Restaurant Cost Control: How Operators Manage Through Rising Costs

Anyone who’s ever managed a limited service restaurant knows the challenge of dealing with rising restaurant expenses. Even if you’ve been managing successfully and know the ins and outs of your operation—you may visit still your books and find the math just isn’t working anymore. That’s why a constant focus at restaurant cost control can help.

Your traffic may remain consistent, for example, as you maintain predictable revenues. But restaurant expenses elsewhere are stalling growth. After all, flat traffic can’t compensate for rising costs in labor, rent, food and supplies.

This scenario is an unfair reality for many people working in limited foodservice management. Today, 82 percent of operators are dealing with labor issues ranging from minimum wage increases, Affordable Care Act overtime exemptions, restrictive scheduling and other personnel related costs.1 Also on the list of operator concerns are food cost increases, changing trends and an increasingly crowded marketplace.

The Easy Fix to Rising Restaurant Expenses

Now that you’re aware of the issue, let’s take a look at measures others are taking to combat rising operational costs and restaurant expenses. One line of thinking is to attack labor costs by reducing employee hours, cutting benefits, or reclassifying management positions. While this may temporarily improve your bottom line, it does so at the cost of employees. Your workers are the lifeblood of your business, and keeping them happy and nurtured is a part of what you do. The smart business owner is aware of this and will attack the bottom line by making the rest of their operation as efficient as possible.

The next logical target would be pricing. If you have predictable traffic, why not just raise prices to fix wage issues? Unfortunately, this seldom works. One study revealed that only 27 percent of consumers are willing to pay more for food/beverages so restaurants can pay employees more,2 and according to a Reuters study, one-third of U.S. adults are eating out less than they did three months prior, mostly because of cost.
The Right Fix: Restaurant Cost Control

If reducing labor costs is unfair to employees and raising prices is unfair to customers, what does a responsible operator do to attack their bottom line? One option is to invest in technology and smarter supply management that can better help you control costs.

If you’re looking for supply inefficiencies start with observing customer behavior. Many food service businesses suffer from customers abusing self-service policies on paper products. Customers may think, “Hey, I need to wipe my hands and here’s a pile of napkins. I’ll grab as many as possible and throw away what I don’t use.” Operators are keenly aware that napkins aren’t free, and waste accumulates over time. So, let’s take a look at overuse. Here’s how one national chain observed this inefficiency and what they did to fix it.

White Castle Shows How to Reduce Waste

Burger chain White Castle observed that their single-ply napkins and dispensers utilized an open-source container, which encouraged wasteful “hook and grab” customer behaviors. The waste from the old dispensers drove up costs and required frequent maintenance to keep dispensers well stocked. Not only was it a drain on supplies, but it was starting to affect labor. Something had to be done.

GP PRO conducted a limited test by installing the Dixie Ultra® SmartStock® Automated Napkin System in 10 White Castle locations. As a result, White Castle found that not only did they save on napkin costs but also on time spent by employees restocking, cleaning and maintaining the dispensers. Overall, they saw a reduction in napkin usage of 64 percent3, in addition to time and labor savings, all for a one-time investment in dispensers.

What Now

Foodservice operators all understand how important it is to invest in technology, but the nature of technology has changed. It’s not just computers and POS systems anymore. Technology is everywhere, and the best way for you to gain an edge over competition is by reevaluating everything—even the things that seem to be decidedly non-tech like paper products. If you want that extra edge, why not make upgrades before your competition does and begin reducing restaurant expenses now?

For more information on how GP PRO can help bring your foodservice business into the modern age, take a look at some of our other Dixie Ultra® innovations that reduce waste and increase hygiene.

1Operator Economic Realities. Technomic, January 2017
2Planning Program U.S. Industry Status and Outlook. Technomic 2017
3Usage reduction for SmartStock® napkin is 40% when switching from a 13x12 full fold napkin to SmartStock® napkin in a limited service restaurant environment