3 tips to chop costs as a restaurateur

You don't need to be a restaurateur to know that inflation is as hot as a pressure cooker at the moment. But since you do own a dining establishment, and food represents a substantial portion of what you spend your money on, you're keenly aware of the domino-like effect rising food costs can have on how you manage your cash flow. It leaves you with less discretionary spending and more room for error in regard to your various purchasing decisions. As it is, it's extraordinarily difficult to thrive as a restaurateur, as demonstrated by how many restaurants wind up shutting their doors shortly after opening them, often within a year or two. 

Adding insult to injury, the cost of food is expected to continue climbing into 2022, according to several economists, since inflation is poised to persist.

Bottom line: While you may be spending more, there are strategies you can implement that will help you offset rising business costs by adjusting to the current economic environment. Here are a few suggestions:

1. Streamline your menu
If you've owned a restaurant for a while, your menu has likely expanded — perhaps with each passing year. But it's highly likely that many of those dishes don't sell at quite the rate as the other more popular menu items. Take a look at your receipts to see what items sell the best month to month. In prioritizing these top sellers, you'll reduce your food costs and also diminish waste. As CNN Business has reported, several well known restaurant chains are making their menus leaner, including Dave & Buster's, McDonald's and IHOP. Not only are they spending less, they're also finding it to be a hit with customers by making it easier to decide. Mark Salebra, who chairs the McDonald's National Franchisee Leadership Alliance, noted in a statement that customer satisfaction scores have improved "significantly" since dialing back their dish offerings.

Smaller menus can yield substantial savings in terms of cost management.

2. Consider kiosks
For just about every business, restaurants included, the biggest ongoing cost is labor; it's the expense that takes up most of their budgets. But if you own the kind of dining establishment that's more quick-serve in nature, investing in a self-ordering kiosk can make a lot of sense. Kiosks allow customers to have more control over and customization of what they order and allow you to use staff more strategically. Subway, McDonald's and Chili's have all rolled out self-service kiosks and experienced better sales as a result, increasing figures by approximately 5% (McDonald's) and 20% among appetizers (Chili's), according to a report from Workstream.

3. Focus on retention
The restaurant sector experiences a high rate of turnover, particularly among certain segments such as fast food or fast casual. In fact, the annual turnover rate among fast-casual restaurants ranges between 130% and 150%, according to a report from CNBC. This compares to a national rate of 49% in the private sector overall. 

Having to train new employees is a major expense. Thus, retention is key. Speaking to your employees about what makes them satisfied in their jobs can help you determine what retention strategies to key in on.