How to improve food costs in your restaurant: 5 simple but effective strategies

Every restaurant owner is looking for a way to cut costs and increase profits — but knowing exactly how to cut costs is easier said than done. 

You’re juggling staff wages, operating expenses, and supplier costs  — all of which are subject to fluctuations that are outside of your control. Navigating all this can feel like a minefield. 🤯

So let’s go right down to the basics: food cost control. 

When done well, food cost control helps you track what you're spending, what your profits are, and where you can cut costs. As a result, you can improve your spending and boost your profit margins.

If you want to find out more about food cost control, keep reading. By the end of this article, you’ll understand what food cost control is, how to monitor food costs, and how to use the process to cut costs in your kitchen. 

What is food cost control?

Food cost control (or food costing) is the ongoing process of tracking and managing your food and beverage expenses. The aim is to optimise spending to increase profits. 

The tricky part comes with making sure the cost of ingredients aligns with your budget, but doesn’t impact food quality. It’s great to cut costs and save money — but you don’t want that to come at the price of customer satisfaction.

After all, if your customers don’t enjoy their experience, they might not come back.

Food costing is an ongoing process. Things change constantly in hospitality — food costs, your menu, your diners. So, if you want to control your food costs as effectively as possible, you need to keep on top of any changes. How to calculate your overall food cost percentage Your food cost percentage is the value of your food costs against your revenue, shown as a percentage. To calculate it, you divide your total food costs by your food sales. Here’s how it works:

(Cost of Goods Sold/Revenue)*100 = Food Cost Percentage

Let’s add some figures to this calculation:

(£2,000/£10,000)*100 = 20%

This calculation shows that you’re spending 20% of your revenue on food costs. Not bad!

You can also use this calculation to work out the food cost percentage for each dish.

Imagine that you have chicken tikka masala on your menu, priced at £12. Here’s the cost of ingredients for this dish:  

1 chicken breast: £1.801 tablespoon of sunflower oil: £0.05¼ onion: £0.15¼ garlic clove: £0:101 teaspoon of ginger: £0:081 tablespoon tikka spice paste: £0:30100g chopped tomatoes: £0:1250g Greek yoghurt: £0:2010g coriander: £0.0450g basmati rice: £0:40

The total cost of this dish is £3.24. So, the food cost percentage for this dish would be:

(£3.24/£12)*100 = 27%

With this information, you can figure out which dishes have a higher cost percentage. This means you can identify your most profitable dishes, and pinpoint where you could make adjustments to reduce costs.

How to calculate your ideal food cost percentage

Your ideal food cost percentage depends on several factors, which vary from kitchen to kitchen. Your supplier costs, operating expenses, location, hours of operation — it can all influence your benchmark for success.

What we’re trying to say is that there’s no perfect food cost percentage that applies to all restaurants. 

But if you want to figure out what your ideal percentage is, start by identifying your current percentage. Then, ask yourself if there’s any room for improvement. This is a good starting point to identify your ideal percentage, but to keep it both realistic and achievable. 

You’ll also need to consider other costs like staff wages, operating expenses, and anything else you need to pay to keep your restaurant running. 

All of these costs will influence your ideal food cost percentage, because you need to make enough revenue to cover these payments and still make a profit. The higher your outgoing costs, the lower your ideal cost percentage will be. 

5 effective restaurant cost reduction strategies 

Let’s take a look at some of the ways to cut food costs in your restaurant. 

1. Launch a virtual brand

A virtual brand is a restaurant that operates exclusively online from your existing kitchen. You create a new menu — complete with a restaurant brand and identity — and prepare food for delivery, which customers order through third-party apps like Deliveroo and Uber Eats. 

It’s a great way to maximise your capacity and increase your income without forking out a lot of upfront costs. You don’t need to lease new premises, buy new equipment, or hire new staff to start running a virtual kitchen! 

But how does it help you cut costs? 

Let’s find out: 

• Better utilise your ingredients. With a virtual kitchen, you can make better use of your ingredients. Imagine that you’re running an Italian restaurant, and you launch a pizza virtual brand. You can use some of the same ingredients (tomatoes, cheese, flour) across both menus. This also means you can buy more items in bulk, which brings your food cost percentage down. 

• Reduce food waste. By better utilising your ingredients, you can minimise your food waste. Think about it — a virtual kitchen helps you use more of your ingredients instead of throwing them away. This means you’re actually using the food items you pay for, and making money from them in the process.

Find out more about launching a virtual brand, or get in touch with the team at Peckwater Brands (that’s us — hi 👋) to see how we can make the process easier. 

2. Track and manage inventory

Inventory management involves tracking your ingredients — and it’s crucial to cutting food costs.

