When restaurant revenue takes an unfortunate turn for the worse, owners often scramble for a response and resort to cost cutting. But cost cutting is a knee-jerk reaction. It's not a long-term solution.
So what do you do instead?
Avoid rash action, and instead practice ongoing cost control.
In an article written for Menu Cover Depot (a source for custom leather menu covers), hospitality professor Christine Letchinger writes that in contrast to cost cutting, cost control “has a goal of maximizing profit and evaluates initiatives in light of their implementation cost and their impact on food quality, service, and the guest experience.”
Letchinger presents a detailed introduction to restaurant cost control best practices by presenting us with advice on encoding cost control into the DNA of the restaurant. In the article, she explains how to design systems that are cost effective and efficient.
Restaurant Cost Control – Part 1: A Nickel-and-Dime Business, focuses not only on food costs, but also on often ignored variable costs. From utilities, to marketing, to laundry; collectively, these are too large to overlook.
On the surface, cost control looks simple:
- For a given cost, you establish a cost standard (the benchmark against which you will measure actual performance),
- You compare actual performance to the standard cost, and investigate the difference between the two (the variance).
- Then eliminate the factors that caused the difference.
But while the explanation may be simple, implementation is another story. In particular, the cost of goods sold (or food cost) can be tough to calculate because it has many moving parts and involves a lot of detailed work. For a pizzeria with create-your-own menu items, it can get even more complicated. But food cost controls can make or break a restaurant.
Read the article to get started designing a system for effective restaurant cost control.
SpeedLine user? For another useful resource on setting up an inventory management system for success, also check out this guide from our POS In Depth Series.