Are Rising Food Costs Killing Your Restaurant’s Profits?

Are rising food costs decreasing your restaurant’s profits?  You better act now!  We anticipate the cost of food, especially the staples, to continue to rise.  Food and Beverage Departments for hotels are typically low profit areas and can easily turn into no profit areas if you do not react quickly.  Here are some things that you can do: 

Know Your Food Costs – It is surprising how little hotels actually know about their food costs.  Most hotels have a breakfast buffet, however, few hotels have any idea what their food cost is on the buffet.  Most just assume they are making a high profit because they were taught that buffets were always high profit.  Not true.  Spend the time to calculate your buffet cost.  You may be surprised to find out that your buffet food cost is 40 or 50 percent!

Here is a simple way to find out the food cost for your buffet:  Have the kitchen log every single item that is used on the buffet during a 7 day period (10 cases of bacon, 22 cases of eggs, etc).  At the end of the week, add up the total food expense and divide it by the amount of revenue you posted for those days.  Be sure to do it for a whole week because you will find that your weekend food cost is very different than your weekday food cost.  Also, be sure to add in all items included with the buffet such as juice and coffee.

Re-engineer Your Menu – Hopefully, you are using a spreadsheet or computer program to monitor your menu engineering.  Be sure to re-evaluate your menu every single month.  For additional menu engineering help, check out this article.

Evaluate your menu prices – Now that you know your food cost and your menu engineering, be sure to evaluate your menu prices.  You will most likely have to raise prices.  However, don’t just raise all of the prices across the board, be very strategic.  Raise only the prices of the items that are the best sellers but do not have the best profit.  Keep the prices the same on the items that do not sell well but have a high profit.  Replace the items that do not sell well and do not have a high profit.

Pressure Your Suppliers for Lower Prices – If the cost of a particular item has drastically increased, pressure your supplier for a lower price or a substitute item.  Let’s pretend the bacon that you use on your buffet increased 30 percent.  Switch to a lower cost bacon, there are tons of kinds of bacon available.  This is especially easy to do if you are using a big supplier such as Sysco and have an inside salesperson who handles your account.  Just pressure him/her to find substitute items for any items that have drastically increased.

Decrease the Size of Your Portions – If you are like most restaurants, the size of your portions have become out of control in recent years.  Take a tip from the grocery stores.  You have probably already noticed that your box of Cheerios is now 21 ounces instead of 24 ounces, your Tropicana orange juice is now 58 ounces instead of 64 ounces, and a case of Coke now contains only 20 cans instead of 24.  Rather than raising prices, these brands all decided to decrease the portion size and keep the price the same.  This same strategy can work for your restaurant too!

Increase Your Profits by Up-Selling – Be sure to have a great up-selling training refresher course and a contest for average tickets.  For more tips on up-selling in room service, check out this article.

 

Whatever strategy you take, the most important thing is to know your numbers and be proactive.  If you have any other tips to share, please post them below in our comment section!

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