How to Save Money When Running a Restaurant

You may have heard stories about how small businesses close due to financial problems. A company that you worked for in the past may have laid off employees or went through a cost-cutting phase. These scenarios show how important it is to manage a business’ operational costs, no matter which industry it is that you are in.

Whether you have a brick-and-mortar store or a small restaurant, managing costs is the way to stay afloat in business, and eventually make a profit out of all your hard work.

Getting into the Food Business

Here, we will be dishing out tips on how you can save money if you have a restaurant:

  • According to Entrepreneur.com, the number of food establishments increased from 155,000 about thirty years ago to almost a million today. However, the sheer number of people joining the food business should not discourage you from starting your very own restaurant – there’s always room for more.
  • With the busy lifestyle that people are leading these days, most individuals would rather eat out than cook and have their meals at home. Restaurants offer utmost convenience, starting from food preparation to clean-up.
  • Nearly half of all adults, specifically in the US, have worked in the restaurant industry at some point.
  • More than 45% of those who work in the restaurant industry say that they would like to have their own food establishment someday.

Saving Money When Building a Restaurant

Now that you already have an idea about the reasons to get into the food industry, how can you save money during the process of building a restaurant? Take a look at the following list:

Identify your target market first

If your restaurant ends up being a total flop in the market, you will be losing a lot of money. To prevent this from happening, it’s good to identify your target market first. You may want to attract families dining together so you’d offer brunch and a kid-friendly environment.

The other types of market that you can attract in your restaurant business are members of the millennial generation or generation Y; the generation X who are now parents themselves; the baby boomers; and the seniors.

If you’d like to capture the fancy of the generation X, for instance, it’s best to offer all-you-can eat salad bars or buffets. Comfort and value for their money are what these Gen Xers are looking for, so make sure that your restaurant’s ambiance and menu hits the target.

Have a solid business plan

After determining the type of customer base that you would like your restaurant to have, it’s time to make a solid business plan. The way to succeed in the restaurant business and not lose your capital is to know which steps to be taken next to reach your entrepreneurial goals. Basically, here are the questions that need to be answered in your business plan:

  •  Should I build a quick-service, midscale or upscale restaurant?
  • Will my restaurant be classified as a pizzeria, a steakhouse, a coffeehouse, bakery, sandwich shop, delicatessen, casual dining, family-style dining or should I offer seafood fare?
  • How should I fund the business?
  • What’s the layout and design of the restaurant’s interior?
  • Which food items should be included in the menu?
  • How many servers should I initially hire?

When you have a solid business plan, you would know how to start the daily operations of the business, how to market your food establishment, and how to take things to the next level once you start realizing your short-term goals.

If you can arm yourself with practical experience by working in a similar restaurant, that’s the best training ground that you can have. It’s also a good idea to start small and work within the initial budget that you have.

Be creative in choosing the décor for your restaurant

Based on the age range of the market that you are targeting, you can think of a theme for your restaurant’s décor. Can you use recycled materials for the chairs and tables? How about eco-friendly wood? There are many cost-effective materials that you can use to decorate the restaurant with, while giving the area some personality as well.

Know how to save money on restaurant marketing 

Word of mouth is still the most effective way to market a restaurant. Based from a study conducted by the National Restaurant Association, 4 out of 5 customers are more likely to choose a restaurant that they haven’t tried before based on the recommendations of family members of friends.

If you know how to give the restaurant patrons an excellent dining experience and sumptuous food, you don’t need to invest in fancy marketing schemes just to spread the word about your business. Just make sure that your existing menus, table tents, ads and signs do send an accurate message of the image that you would like your restaurant to have.

My Restaurant’s Built: How Do I Save Money on Day-to-Day Operations?

You’re already running the day-to-day operations of your business. You would like to keep the costs down while still serving mouth-watering dishes and offering customers excellent service. How exactly can this be done? Take a look at the following tips:

Use up ingredients in more than one dish

If your specialty for the week is beef stroganoff with broccoli, offer side dishes which includes broccoli in the ingredients list. This way, you can order the vegetable in bulk and save on food capital costs.

