The COVID-19 pandemic has hit many industries hard, particularly the socially-oriented ones such as restaurant dining. The urgent need for social distancing to avoid spreading the virus is driving people to stay home and causing mandatory closing of dine-in facilities in many areas. Restaurants are now analyzing their business to find ways to survive and thrive during this change in consumer behavior. With the sharp declines in dine-in sales, maintaining profitability is a real concern. Keeping costs down and optimized is crucial, and now is the time to consider your options. Here are some strategies for reducing your expenses during COVID-19.
Analyze Your Restaurant Costs
There are two types of costs for restaurants: fixed (unchanging), and variable. It’s worth the time to analyze where your money is going, and identify which costs are variable and can be adjusted to help maintain your profit margin. Top costs for restaurants include:
- Labor: This category includes staff wages, tip distribution, health insurance, and sick leave. Restaurants are a high-turnover industry, so recruitment and training are also labor cost factors.
- Inventory: As one of the biggest costs besides labor, inventory is where you should focus next. Food accounts for the majority of inventory costs, but there’s also operational supplies (tableware, napkins, straws, cleaning supplies, packaging for takeout and delivery, and more).
- Occupancy: The costs you pay to occupy your building space include your rent (or mortgage payment), insurance, maintenance (garbage pickup, landscaping, parking lot lighting, etc.), property taxes, security, and any safety regulation compliance costs.
- Utilities: This category covers power (gas and/or electric), water/sewer, phone, and internet/Wi-Fi connection to run your point of sale (POS) and back-office equipment.
- Equipment: Everything from stoves, grills, dishwashers, and refrigerators/freezers to POS and kitchen display system (KDS) terminals and back-office computers falls into this category.
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Identify Savings Opportunities for Variable Costs
Restaurant variable costs can be adjusted by making operational changes to adapt to the coronavirus pandemic circumstances.
- Labor: It may be necessary to cut back on employee hours, at least temporarily. A beneficial option during this time might be to reallocate your staff as you shift your operational focus. With dine-in facilities shuttered, emphasizing online order fulfillment and delivery services can keep you going. Servers and hosts can help out with kitchen prep, become delivery drivers or assist with curbside pickup and distribution. Your POS should have labor scheduling and management features you can leverage to optimize your staff costs.
- Inventory: Your first priority is to use up the food you have on hand to minimize waste and spoilage—especially with specialty items that have shorter shelf lives. You may also need to temporarily reduce your menu offerings and focus more tightly on your core menu. Identify a reduced selection of ingredients and plan meals based on those, creating a limited menu from these choices. To keep it interesting, restaurants can offer a “menu of the week” to rotate different meal options and promote through digital marketing avenues.
You could also create meal deals based on the most popular items to offer families for quick “grab and go” service: spaghetti dinner for four, or a family burger bundle. Another option is to package the ingredients for a meal and let customers prepare the dish themselves at home with instructions you provide.
- Utilities: Energy efficiency is key in keeping these costs down. Reducing your operating hours will help to lower these expenses, and you can conserve by not needing to run lights, air conditioning, etc. in dining space you aren’t using—just essential areas such as the kitchen and pickup/delivery areas. If you do adjust your operating hours, make sure that is reflected online wherever customers will be seeking information about your restaurant: Google maps and local search (or third-party partner) sites, social media channels, and on your website and mobile app. Customers need to know that you are still open, and when.
- Equipment: Only using the equipment you need and cutting back on what is less necessary (dishwashers, for example, or laundry equipment for cloth napkins and tablecloths) will help trim the utility bills as well. You can also try strategies such as prepping and cooking meals in bulk to reduce equipment running time. This becomes easier with a scaled-back menu.
Stay Optimized with an Integrated Suite of Technology
Technology is one cost that is vital to success during the COVID-19 crisis. Make sure you are leveraging a suite of restaurant tech that includes POS, KDS, online ordering and delivery management, website, and mobile app. The best tech choices will have features that can help you manage and streamline online orders and maintain communication and engagement with your customers.
Keeping restaurant costs down is just part of the puzzle. Restaurants need to understand the big picture of COVID-19 and have a plan in place to not only reduce costs, but maximize profits. Download our free restaurant survival guide to learn how to protect revenue and profitability during these unexpected times.
HungerRush is a leading provider of restaurant technology designed by industry experts. For more information on how our integrated solutions can help your business survive and grow, request a demo today.
Restaurant Survival Guide
Learn more about protecting revenue and profitability during unexpected times with HungerRush’s free restaurant survival guide ebook.