Fighting inflation and lowering costs at your restaurant

Published August 23, 2022

There's no denying the impact that record-breaking inflation is having on restaurants. Consider that inflation jumped 8.6% in May, the biggest increase since 1981. Small business network, Alignable, found that 72% of the restaurants surveyed fear that inflation could close their businesses within six months.

Restaurants' inflation worries are starting to overshadow the restaurant labor crunch as a business threat. And no wonder, as prices for just about every ingredient have gone up with the United States Department of Agriculture (USDA) estimating that overall food prices are 9.4% higher in April 2022 than April 2021. Poultry, seafood and even prices of vegetables have shot up. And as food costs for restaurants go up, restaurant prices are rising along with them.

So what’s a restaurant to do? Here are four actionable ideas on the best way to fight inflation.

1. Reduce food cost

There's no easy way to pay less for the same amount of food when inflation is shooting through the roof. That said, there are several tactics you can take to cut food costs for restaurants.

●       Look for seasonal deals

Prices on produce often drop when the harvest comes in, and if you can buy in bulk and adjust your menu accordingly, you'll save some cash. Asparagus in spring will likely be cheaper than it is in December, for instance, while melons might be a better deal (and undeniably tastier) in summer. Whenever you see a seasonal price drop, try to take advantage of it, perhaps subbing out a more expensive item on your menu for a bit.

●       Buy local

When you can, buy local to cut down on transportation costs (a real factor when gas prices are at an all-time national high) and to build relationships with local farmers and purveyors. Cultivating those local relationships can help you get better deals and perhaps even lead a farmer to grow or produce an item just for you, which can be a selling point on your menu, too.

●       Buy in bulk

Maybe there's a bumper crop of blueberries and you buy a bunch and freeze them to use later, or perhaps you start pickling cheap, in-season veggies. Even when the food item has to be used fresh, if you can get a deal on it and work it onto your menu in multiple ways, you'll cut costs.

●       Grow some things yourself

You may not have a plot of land for a full-scale garden bed, but perhaps you've got room for a raised herb garden. You'll save money and get bragging rights for some home-grown grub.

2. Reduce food waste

Restaurant kitchens usually prioritize not wasting food, but restaurant inflation should have you exploring all angles on minimizing food waste. The amount you can save is not insignificant; one study found that "the restaurant industry generated approximately 33lbs of food waste per $1,000 of a restaurant’s revenue." Here are a few ways to tackle the problem of waste:

●       Conduct a trash audit

Finding out how much food you're throwing away— from the kitchen and uneaten food from diners— can help you identify ways to not waste it in the first place. To do an audit, collect all food waste from a day (or week) and analyze it by type and weight. Once you know how much and what type of food you're wasting, you can come up with solutions. Maybe it's figuring out how to use more of a vegetable on the kitchen side of things, or putting smaller plates on the buffet if guests end up consistently taking more than they can eat and then tossing the leftovers. You might also consider starting a composting program or participating in your municipality's existing compost initiatives.

●       Practice good inventory management

There are a couple of elements here. Make sure you're enforcing a first-in, first-out (FIFO) model when you receive a new order. And maintain a consistent inventory schedule so you know exactly how much of an item you have and how much you need. If you have visions of spreadsheets (or an overly complicated notebook system), think again. Food management systems, or inventory management systems, allow you quick access to the cost of goods sold by tracking and managing sales trends and food costs for restaurants. It's easy for you as a manager, and it also saves money and is more efficient — two key areas to consider in an environment where restaurant inflation is a big worry.

3. Fine-tune your menu for cost

With restaurant prices rising, you need to take a hard look at your menu and think of ways to cut food costs with creative menu planning.

●       Conduct a menu audit

Consider the following for each menu item: how cheap it is to make, how easy it is to make, and how popular (or not) it is. The holy grail of menu items is going to be cheap, easy and highly popular. On the flip side, the areas of concern are going to be expensive, difficult to make, and both popular or not (each presents a different problem). You may decide to replicate the cheap/easy/popular dishes and tweak or phase out the ones that cost more in ingredients and prep time.

●       Simplify your menu

Your menu audit may reveal dishes to remove altogether. A simplified menu generally costs less, both from food cost and prep cost perspective. You'll also be able to focus on getting your simplified menu exactly right, giving guests consistently good food that'll have them coming back for more, and inspire discussion with their friends.

●       Focus on cheaper ingredients

Take a look at ingredients that are especially expensive on your menu and see if you can swap in something less expensive, without changing the quality and taste of the menu item. It might be something you adjust seasonally, or you might find a cheaper substitution that works in every season.

4. Cut costs beyond food

Sure, food costs can eat into your profit, but there are plenty of spots to potentially save money as you look at the inevitability of restaurant prices rising to combat inflation.

●       Takeout containers

These can be a big bottom line expense, especially if you're buying eco-friendly ones. Consider shrinking their size or reevaluating how you package to-go orders to maximize use of containers.

●       Utilities

Cutting down on waste may help trim your waste management budget, but you can also make simple fixes like using energy efficient light bulbs and opening doors for fresh air instead of running the AC constantly.

●       Staff training

Whether it's streamlining your kitchen by doing more batch prep and cooking to save time or making sure your servers know to ask about allergies and temperature preferences to avoid having to re-fire a dish, consistent staff training can help save money.

With restaurant prices rising, it's becoming even more important for restaurants to watch food costs. Once you've got food costs under control, tackle food waste, fine-tune your menu, and identify other small ways to control inflation, you'll be on your way to running a profitable restaurant, even in this era of sky-high inflation.

When your restaurant is backed by NCR, it's simple to stay out front.

Whether that's literally up front with your customers, or out front of your competition.

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