June 19, 2025
Running a successful restaurant is challenging, especially when managing costs while maintaining high quality and a positive customer experience. With profit margins between 3% and 5%, small inefficiencies can quickly impact profits. Therefore, mastering cost control is crucial to enhancing profitability and maintaining competitiveness in today's dynamic market.
According to the National Restaurant Association, food and labor costs alone account for 33 cents for every dollar in sales, which is nearly 33% of a restaurant's total expenses. This makes effective cost control necessary for long-term sustainability and growth.
In this comprehensive guide, we will walk you through proven strategies to take control of your restaurant's expenses, from inventory management to labor optimization, supplier negotiations, and more.
Let’s start by understanding what cost control really means in the context of your restaurant business and why it matters.
Cost control in restaurants refers to the process of monitoring and managing all expenses involved in running your business, from purchasing ingredients to paying staff and covering overheads.
It ensures that every dollar spent is justified and contributes to your operational efficiency. Without proper cost control, even high sales volumes can fail to translate into profits.
There are three primary cost categories that most restaurants focus on:
Many restaurants struggle with unpredictable demand, fluctuating food prices, and employee turnover, all of which can make controlling costs difficult.
For example, sudden spikes in ingredient costs can significantly affect your food cost percentages if not adjusted promptly. Similarly, poor scheduling can result in overstaffing during slow hours or understaffing during busy times, both of which can negatively impact your bottom line.
iOrders' real-time tracking and reporting allow you to keep a close eye on your food and labor costs. Its integrated platform helps you manage payroll, monitor consumption, and spot trends early, so you can react before small issues become costly problems.
With a solid grasp of what cost control means, the next step is to focus on managing your inventory effectively.
Your menu is more than a list of dishes; it's a powerful tool for controlling costs and driving profits. Smart menu engineering and pricing can help you highlight your most profitable items while keeping customers happy.
Identifying profitable menu items is essential. Analyze each dish’s food cost, preparation time, and popularity to find "stars" (high-profit, high-popularity) and "dogs" (low-profit, low-popularity).
For example, a pasta dish made with inexpensive ingredients that is highly popular will increase margins. In contrast, a complex entrée featuring costly components but low orders might be dragging down profits.
By focusing on promoting your stars and reconsidering or eliminating dogs, you optimize your kitchen resources and enhance overall profitability.
Portion size plays a significant role in managing food costs. Without standardized recipes and strict portion control, chefs may unintentionally serve more than necessary, resulting in increased waste and cost variability.
Standardized recipes ensure consistency in taste and cost by clearly specifying the amounts of ingredients and the steps for preparation. This also aids in training new kitchen staff, maintaining uniform quality and predictable costs.
Pricing your menu requires striking a balance between profitability and perceived value. Too high, and you risk turning customers away; too low, and your margins suffer.
According to a study by Restaurant.org, well-executed menu engineering can increase restaurant profits by up to 15%.
iOrders provides detailed sales analytics to identify your best and worst-performing menu items. Pricing insights help you optimize menu pricing for maximum revenue without alienating customers.
Now that your menu is optimized, the next key to controlling costs lies in managing your labor efficiently.
Managing labor costs presents significant challenges and opportunities for restaurants aiming to control expenses. Labor often constitutes a significant portion of total sales, so optimizing scheduling and staff productivity has a direct impact on profitability.
Creating schedules that match demand is crucial. Overstaffing incurs unnecessary costs, while understaffing risks poor service and lost sales.
Analyzing sales data and peak hours helps build efficient schedules, ensuring the right number of employees work at optimal times. Seasonal trends and events affect labor needs. Flexibility in scheduling, along with part-time or cross-trained staff, helps adapt to fluctuating demands.
Cross-training your team enables employees to perform multiple roles, such as a server who can also assist with bussing or food prep. This increases staffing flexibility and reduces the need for extra hires. Cross-trained staff can fill in during busy periods or unexpected absences, helping to maintain smooth operations without increasing labor costs.
With your labor costs optimized, the next crucial step is to manage your supplier relationships and purchasing practices effectively.
Utility costs can account for a significant portion of a restaurant's operating expenses. From energy consumption to water usage, managing these costs is essential for maintaining profitability.
Here are several strategies restaurants can implement to lower utility expenses.
Investing in energy-efficient kitchen appliances and lighting can significantly impact utility bills. Look for equipment with ENERGY STAR certification, as these appliances are designed to use less electricity while still performing effectively.
Energy-efficient equipment can lower electricity consumption, resulting in significantly reduced monthly energy bills.
HVAC systems are major energy consumers in restaurants. Regular maintenance, such as cleaning filters, checking refrigerants, and scheduling inspections, can enhance efficiency and reduce energy consumption. This reduces cooling and heating costs.
Utilizing smart thermostats for heating and cooling enables restaurants to monitor and modify temperature settings according to busy hours and periods of closure. This approach prevents energy waste during off-peak times when the restaurant isn't fully operational.
