Controlling costs means optimizing profit. In the restaurant industry, finding the balance between providing superior quality food and keeping costs in line can be challenging. The price of food can fluctuate significantly from month to month. Customer demand, changes in economic pressures, and seasonal factors all can make it difficult to control costs. But why is cost control necessary in a restaurant beyond profitability?
Cost control impacts profits, but it can also play a role in enhancing efficiency, stability, and adaptability. When you work with a restaurant management consulting team, you’ll learn the specific strategies available to help you optimize costs clearly. Here is why cost control matters.
Cost Control Directly Impacts Profits
Higher costs impact your business’s bottom line. The more you can control and maintain your expenses, the higher your profit margins increase. Your business cannot survive long-term without a healthy profit margin.
Cost Control Supports Long-Term Financial Stability
Meeting monthly financial obligations is always important. However, cost control also impacts your restaurant’s ability to:
Make payments to vendors on time
Keep employees paid
Meet supplier requirements
Pay the rent on the building (and pay yourself!)
Maintain positive cash flow to support emergency needs or unexpected costs
Each of these relationships and areas of need is critical to build over time. Without positive cash flow, you may end up borrowing. That means expensive interest rates could further impact profitability.
Effective Cost Control Ensures Efficiency
Sometimes, the best reason to invest time in cost control is to ensure you’re not wasting money. Even if cash flow is fantastic and profit margins are in line, operational efficiency remains a critical factor in building your business. Why spend more than needed? Consider:
Improved product management reduces waste, which in turn protects the environment and results in fewer calls to pick up trash.
Ensuring proper cost control keeps inventory optimized. That streamlines operations, making sure you don’t run out of what you need or spend money to throw product out that spoils.
Portion control keeps costs in line, but also keeps customers happy. If a customer comes in one day and receives twice the portion they expect, they should expect that every time. That can impact customer satisfaction even if the expected portion size is ample.
Operational efficiency is also a factor in your restaurant’s reputation. Consumers increasingly want to work with companies that are cognizant of their role in minimizing waste and being effective in managing energy costs.
Cost Control Helps You Make Better Decisions
Information is one of the most powerful factors in building your business. Cost control insight enables you to make informed decisions about some of the most critical aspects of your business.
With cost control data, you know how well your business is performing each month and year-over-year. This allows you to make decisions such as:
Should you hire? Is your business actually growing faster than you realize? It could be if you optimize profits.
Which menu items are profit makers and which are costing you too much?
How well do your prices represent the actual income and profit margin you need to make? If your costs creep up and you raise prices, the direct outcome is driving customers away.
Are you working with the most cost-effective suppliers and vendors?
Should you make decisions about upgrading equipment to reduce costs or provide a better level of service for the customer?
Throughout each day, you will make big and small decisions that impact profitability. That could be on what dishes you plan for next season or whether you hire another cook.
Cost Control Helps You Adapt
Think long-term. Market conditions change. Your customer base is also likely to change over the years. You may have seen new trends pop up that you want to take advantage of to bring customers in. If you have a good level of cost control in place, you can make those decisions with confidence.
Being able to adapt to changing conditions in the restaurant industry is a part of doing business. Consumer behaviors, demands, and preferences will change, even slightly. You need to know how those changes are impacting your bottom line before they hurt it.
How Restaurant Consulting Makes a Difference
Prix Fixe Accounting provides you with the tools to manage your costs efficiently. With our services, we ensure you can consistently grow your business. Contact us to learn how you can enhance cost control.