menu items are priced to account for your restaurant’s bottom line.
Food and beverage cost control is the backbone of your restaurant’s success. It allows you to increase your profit margins, and in turn, attract new diners. On average, food and beverage costs represent 25-40% of a restaurant’s total expenses. On top of that, labor costs fall in a similar range of 20-35% of total costs.
Since food, beverage, and labor costs make up a large part of a restaurant’s cost structure, these expenditures are called “prime costs.” Even though prime costs take up most of the budget, restauranteurs actually have the most control over them. With this in mind, it’s clear that managing these prime costs are the key to running a profitable restaurant business.
For the Table
Tracking Your Food Costs
Keeping on top of your food inventory is the first step towards effective food and beverage cost control and most importantly, maintaining a superior profit margin. This means knowing exactly how much you spend each day, and it also keeps you from finding out far too late that your bottom line is not being met. Tracking food costs should be done daily – it lets you adjust food ordering, monitor and manage food waste, as well as take note of the number of patrons dining at your restaurant.
How many times have you ordered extra produce or beverages only to find it sitting unused in the stock room? Check your inventory daily to find out what you need and what you already have, so you always have the right amount of the right items. Remember, a profitable restaurant runs on efficiency.
Reducing Food Waste
Speaking of efficiency, your kitchen staff should also be trained to serve the right portions for each menu item so waste is minimal. Be consistent with how you serve your dishes – find the right portion size for each dish and stick to it.
You can do this by observing how much food gets tossed in the garbage or taken out in to-go containers. If your wait staff is throwing away large amounts of food, it’s time to reduce your portion sizes. If certain dishes are consistently half-eaten because customers are unable to finish them, revisit your portion sizes.
Control portion sizes by measuring out all of your food orders. Meats like beef, fish, and chicken should be weighed. Dry goods like salad, pasta, and grains should be measured and served according to the optimal portion size suited to your restaurant’s profit needs and its patrons’ dining habits. Store cheeses and other specialty food items in pre-separated quantities.
Pricing Your Menu and Promoting the Right Items
Pricing your menu is an art, and it’s important to do it right. It is the center of your restaurant’s profit, as it is the piece of the puzzle that dictates the prices and food ordering process. It is also the aspect of your restaurant that you possess the most control over.
You’ll recall that food costs usually take up about 20-35% of your restaurant’s total cost. That means you should be pricing your menu items so that your restaurant’s net profits exceed these costs. You also have to keep in mind labor costs for food preparation, serving, and clean up. And you also have to pay the bills. So, that might mean that you have to charge $22.00 for a $15.00 dish, for instance.
Telling your wait staff to push specific menu items can help lower your food costs. For example, if your food costs are running high one week, work with your servers to promote your higher value items. If serving lamb costs your more than serving fish, tell your wait staff to promote fish specials to ease the pressure on your food costs that week.
The right menu pricing strategy provides quality food and value to your diners while earning a living – this depends on knowing how every different type of restaurant cost affects your profitability and creating a food and beverage cost control plan that meets and exceeds your bottom line.
For the Bar
Using Par Settings
Although a lot goes into calculating a par setting, it basically represents the minimum amount of product your bar wants to keep in stock at any given time. Accurate par settings ensure that you’re not over-purchasing bar products. A profitable bar business also uses par settings to make sure they never run out of products, and also to make sure that they always have just enough of them – too much inventory ties up valuable resources.
Pars take into account historical usage (calculated by bottle amounts over a period of several months for specific products), average weekly usage, seasonal changes (slow season vs. busy season), and set a goal for the number of weeks before stocking the bar again. Pars allow you to save money and cut down ordering time significantly. With pars, you can adjust your inventory as seasonality and customer preferences change, letting you move on to other management priorities.
Avoid Overpouring and Controlling Beverage Cost
Overpouring is a surefire way to drive your liquor costs through the roof. Should you use jiggers or should you allow your bartenders to free-pour? This has been a long-standing and controversial topic for bar owners. No matter what method you end up choosing, make sure your bar staff is properly trained and stringently reviewed to ensure accurate pouring.
However, to eliminate any guesswork, you should require your bar staff to use precision pour spouts and jiggers. If your bartenders are constantly overpouring, you’re basically giving away drinks for free. Over time, these costs pile up and you’ll end up losing a lot of money. Jiggers and precision spouts limit the possibility of inaccurate drink pouring. Specialized three-ball precision spouts are available in many different shot sizes, eliminating drink waste and overpouring.
Spills and complimentary drinks also fall under the category of beverage waste. A spilled drink is a normal occurrence in bars, and usually customers will get a complimentary drink in its place. Most bar owners see spills as inevitable, and don’t take them into account when calculating liquor cost. However, it’s important to take note of spills and record the percentage of product loss they represent. Setting a limit on how many complimentary drinks bartenders are allowed to give away each month can also reduce bar expenditures in the long term.
Much like pricing your menu items for food, drink pricing determines the majority of your drink sales revenue. To determine smart prices for your drinks, calculate your current liquor cost and see how it measures up to the industry standard of 25-30%.
Your liquor cost should be close to this number, but it will vary based on your bar’s location, clientele, and customer tastes. However, it’s usually better to give yourself a bit of a cushion for fluctuations in profits, so bar owners should aim their liquor expenditures closer to 16.67% of their total bar cost.
Choosing the Right Bar Staff
To avoid any unnecessary overhead in the first place, it’s important to hire competent and dedicated bar staff. Your bartenders are the lifeblood of your business, and the customer service they provide is a crucial factor in garnering revenue. You should trust your staff to safeguard your bar from profit losses associated with product damage and theft.
In fact, employee errors, negligence, and improper practices are responsible for some estimated 20-25% of bar business losses, according to loss prevention professionals. If the members of your bar staff are disrespectful to customers, or behave irresponsibly on the job, you’re likely to lose business. Bottom Line Bar and Restaurant Consulting™ provides superior and cost-effective bartender training and hiring services to ensure that your employees are both a good cultural match for your bar as well as technically capable. Remember, your employees are the face of your business and should help drive its profitability.
Bar and Restaurant Consulting with BLBRC
Here at Bottom Line Bar and Restaurant Consulting™, we provide full-service consulting, including food and beverage cost control services. From the bar to the table, we’ve got you completely covered. Our branding and design experts also provide marketing services that allow your bar or restaurant’s brand to grow, and in turn, bring new customers to your door. Give one of our knowledgeable representatives a call at (855) 552-5272 – we’d love to share our expertise with you.