How to Lower Food Cost in a Restaurant as Prices Soar

How to Lower Food Cost in a Restaurant as Prices Soar
Restaurant Inventory - November 14, 2022 Written By: Krista Dinsmore

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High inflation, soaring interest rates and a volatile stock market are leading to speculation that a recession is around the corner. In fact, in the US, more than half of Americans believe the country is currently in a recession. 

Rising interest rates and high inflation have two major impacts on the restaurant industry. Firstly, customers have less disposable income and that has an effect on the foot traffic coming through your doors.

In Canada, for example, Dalhousie University's Agri-Food Analytics Lab estimates that currently 26 percent of the average Canadians' food budget is spent on food outside of the home - compared to 35 percent before the pandemic. 

Senior Director Sylvain Charlesboi told Montreal CTV News: “The annual report is, of course, imbued with the optimism and [resilient] characteristic of the sector. But with both a possible recession and higher interest rates on the horizon, consumers will have to make choices and change habits. With a tighter budget, many consumers will eat in restaurants less often.” 

Secondly, the rising price of inventory, rent and other business payments have a significant impact on a restaurant’s profit margins. 

With restaurants spending between 20 and 40 percent of their operating costs on food, rising food prices can have a huge impact on how profitable the business is. To counter this, many restaurant owners tighten their belts, reduce portion sizes or pass along a percentage of the increasing costs to customers. 

Here are five ways your restaurant can lower food cost and improve profit margins over the coming year. 

  • Make sure you are managing your inventory properly

Restaurant owners can lower operating costs or gain insights into their profit margins if they aren’t managing their inventory costs effectively. Restaurants with no visibility or control over their inventory will experience extremely high food costs without even knowing, making a huge impact on their bottom line. 

By implementing a strategic inventory management process that uses an inventory management system to automate calculations, restaurant owners are able to gain invaluable insights that help them lower operating costs, reduce food waste, improve ordering processes and increase profit margins. All these things help build a healthy business, even in times of recession. 

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  • Join a restaurant buying group

The more you buy from a food supplier, the higher the discount they will give you. That’s why restaurant chains typically have lower food costs than independently-owned restaurants, because they are able to benefit from bulk discounts.

There is a way for independent restaurants to access those bulk discounts, however. By joining a restaurant buying group - a type of group purchasing organization in which independent restaurants pool their orders together to purchase more volume from suppliers - independent restaurants are able to access higher discounts than they would have got on their own.

  • Minimize food waste

The inventory that your restaurant purchases is an investment into the profitability of your business. If that inventory is going to waste, your business may as well just be flushing cash down the toilet. 

Reducing food waste is an excellent way to reduce operating costs and improve your profit margins. When you are able to maximize all of your inventory, your business is able to bring in more revenue and experience less waste.

  • Reach out for expert help if needed

Results are far superior when your business combines world-class technology with expert help. If you don’t know how to maximize something within your business for optimum profitability, don’t be afraid to reach out for outside help to improve your business. 

For example, here at Sculpture Hospitality not only have we built an innovative inventory management system, but we strongly believe that it’s crucial restaurant owners have access to specialized help to ensure they can use their system correctly. 

That’s why we have a team of specialist consultants, located all over the world, who help restaurant owners build the specific inventory management data points that will help their business to maximize its ROI. 

  • Utilize daily specials

Daily specials are a fantastic tool to help reduce food waste and turn inventory that won’t sell into revenue options. If you notice that food has been in your pantry for a while and needs to be used up, try to create a recipe that makes use of that ingredient and add it to your daily special list. 

By adding a daily special to your menu, you can turn food that would have otherwise been wasted into profit opportunities. 

Interested in learning more about how your restaurant can lower operating costs as we potentially move into a tougher economic climate? Get in touch with Sculpture Hospitality today. Our team of experts would love to help.

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A Complete Buyer's Guide to Food & Beverage Inventory Management Systems

With around 25 to 35 percent of a restaurant’s operating budget dedicated to purchasing food (that’s not even taking into account beverage inventory costs for the bar), proper inventory management can significantly improve expected revenue.

To maximize profits you need to improve visibility and control over your restaurant or bar’s inventory. 

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