Reducing costs to increase profitability

How to decrease your operating expenses?

2021/07/15
By Nadine Hashem

If you’re looking to decrease your operating costs and expenses, then you’re not alone.

 

All businesses are looking for ways to decrease their expenses especially during and after the pandemic. 

 

Businesses and especially restaurants have incurred serious losses during the pandemic when the restrictions were imposed strictly on opening restaurants and receiving guests in their dining area.

 

Do you think that in order to increase your profit margin, you need to increase your prices solely without bothering with controlling costs? 

 

If this is the case, then you’re making a mistake. 

 

Increasing your prices to increase your profitability is a risky game. 

 

You might lose customers when increasing prices which eventually results in decreasing your profitability especially if you target customers with a limited purchasing power. 

 

So, whenever increasing prices is not an option for you, consider reducing you operating costs and expenses.

 

Let’s start with defining the operating costs.

 

Operating costs are all costs related with the maintenance and administration of a business on daily basis. They include the cost of goods sold and other expenses related to the administration and selling at your business like the POS software, utilities, repair costs…

 

 

 

How to decrease operating costs at your restaurant?

 

Reduce employee turnover 

 

You cannot overlook employees’ satisfaction when examining your costs. 

 

Employees are an important factor in reducing costs.

 

A high employee turnover means that you are spending more money to hire especially if you deal with a recruiting agency for the hiring process and training the new staff not to mention the time they take to adapt and to start actually being productive by increasing your revenues.

 

Employee turnover can cost you 33% of employees annual salaries. 

 

 

Hospitality industry including restaurants has a high employee turnover rate and it goes back to several reasons including the low wages, long working hours and simultaneously high demand. 

 

 

For this reason you have to:

 

  • Make the right choice from the beginning during the hiring process. Don’t just hire any fit that is looking for a casual temporary job. Look for those that match your company culture.

  • Offer competitive wages and benefits to attract the good employees. Check for your competitors' offered salaries and try to give competitive salaries and benefits. Offer a room for development within your restaurant to ensure that employees can feel self achievement.

  • Encourage family culture at work to increase loyalty and commitment of employees. Plan for meals at certain occasions and celebrate employees birthdays.

  • Be flexible about their shifts and offer them the chance to balance work-life balance.

 

Embrace technology 

 

Technology is constantly changing and automating our manual processes. 

 

We should definitely benefit from technology to save operating costs. 

 

You might pay more on the short run to automate your restaurant processes but on the long run you’ll be saving lots of money. 

 

You need to get a modern POS software, reservation management software, contactless digital menu, kitchen management software and client relationship management software…

 

All of these features save you costs of hiring additional staff and lower human errors in addition to increasing your revenues.

 

Embracing the appropriate modern software in your business helps you with decision making process when you analyze your reports in different departments.

 

Analysing sales reports identify the busiest times as well as the slowest times of the day so you can look for ways to improve your revenues.

 

Adpoting a contactless digital menu saves you costs of printing and altering your menu.

 

Rework your menu

 

If you think that the bigger and more varied menu is the best option to go with, you’re mistaken.

 

A menu with many options is definitely costly especially when it comes to food prices that are limited to a meal or two.

 

A more variable menu means more inventory, more storage, more preparation time and more raw materials. 

 

For an optimized menu, monitor your sales report to identify the most popular dishes in addition to the most profitable ones. 

 

Reduce food cost

 

Food cost begins with the purchase of raw materials.

 

Usually, restaurants buy their raw materials from a limited number of suppliers. 

 

So, it’s always a good idea to maintain a strong relationship with them so you garantee the best prices and offers especially during economic crisis.

 

Sometimes buying in bulk is less costly depending on the supplier policy of course.

 

Food cost is also related to the preparation process where you can train your staff to decrease wastage during preparation and to make the most out of your raw materials through using them in different recipes.

 

Adopt energy saving tools

 

Saving energy benefits you greatly. Switch to less energy consuming kitchen appliances and lighting lamps to decrease your utility bills. 

 

You might think that it’s not worth it but trust me everything adds up when it comes to costs.

 

Pay attention to your internet and telephone bills as well. 

 

Use low cost marketing 

 

Again and again technology is doing us endless favours.

 

Social media platforms are far less costly than other marketing tools and it has high reacheability.

 

Email marketing as well is a cost effective way to reach more customers.

 

 

During or after the pandemic, operating costs are something to keep your eyes on to survive and increase your profitability.

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