It shows you what ingredients you have, how much they cost, how often they’re replenished, and how much goes to waste. All this information gives you a clear picture of your food costs.  

So how exactly do you track your inventory?

One of the best ways is to use an inventory management system.

This could be a software solution, or an inventory management module within your point-of-sale (POS) system. With a central system to manage your inventory data, you can easily review costs and make informed decisions to save money.

Plus, with a centralised system, you can keep track of inventory in real-time. This means you only order new food items when you actually need them, preventing you from spending money on unnecessary items.

Plus, with a centralised system, you can keep track of inventory in real-time. This means you only order new food items when you actually need them, preventing you from spending money on unnecessary items.

3. Price your food items effectively

Underpricing your food is a surefire way to reduce your revenue, decrease your profit margins, and increase your food cost percentage

And when your food cost percentage goes up, your cost-cutting efforts go down. 

Here are some of the ways to ensure you price your menu items as effectively as possible: 

• Review the cost of each meal. Start by working out the cost of each meal, similarly to how you’d work out the food cost percentage. Break down the ingredients, the measurements, and work out the cost of each item. Then, you can make sure you price your meals to cover all of these costs and still make a profit. 

• Consider your outgoing costs and expenses. The revenue you make from your food helps you pay all your outgoing costs, like staff wages and operating expenses. So, you need to ensure that your menu prices generate enough revenue to cover these costs. Figure out all your outgoing costs and how much revenue you need to hit all these payments to make sure you generate enough money to cover these costs. 

• Track your food cost percentage. You can also track your food cost percentage to ensure you’re pricing your menu items as effectively as possible. It shows you if you’re pricing your meals too low, or if you’re paying too much for ingredients. That way, you can make changes to bring costs down. For example, if your ideal food cost percentage is 30% but you’re currently hitting 35%, you can return to the drawing board and review your menu pricing. 

4. Use portion control 

Portion control is a great way to keep your costs in check. It prevents you from over-serving your customers, making sure you don’t serve too much food and helping you spread your ingredients across as many different plates as possible.

Portion control is a great way to keep your costs in check. It prevents you from over-serving your customers, making sure you don’t serve too much food and helping you spread your ingredients across as many different plates as possible. 

It also helps you track your costs better. When you know how much you’re serving, you can work out your total cost per dish (and an accurate food cost percentage). 

Here are some tips for using portion control in your restaurant: 

• Emphasise the importance of accuracy. Ensure that everyone understands the importance of consistency and accuracy in portioning food. This will help you and your team avoid both over-portioning (and under-portioning, too). 

• Standardise your recipes. Create clear, concise, and standardised recipes for your kitchen staff. That way, everyone’s following the same steps and measurements to ensure consistency across all your food. 

• Use measuring tools. An obvious point to make, but important nonetheless. Make sure all your chefs use measuring tools when preparing and plating food. This will ensure that all your portion sizes are accurate and prevent over-plating. 

5. Control labour costs by reducing employee turnover

Let’s not beat around the bush — turnover rates are high in hospitality.

Studies have found that 5.7% of the entire hospitality workforce left in June 2022. Plus, some of the largest issues for hospitality owners are hiring new staff (23%) and staff retention (11%).

But hiring and onboarding new staff can be expensive.

CIPD estimates that the cost of hiring senior managers is £3,000, and £1,500 for other employees. The same study also found that retaining talent is becoming harder for employees.

So what can you do to reduce staff turnover and keep recruitment costs down?

Let’s take a look: 

• Create a positive work environment. Creating a positive and inclusive work environment is a great way to boost employee morale and motivation — both of which can help with retention. Make employees feel valued and supported, encourage open communication, and address concerns promptly. 

• Recognise and reward hard work. Use employee recognition programs to acknowledge and reward employees when they do a good job. This could include employee of the month awards, bonuses, or other incentives. It shows that you value their hard work and that they play an important role in the business. 

• Provide flexible scheduling. Did you know that 24% of employees switch roles for a better work–life balance? By providing flexibility with your scheduling, you allow staff to better manage their lifestyle and get a good work-life balance. This means allowing them to change their schedules, choose shift preferences, and swap shifts with other staff. 

Maximise capacity and increase profits with a virtual brand 

There are a lot of different ways to manage food costs and reduce spending in a professional kitchen. From managing your inventory in real-time to adopting a virtual brand — anything you can do to bring your costs down is good for business. 

If you want to find out more about running a virtual brand, book a chat with us. We can help you start your own virtual restaurant, from managing the logistics and marketing to finding a brand that appeals to customers in your local area. 

So what are you waiting for? Let’s start boosting your income!