Next on the list are supplier negotiations.
Fostering strong relationships with suppliers and making informed purchasing choices can significantly impact the management of your restaurant's costs.
How you procure your ingredients and supplies influences not just your expenditure but also the efficiency of your kitchen and the quality of your menu.
Building trustworthy relationships with your suppliers fosters dependable quality, timely deliveries, and competitive pricing. When suppliers are familiar with your business and trust your payment practices, they are more inclined to provide discounts, prioritize your orders, or offer flexible terms.
Effective communication is essential. Address your volume expectations, delivery timelines, and any specific requirements early on. Being open about your business needs enables suppliers to customize their services to support better.
Purchasing in bulk can lead to cost savings due to volume discounts. However, it comes with the risk of spoilage or tying up cash in inventory that may not be used quickly, especially for perishable items.
Just-in-time purchasing involves ordering only what is needed shortly before use, thereby reducing waste and storage costs. This approach requires excellent supplier reliability and efficient ordering systems.
Many restaurants find that a hybrid approach works best, bulk-buying non-perishables while ordering fresh produce just in time.
Choosing local and seasonal sourcing helps your community and can lower costs while enhancing ingredient freshness. Seasonal fruits and vegetables are typically less expensive and of superior quality because of their abundance and diminished transportation expenses.
For example, using local vegetables during their peak season can lower your food cost percentage while appealing to customers who value fresh, sustainable ingredients.
Next, let's explore effective waste reduction techniques to cut unnecessary losses and boost your bottom line.
Reducing waste is one of the quickest ways to improve cost control in restaurants. Food waste increases expenses and impacts sustainability, a growing concern for consumers today.
By identifying where waste happens and taking proactive steps, restaurants can save money and boost efficiency.
From the walk-in to the prep station, waste happens in several ways. The following are the most common sources:
For example, you ordered too much perishable seafood for a weekend promotion, but it didn't convert as expected. Tracking these patterns regularly, through data rather than guesswork, helps you make smarter decisions about what to stock, when, and in what quantities.
Educating your team about the cost impact of waste fosters a culture of responsibility. Simple habits, such as handling food correctly, storing ingredients properly, and utilizing FIFO (first-in, first-out) methods, help minimize spoilage.
Creative repurposing of leftovers, like using vegetable scraps for stock or day-old bread for croutons, transforms potential waste into valuable items.
Using waste tracking tools or logs allows restaurants to quantify waste and set reduction goals. Some modern software integrates waste tracking with inventory and sales data, providing insights on where losses occur and how to prevent them.
According to the National Restaurant Association, reducing food waste by just every dollar invested in food waste reduction, restaurants can realize approximately $8 of cost savings.
iOrders is a comprehensive digital platform designed specifically for restaurants across Canada and North America. iOrders' Commission-free online ordering feature allows restaurants to better forecast demand and avoid unnecessary over-prep, giving you more control over your bottom line.
With waste minimized, the next step is to utilize technology and automation to streamline operations and further reduce costs.
Technology and automation aren't just conveniences; they're essential tools for keeping costs in check and improving operational efficiency.
The right systems can save time, reduce errors, and provide insights that manual processes simply can't match.
Besides processing payments, modern POS systems help track sales in real-time, connect directly to inventory, and deliver detailed reports on popular items, peak hours, and customer preferences. This data helps you make informed decisions about purchasing, staffing, and menu adjustments.
Integration of POS and inventory systems ensures automatic stock level updates with each sale, reducing manual entry errors and providing accurate, real-time inventory visibility.
Kitchen Display Systems (KDS) replace conventional paper tickets with digital screens, enhancing order flow and fostering better communication between the front and back of house. This minimizes errors, accelerates service, and boosts kitchen productivity.
Automation tools can also manage ordering and invoicing, reducing human error and enabling staff to focus on delivering exceptional customer experiences.
According to PwC, businesses that adopt automation can reduce operational costs by up to 30%, a significant saving for restaurants with tight margins. Let’s see how!
iOrders' all-in-one platform seamlessly integrates with your existing POS, inventory management, and ordering systems, creating efficient workflows that reduce errors and save time.
With technology streamlining your operations, monitoring your financial metrics regularly becomes the next critical step in cost control.
Monitoring your restaurant's financial health is essential for effective cost control. Keeping track of key metrics allows you to see where your money is going, identify problems early, and make informed decisions that keep your business profitable.
Tracking the right KPIs gives you a clear picture of how your restaurant is performing financially. These metrics help pinpoint areas that need attention and guide smart decisions to boost profitability.
Keeping these KPIs on your radar helps you spot trends, make adjustments quickly, and maintain a financially healthy restaurant.
Establishing clear benchmarks based on industry standards and your historical data gives you a target to aim for.
For example, if your food cost percentage is trending above 35%, it's time to analyze inventory, menu pricing, or portion control to bring it down.
