Pre-pandemic, restaurants were doing well! Products were available, prices are stable, and employers had the power. Then an unexpected punch to the gut happened when the supply chain took a major hit due to shortages and price increases.
What if we said there were things you can do today in order to keep costs low and improve your margins? That means that in a world where everything was all about marketing, sales, butts-in-seats, new locations…. is now all about cost reduction, streamlining efficiency and driving margin.
The biggest and brightest minds in the industry are shifting their focus from top-line revenue to margins and profitability.
Here are 5 steps that you can begin taking today to reduce your prime and operating expenses by 5% in the next 5 months putting you on the right path to profitability:
Are you calling your distributors every day to check on stock levels of your most pressing inventory? Many operators are finding out about substitutions only after the products have already been delivered to their restaurants. This does not work when you have been using the same ingredients since the day you opened your restaurant. By leveraging technology such as InsideTrack, you gain visibility into product sourcing and substitutions so you can prepare for menu changes ahead of time – instead of last minute.
What about carrying out core responsibilities in your restaurant such as auditing and price verification? That takes time and resources that not everyone has these days. Your in-house system of taking multiple spreadsheets and comparing them against each line item is no longer a very efficient way to audit. That manual process is too long and can lead to overlooked overcharges – which cost you money at the end of the day. By embracing technology in both your front and back of house, you can streamline operational tasks and reduce spend all at the same time.
Think About Outsourcing
Today, restaurant operators are having to do more with less and are being forced to outsource certain functions of their business such as Marketing, Legal, HR, Payroll, or Accounting. So, why not outsource supply chain management and purchasing? This does not mean your current supply chain team is replaced. Instead, by partnering with supply chain experts you expand your resource pool and supplement your current staff. Most operators would love to add to their supply chain staff but the added cost to do so is too much, leaving them scrambling to manage the supply chain chaos on their own.
When you work with a supply chain management partner like Consolidated Concepts, Sundell and Associates, or even Restaurant Partners Procurement, you don’t have to pay for training, salary, insurance, and time off. This is a popular option for many emerging and national chains, Private Equity firms, and even Publicly Traded restaurants.
Most operators don’t have the bandwidth, volume, or category expertise to efficiently manage their produce programs in-house. By leveraging a third party produce management company, you can reduce your produce spend by 5-10%. On average, produce spend is about 15% of total food cost, so a 5-10% reduction in produce cost can lead to 100-200 basis points off your total food cost. Produce prices fluctuate throughout the course of a year due to things like seasonality and different growing regions. Yes, it’s true that you can occasionally buy better than the market but locking in contracted prices will protect you from volatility and you’ll ultimately be better off. Produce management companies such as Fresh Concepts or Produce Alliance will not only help you maintain, but improve your pricing, quality, food safety and traceability.
There are many changes you can make, both big and small, within your operation that can help you cut costs without making it so obvious to your customers. Take trash liners for example. If they are too big for your trash cans, you are wasting money on buying bigger bags without maximizing the full value out of each liner. By buying liners that are the correct fit, you can save on costs and extract the full value of each trash bag. What about your TV’s? Are all your TV’s running at the same time – even the ones where no customers are being seated? What a waste of power and electricity. Turn unused TV’s off and save on your electrical bill. Don’t forget about your kitchen burners. If you aren’t making food right away, they don’t have to be turned on as soon as your staff is clocking in. All that is doing is heating your restaurant up, forcing the AC to kick on – using unnecessary energy.
Making changes to your utility usage such as turning of lighting and electronics in unused sections of your restaurant, buying the correct size trash bags, using energy saving light bulbs are all small changes you can make cut costs.
GPO’s sometimes have a bad rap. They can cost an operator money and sometimes require you to switch products and change distributors. But not all GPO’s are the same. GPOs are widely used in the Healthcare and Hospitality space and the adoption rate for restaurants has dramatically increase over the past few years. Finding the right GPO partner for your restaurant brand can reduce costs and broadliner purchases by 50-150 basis points or more, depending on how contracted you are. Work with a GPO partner that is distributor and manufacturer neutral – one that will not require you to switch products or vendors and will honor your contracts. Work with a GPO partner that you can call on when you are looking for new product suggestions or reporting and analytics on existing purchases.
If you implement any of these suggestions, you will reduce cost and improve your margins. It’s just a matter of how much. At Consolidated Concepts, we can help you tackle each of these steps, reach your business goals, reduce your costs, and streamline your operations. Become a member today for FREE and start making smarter business decisions.