Decrease your inventory

Even big restaurant owners are guilty of overstocking the pantry. If you would like to control your restaurant’s operational costs, lower your inventory levels. Be especially careful of ingredients which are difficult to source, and are expensive. When you have just enough ingredients in the pantry, you can reduce the incidents of spoilage and wastage.

Sell the highest-grossing items on the menu

When meeting up with the staff for the day, make sure to train them to sell and promote the highest-grossing items on the menu. Even if you only have a few orders of the most expensive steak dishes, it would lead to bigger profits as compared to many orders of less pricey items on the menu.

Take measures to prevent theft inside the restaurant

Unfortunately, employees stealing ingredients, liquor, money and other items inside a restaurant are a big problem in the industry. To protect your investment, conduct a daily inventory of the key items inside the kitchen. Install a surveillance camera in the dumpster area where unscrupulous employees can steal pricey steaks, liquor or even silverware.

Regular auditing will also go a long way towards preventing theft and managing the costs associated with overbuying ingredients as well as other restaurant items.

Implement ways to save on frying oil and gas

If you’re a casual dining restaurant, you would be frying up French fries, burgers, chicken and similar items on a daily basis.

The cost of buying oil would eventually add up, especially if you will not implement a filtering system. When you filter frying oil for every shift, you can maximize the flavor of the food you’re serving while also minimizing the costs associated with buying frying oil.

To save money on gas, make sure that all unused burners are turned off, along with ovens and fryers. The same thing holds true for unused exhaust hoods and steamers.

Buy energy-saving lamps and invest in appliances and restaurant equipment which have Energy Star ratings. By doing so, you can save money on utility costs which typically account for around 5% of your overall sales.

Hire at least one-third of your restaurant staff as part-timers

To reduce labor costs, hire about 35% of your restaurant staff as part-time employees. This will prevent servers from having to go on overtime during peak days and hours.

You can also have other employees take up the slack during the busiest times in the restaurant. During the non-peak hours, you would not have to send home excess staff  because you can more or less predict how many people you would need based on the number of customers you’re expecting.

Knowing how to manage manpower is one of the best ways to save money when running a restaurant.

Additional tips

Cross training bartenders, serves and kitchen line cooks is a cost-effective way of maximizing the talent that you already have inside the restaurant. You should also reconcile the cash-on-hand for every shift, conduct surprise cash audits on cashiers randomly, calibrate your dial scales and have a system to measure ingredients.

By following these tips, you can save money on the daily operations of your restaurant business and realize more profits in the long run.

Irina Vasilescu: Irina Vasilescu is our crafty designer. She joined the team three years ago and is also involved in the writing process.

View Comments

  • The decor is so important. So many places over-do it, and when that happens then you also have to put up with replacing to keep everything uniform. It's no fun to be completely bare, but it isn't terrible to have very subtle accents instead of a huge decor plan.

    • I agree I think it is important and can often get overlooked sometimes. I think it is important to understand all the expenses that go into opening a restaurant, from decor to supplies to employees.

    • I agree. My friend runs a coffee shop near where I live and often times her customers compliment her taste and style when it comes to the place's decor. Very simple yet elegant.

  • Also I think the place where you establish your business is important. There was a diner once in our place which for the life of me I can't understand why they would put a diner in the most remote and isolated place ever with not that many people.

  • Interesting article. I'm not that interested in starting a restaurant any time soon, but it's enlightening to see what restaurant owners have to do to prepare, and more importantly, to make a profit. The number of precautions and activities that go on behind the scenes while you're eating seems rather insane. Also, I've heard about a way of preventing employees from stealing is to make them throw away food they have spoiled, such as dropping it on the ground. It's a good method, but it's also a waste of food. What's your take on this?

  • Hey Irina,
    Thanks for sharing such an amazing post. I agree with your point, Thefts and over-stocking lead to huge losses to many restaurants. Technology can really help in tackling these problems. Modern restaurant management software provides features like Anti-theft & Stock Management, that can not only help in reducing your costs but will also push up your profits. One such software is Posist.