So, you’re looking at how to save money on the food costs of your restaurant.
What does that look like? Saving costs means bigger profit margins for your menu items. And bigger margins mean more profit.
Imagine what you could do with more income! Reinvest, take some time off, and take care of the people you love.
Allow me to help by showing you 5 ways to cut food cost fast.
Let’s dive right in.
1: Track Your Numbers
The number one way to save on food cost is to track it.
This is something I learned firsthand with my ice cream chain. Before we started tracking our food costs, we were actually running around $35k to $50k in revenue and thought we were making a lot of money.
But in the end, the profits weren’t there, the money wasn’t in my account. I didn’t know why at the time.
Eventually I realized the problem was that we weren’t tracking our numbers properly. We didn’t understand where our money actually went.
So after sitting down and calculating it out, I learned out that the dry ice we were using to make the smoking ice cream actually accounted for more than 20% of our food costs. After a bunch of meetings we decided that taking out dry ice might be the best idea for our profitability.
So we did a test run in taking out the dry ice. Turned out, scraping the dry ice didn’t affect our sales or our revenue negatively. But that 20% did translate into an extra $2,000 per month that went back into our pockets.
If I had not tracked my numbers I would not have known where my money was going, nor what choices to make to save it.
This a prime example of why you need to be able to track your food costs and in addition to that, after the fact that you started tracking your food costs, you know where your money is going.
You should always set goals, but in this case we’re talking specifically about Cost of Goods Sold (COGS) goals.
Typically speaking, 25-35% is a good range for COGS, depending on the food or beverage item. Every business is different, this number could be higher or lower, but this is a good margin to be aiming for.
Before our ice cream shop started tracking, we’re hitting around 40% in cost of goods sold. FORTY!! Cones, toppings, our ice cream base – all these things were taking 40% of our revenue!
So if we’re selling $10 in ice cream, $4 of it goes to our ingredients cost. We were trying to understand why this was the case because all my peers and competitors had such low COGS.
It was only after we started tracking our costs and sales that we realized there were a lot of small improvements that we could make. By taking out dry ice alone, we were able to save so much.
We also realized our cone supplier was overcharging us. We found a more reasonable source and in turn were able to drive our COGS down to 25%!
This extra 15% also became our profit! The dollars certainly add up, which is why it’s super important to always keep track of your costs and evaluate places where you can cut them to lower those margins.
2: Forecast Your Sales
The second secret to cutting food costs is to forecast your sales.
What’s The Weather Like?
In the food and beverage industry, we have waves of sales. There’s always going to be peak seasons, and slower days.
As business owners we need to be able to understand and predict these tides. We need to know when to order more ingredients to fulfill all sales on busy days, and know when to scale back to save money during the slower days.
If you’ve been running your business for a while, you probably already know when these times are, but you need to be tracking them so you can order confidently.
Even if you’re just starting out, it’s important to estimate and make educated decisions, because any food that goes to waste = your profits.
For our business in winter we knew to order less milk because we’re going to produce less ice cream. Less milk means less costs of goods sold, less wasted supplies, but more profit in the bank.
3: Audit Your Menu
The third way to cut down your food costs is by auditing your menu.
A lot of new entrepreneurs don’t do this, especially if they are passionate about what they’re offering.
High Margins + Low Prep Time = $$$
On your menu, there are items with high profit margins that are easy to prepare. There are also items with lower margins and harder to prepare. Which one would you rather to sell more of? Obviously the item with a high margin that’s easy to produce.
So many different business owners have these low-margin items that require lots of prep time on their menu for one reason on another, so they keep buying the ingredients to make them when ordered.
But if you think about it, why would you even have that as an option on your menu? If it’s not making you money, it’s not worth it. And the only way to know, is by regularly auditing your menu.
To give you an example, with 720 Sweets in our Metrotown location, we realized that most customers are looking for something that is quick grab-and-go.
We were mostly selling our $2 ice cream cones: Super easy to make, low in COGS. To contrast, out $7 premium cones with dry ice took twice as long to produce with a higher COGS.
By auditing our menu we learned that our profit from the premium dry ice cones was actually the SAME as the basic cone. We took the dry ice version off our menu because we realized we were just wasting time and money, when it wasn’t even what the customers were buying.
You have to audit your menu and be ready to make the tough choices that make the most sense for your profits, not your ego.
4: Audit Your Operation
The fourth way you can save some food costs is by auditing your operations.
What does that look like?
The Efficiency of Operation
Well, we need to be able to find efficiency in the system. What does efficiency look like? How does it show up in a restaurant environment? We’re probably more familiar with inefficiency.
Inefficiency happens when the front of the house staff doesn’t put in the order right away or worse, incorrectly and all that food goes to waste.
These issues are usually caused by lack of training or problems with the system. It’s really important for us to teach staff properly when these things happen, or better yet, before they happen.
Minimize these inefficiencies to maximize the profits.
The Consistency Of Operation
It’s not just in the front of the house staffing, but also in the back of house. We need to ensure that all the chefs are producing things properly with regard to quality and quantity.
It’s all about the consistency.
Imagine if the food changed based on the chef’s mood! Today, he might be happy and generous so he’s going to throw in a few extra pieces of chicken. The next day he might be grumpy so he rushes and forgets an ingredient. This would be less than ideal.
At some restaurants they even have a scale to ensure that the correct portion is being served for each and every single dish.
It is super important for us to create processes, establish standards, and adequately train all staff to follow these operations to ensure consistent quality.
The more you audit your procedures the more areas you’ll find to improve efficiency and save costs, meaning more money goes back in your pocket.
Train Your Staff
At 720 Sweets, we have very strict training. There are detailed procedures that we follow to ensure that we’re maximizing profits
When we started tracking the consistency of our product we realized that the cones being served were all different sizes. So we created a scale for our staff: 3 swirls = 180-220ml of ice cream.
Suddenly, our costs came down drastically because our operations were optimized and our product was consistent and measurable. All that extra profit from one simple change.
5: Loss Prevention
The fifth and final way for you save on food costs is to implement loss prevention and minimize theft.
You’re not always going to be at the business, you need to make sure you’re running a tight ship. If it’s not tight, then a lot of things can go wrong.
Beware of Theft
Theft doesn’t always mean stealing cash. Some of your staff might be giving away free food to their friends, or keeping some for themselves.
That means that costs are higher than revenue, so you’re effectively losing money.
This is a super big red flag. The best way to pinpoint and catch a staff member that’s stealing is by looking at your numbers by shift: your revenue stays the same, but your food costs have increased.
This can be extremely dangerous for your business.
When this happened to us we were confused about why the food cost went up when a specific staff member worked. We checked the cameras to see if they were giving away free food or selling the food without putting cash back into the till.
It is crazy how much information you can tell by just looking at your costs, which brings us back to the first tip: track your numbers!
Use These Ideas NOW
In the food and beverage industry, our margins are slim to none.
To succeed you need to optimize your food costs by
- Tracking your Numbers
- Forecasting your Sales
- Auditing your Menu
- Auditing your Operations
- Preventing Theft
All this being said, nothing will change unless you take action.
Applying these things to your business and work flow now can end up saving you tens of thousands of dollars in the long run.