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Offsetting Rising Labor Costs

With labor costs rising, see how menu and purchasing excellence can help your restaurant get ahead.

Your people are the face, heart, and soul of your restaurant. But rising labor costs can make turning a profit challenging. With higher minimum wage laws, increased competition for workers, and the rising cost of healthcare, it can be tough for restaurants to get — and stay — profitable.

To counterbalance higher labor costs, many restaurants are focusing on optimization opportunities within their organizations. As you work to increase your profitability, two areas to explore are recipe and menu engineering, and purchasing and inventory optimization.

Menu Engineering

What it is: Menu engineering is the study of the profitability and popularity of menu items and how these factors influence the placement of items on a menu. The goal is to increase profitability per guest.

Why you need it: By fully understanding the performance of your menu, you can look at where to make improvements to increase profitability. Popular but expensive dishes can be tweaked to reduce the cost of ingredients, while less popular dishes can be removed.

Steps to take:
  • Know your sales trends. Gain visibility into what’s selling and what isn’t. Combined with the profitability of your menu items, you can then determine which items to keep on your menu and which to remove. And, you can see where tweaks can be made.
  • Develop a single set of master data. This should include vendor catalogs and pricing, so you can stay on top of exactly what each recipe will cost — and adjust accordingly.
  • Perform quick analysis. See the impact of your actions. For example, if you swap one ingredient in a recipe for a cheaper alternative, how does that impact the popularity of the dish? With a fully-integrated solution that brings all data together in one place, you’ll see exactly how these changes affect performance. And, you can pinpoint where you need to make further changes.
  • Look at technology that can help you manage the process. One of the biggest challenges with recipe and menu engineering is trying to manage it using tools like Excel. Errors in formulas, out-of-date prices and large, unwieldy spreadsheets will impact the effectiveness of the entire exercise. Not to mention the results! Consider analytics platforms that can help you quickly see the results of potential changes, in real time.

Download a copy of our complimentary white paper, Leveraging Technology to Offset Rising Labor Costs

Optimized Purchasing and Inventory

What it is: There are many ways to streamline the purchasing and inventory process. But where do you start? We have a suggestion: stop rogue purchasing, eliminate paper from the entire purchase-to-pay process and tackle waste.

Why you need it: The goods you purchase are a direct reflection of your business. Your purchases should be high-quality items with timely delivery. You’ll also want them to be ordered according to need, and within pricing agreements. Plus, the more paper you can remove from the process and the more waste you can eliminate, the more you’ll save.

Steps to take:
  • Trade electronically. Information can be automatically extracted from your purchasing documents to populate your system. Now, everything is stored in the right place.
  • Enforce supplier lists. Lock down supplier lists, ensuring that all sites can only purchase from approved vendors.
  • Set delivery schedules. You can establish routine delivery schedules in the ordering system, so that any order placed outside the schedule is rejected. You can allow for some flexibility in case of emergencies, but formalizing the process keeps costly ad-hoc purchases to a minimum.
  • Enact 3-way invoice matching. Checking that the details on the invoice match the original order and the goods-received note is a must. With technology, this process can be automated. We’re all for eliminating paper-based manual processes! The right technology ensures you’re only paying for what you’ve ordered one it’s actually been delivered.
  • Start tracking waste. By gaining a good understanding of exactly what food is being wasted and why, you can identify the issues and see where savings can be made. For example, if a dish on your menu is regularly unfinished by customers, maybe the portion size is too big. And if an ingredient is frequently thrown away because it’s going past its expiration date, you’re probably ordering too much.

What’s Next

Leveraging technology to power your menu engineering and purchasing optimization is a smart decision. It will help increase your efficiency — and your profitability.

To learn how your restaurant can leverage technology to help offset rising labor costs, download our complimentary white paper.

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Want to offset your rising labor costs? We can help.