Regularly reviewing financial reports with your team fosters accountability and cultivates a culture of continuous improvement.
Periodic cost audits help verify that actual expenses match your records. Variance analysis compares budgeted costs with actual spending, highlighting any discrepancies.
For instance, if your labor cost is higher than budgeted during a slow sales period, you can investigate scheduling or productivity issues.
These practices enable proactive management and avoid surprises at the end of the month.
iOrders provides real-time dashboards and detailed financial reports that make tracking KPIs straightforward and accessible.
By keeping your financial metrics in check, you set the stage for engaging and empowering your staff to participate in cost control, which is the next key focus.
Your team plays a vital role in controlling costs at your restaurant. When employees understand the impact of waste, efficient service, and proper handling, they become active participants in efforts to reduce costs. Engaged and well-trained staff help maintain consistency and boost overall profitability.
Training employees about the importance of cost control builds awareness and accountability. This includes teaching proper portion control, minimizing waste, and handling ingredients carefully. When staff understand how their actions affect the bottom line, they're more likely to follow procedures diligently.
For example, servers who understand the value of upselling high-margin items or kitchen staff who minimize over-prepping can significantly impact your cost structure.
Motivating staff through rewards or recognition programs encourages positive behaviors and attitudes. Offering bonuses for meeting waste reduction targets or maintaining efficient service standards makes cost control a shared goal rather than just management's responsibility.
Simple incentives, such as "Employee of the Month" or team-based challenges focused on reducing breakage, can foster a culture of collaboration.
Encouraging open communication and feedback allows your team to suggest improvements and report inefficiencies. Regular meetings focused on cost control achievements and challenges help keep everyone aligned and informed.
A culture that values continuous learning and problem-solving ensures that cost-saving efforts are sustainable over the long term.
Now let's see how iOrders can help you in cost control with its services.
Managing costs is one of the biggest challenges for restaurant owners. From operational expenses to marketing and delivery fees, keeping expenditures in check is crucial for long-term profitability.
iOrders offers a comprehensive suite of services designed to streamline operations and help restaurants minimize unnecessary costs.
Here's how it can help you in cost control.
Traditional third-party delivery services frequently impose steep commissions, cutting into profit margins.
iOrders’ commission-free online ordering system allows restaurants to accept orders directly from their website or app, eliminating dependence on third-party providers. This approach reduces commission costs and gives restaurants full control over sales and customer interactions.
This eliminates 15% to 30% of the commission fees that restaurants typically pay to third-party platforms.
Many restaurant management solutions come with hidden fees or unpredictable pricing structures that make budgeting difficult.
iOrders operates on a subscription model, where restaurants pay a fixed monthly fee for access to all its features. This transparency helps restaurant owners accurately forecast expenses and avoid unexpected charges. It simplifies budgeting and makes it more predictable, ensuring no surprise costs.
With delivery becoming a key part of a restaurant's operations, managing delivery costs can be a headache.
iOrders' Delivery-as-a-Service enables restaurants to provide delivery without high third-party fees. It integrates with the restaurant's ordering system for efficient, cost-effective delivery management. It reduces the reliance on costly third-party delivery services, optimizing delivery costs.
Marketing can be a significant expense for restaurants, especially when relying on expensive, third-party advertising campaigns.
iOrders' marketing services enable restaurants to run cost-effective campaigns for their audience. With loyalty programs, smart campaigns, and automated promotions, they can enhance customer retention and boost repeat business without overspending.
These streamlined marketing efforts can lead to reduced advertising spend while increasing customer engagement and loyalty.
Customer reviews are vital for attracting new customers, but managing them manually can be time-consuming and inefficient.
iOrders' AI review system helps restaurants collect and respond to reviews, enhancing customer satisfaction without requiring additional staff. It saves time and resources while attracting new clients through positive feedback.
Having a custom-branded mobile app provides restaurants with a direct line to their customers, reducing dependency on third-party platforms.
iOrders' white-label mobile app allows restaurants to deliver a personalized ordering experience without additional app development or maintenance costs. It removes third-party app fees and offers a branded experience at a lower cost.
By integrating these tools, iOrders helps restaurants optimize their operations, reduce overhead costs, and boost profitability.
With an engaged and knowledgeable team, your restaurant is well-positioned to maintain strong cost control. Bringing all these strategies together will empower you to boost your profitability and efficiency.
Effective cost control in restaurants is essential for profitability and long-term success. By mastering strategies like inventory management, menu optimization, labor scheduling, supplier negotiations, and waste reduction, owners can reduce expenses without compromising quality.
iOrders streamlines intricate processes by providing a unified platform for automated inventory management, scheduling, ordering, and financial reporting. This enables restaurant owners to make faster, informed decisions, minimize mistakes, and manage costs effortlessly.
Ready to take control of your restaurant's costs and boost your profits? Explore how iOrders can help you streamline operations and maximize savings today. Get started with iOrders now!
