3 Biggest Restaurant Costs & How to Reduce Them

biggest restaurant costs

3 Biggest Restaurant Costs & How You Can Reduce Them

Let’s face it: when you’re operating and managing a restaurant, your primary focus is to provide unique menu items and excellent customer service. But, for you to make these goals a reality, you must first create significant investments. And because customers have grown accustomed to speed and convenience, it’s also essential to allow them to pay the way they prefer when they visit your restaurant.

So, to accomplish all of this, you must identify your biggest restaurant costs and how you can regulate them. The best way to lower your costs and expenses is by investing in the proper hardware and software systems. Overall, providing the best experience for your customers requires paying some money—here’s how you can optimize your spending and maximize your profits.

Cost #1: Food/Ingredients

It may seem obvious, but the cost of food and ingredients is one of the biggest restaurant costs to track. However, it isn’t always easy: food prices are constantly changing and increasing due to various factors, such as produce spoiling or natural disasters slowing down delivery services. Also, it’s challenging for restaurants to keep food costs low with internal waste issues. For example, when your inventory orders too much food, this turns into wasted ingredients and wasted money.

To avoid one of your biggest restaurant costs, you need a POS solution that can help you manage your inventory and menu items. Your POS software can assess what items sell the best and optimize your menu based on that data to help you reduce waste. And because the POS system’s reporting capabilities can do all the heavy lifting for you, you’ll have more control over food costs and more time to focus elsewhere with your restaurant’s finances.

Cost #2: Labor

In addition to food, your other biggest restaurant cost is labor. When you’re looking at your labor management, you generally want your labor costs to be less than 30% of your restaurant’s total revenue, so even when sales fluctuate on certain weeks, your restaurant will still stay in the black.

With that in mind, it’s cheaper to keep employees than trying to continually hire more, which is why you want to hire and keep hardworking and reliable employees. So, you can get new hires off on the right foot with a good training program that’s made more accessible when the software they’re learning from is intuitive and on a familiar device. Training your staff from an easy-to-use POS solution helps them retain more information quickly and learn things right the first time, reducing human errors further down the road.

On the flip side, if you’re still having trouble retaining employees, your point of sale system can help you find other alternatives. Another way to optimize your labor costs could be to supplement your serving staff with technology solutions like order & pay by phone options, which function like a kiosk but without the expense or investment of the hardware. Customers can easily order from their phone or other mobile device and pay the moment the order is placed.. You can manage and control these solutions from your POS system, saving you money without sacrificing exceptional customer service.

Cost #3: Processing Fees

While it’s simple to understand why food and labor are some of your biggest restaurant costs, there is a third cost that you might not have considered a top priority: processing fees. For you, it might make sense initially to include processing fees under something like “location overhead” or “utilities,” but truthfully, there isn’t an immediate solution to reducing them. It’s unfortunate, but you have to accept these costs.

However, that doesn’t mean you have to accept excessive credit card processing fees, and that’s where having the correct POS system counts. Instead, you can reduce expenses by choosing a payment processing partner that values your bottom line and can help you implement a cash discount program into your point of sale system.

Cash discounting is an excellent way for you to recover processing fees or other operating expenses while offering your customers the opportunity to lower their price of purchases when they pay with cash. It’s just one more way your POS solution can keep one of the biggest restaurant costs at bay without you having to reconfigure your entire business operations.

How Paradise POS Can Help

At Paradise POS, we have the perfect point of sale solution to help you cut down on all of your biggest restaurant costs. Our restaurant POS system can help you increase operational efficiency, control costs and item inventory, and help you reduce waste with high-end reporting capabilities.

Plus, because our software is designed for iOS devices, training your employees or managing order & pay at the table solutions couldn’t be easier. Also, since we have a thorough understanding of the payments industry, we can help you implement a cash discount program and stay compliant with the proper on-site signage. Are you interested in reducing restaurant costs with the right POS system? Contact us today, and we’ll get you started!