The US Bureau of Labor statistics defines inflation as the general upward price movement of goods and services in an economy. The average citizen – or the average multi-unit restaurant owner or manager – might not understand all the economic principles behind inflation, but its effects are straightforward and easy enough to see and feel. Goods and services cost more. Right now, inflation is at its highest point in decades, and the costs of owning and operating a restaurant continue to trend upward. To stay in the black, you’ve got to identify where your costs are increasing and devise strategies to keep them as low as possible. The MeazureUp team is here to help. Let’s look at four areas in which expenses are commonly on the rise – supply, labor, transportation and shipping, and energy – and explore ideas for cost management in each area.
“Sharp increases in food and labor costs are having a dramatic impact on restaurants’ bottom line.” – National Restaurant Association
Commodity Prices
The Problem: Inflation has led to a rise in the cost of restaurant supplies. Prices for meat, poultry, vegetables, and grains, all essential ingredients for restaurant dishes, continue to increase. The National restaurant Association says, “Supply chain issues have caused wholesale food prices to increase 16.3%, the war in Ukraine resulted in record gas prices, and an Avian flu outbreak reduced the number of poultry and eggs available for processing.” Federal Reserve Bank Data indicates that, in December 2022, the price of a dozen eggs averaged $4.25, up from $1.79 only a year before. That’s an increase of 237%! Cost increases like that directly impact your restaurant’s bottom line.
Our Recommendations:
- Look for alternatives: Swap more expensive ingredients for less costly ones. For example, you may be able to switch to a more affordable cut of meat or use more seasonal produce. Alternatively, you may be able to find a new supplier that offers more competitive pricing.
- Menu engineering: Try strategically engineering your menus. Focus on items that are less affected by commodity price increases or adjust prices accordingly to maintain profitability.
- Manage inventory: You can also manage inventory to combat commodity price increases. By purchasing in bulk and taking advantage of seasonal pricing fluctuations, you can reduce their overall supply costs.
Labor Costs
The problem: Nearly 2.5 million restaurant workers have walked away from their jobs in recent years. As a result, restaurant owners and operators have had to increase wages and benefits in order to attract and retain skilled employees. It costs more now to prepare and serve meals, as well as to clean and maintain restaurant facilities. This is affecting profits.
Our Recommendations:
- Increase Efficiency: Streamline processes, reduce waste, and cross-train employees.
- Leverage Technology: Leverage technology to combat higher labor costs. This may involve investing in automation or implementing new software systems to manage scheduling and inventory, take orders, or increase the effectiveness of daily staff checklists and periodic field assessments.
- Adjust Staffing Models: You may be able to reduce labor costs by evaluating and modifying how you staff your locations. Consider offering part-time or seasonal employment opportunities or outsourcing certain tasks.
Transportation and Shipping Costs
The problem: While fuel costs have come down somewhat from their record-breaking 2022 increases, they remain high, leading to an increase in restaurant supply transportation and shipping costs. This can impact expenses related to everything from food and beverages to cleaning supplies and equipment and can quickly eat into a restaurant’s profits.
Our Recommendations:
- Negotiate with Suppliers: By leveraging your purchasing power, you may be able to negotiate better pricing or shipping terms.
- Optimize Distribution Channels: Examine and optimize your distribution channels to combat transportation and shipping costs. This may involve partnering with local suppliers or adjusting delivery schedules to reduce transportation costs.
- Manage Inventory: Carefully manage inventory to combat transportation and shipping costs. By reducing the frequency of deliveries and optimizing inventory levels, you can reduce expenses.
Energy Costs
The Problem: Inflation impacts energy costs, which can increase the cost of cooking, heating, and cooling your restaurant space. It becomes more expensive to operate all equipment that requires electricity and other fuels, such as refrigerators, freezers, stoves, ovens, warmers, and more.
Our Recommendations:
- Invest in Energy-Efficient Equipment: By replacing outdated equipment with newer, more energy-efficient models, you can reduce your overall energy consumption.
- Implement Energy Management Systems: Investigate systems such as timers for lights and climate control. These systems can monitor energy consumption and identify areas for improvement.
- Encourage Employee Energy Conservation: Your employees are part of the solution. Restaurant employees can be enlisted to assist in energy conservation to combat high electricity and fuel costs by educating them on energy-saving techniques, such as turning off lights and equipment when not in use and incentivizing them to implement these techniques.
“Restaurant operators obviously have to look for creative solutions in this environment because the traditional restaurant model, from a cost standpoint, was not designed to endure the depth and breadth of this sustained period of much, much higher food and labor cost.” – Hudson Riehle, National Restaurant Association Senior Vice President of Research
Save Money by Improving Operations
You already know that site visits are critical to brand consistency, diner loyalty, and customer lifetime value, but have you thought about how those same internal audits can affect profits by helping you combat inflation-related price hikes? Improving the effectiveness of site audits can help multi-unit restaurant owners and managers combat inflation-related costs in several ways. Here are some suggestions to get you started:
- Identify Cost-Saving Opportunities: By analyzing energy usage, food waste, and labor inefficiencies, multi-unit restaurant owners and managers can pinpoint areas for improvement and implement cost-saving measures.
- Ensure Compliance with Standards: You can’t afford costly fines at any time. As margins become increasingly thin, that’s truer now than ever before. Your site audits should help ensure compliance with standards and regulations, such as food safety and health regulations.
- Improve Operational Efficiency: Site audits can also help improve operational efficiency, which will help you combat inflation-related costs. By analyzing kitchen layouts, supply chain processes, and employee workflows, restaurant owners and managers can identify opportunities for improvement and implement changes that increase efficiency and reduce supply costs.
What does your current field assessment tool look like? If the answer to that question involves clipboards, it’s time for an upgrade. Those old paper and pen systems are slow, ineffective, and do a poor job at sharing information among stakeholders. They just can’t give your business the kind of insight that it takes to combat inflation-related cost increases. You need a digital field assessment tool like AuditApp by MeazureUp instead. Fully customizable and easy to use on any tablet or smartphone, AuditApp makes it quick and simple to spot inefficiencies that are costing your company money, then to share that information with the team that can implement change.
How could a transition to AuditApp be a cost saver for your business? Let’s find out together. Schedule a demo today.
