How to… cut costs, not your profits

01 September 2017 by
How to… cut costs, not your profits

As inflation starts to take ever-greater bites out of the bottom line, Mark Kuperman offers 10 tips to help operators maintain their margin

According to the latest index from the Office for National Statistics, food inflation in the UK hit its highest rate in three years in June. Food and non-alcoholic beverage prices were 2.3% higher than a year earlier, with inflation up from the 2.1% recorded in May. Hospitality operators need to get wise to this major and growing expense, without causing harm to their business. Here are 10 tips for reducing costs.

1. Rethink your menu
It may sound obvious, because it's something operators do every day, but executive chefs need to take a hard look at re-engineering their menus. This isn't about saying goodbye to quality produce, it is about using fewer ingredients more creatively and wisely. Doing this will allow operators to cut costs in a way that will be invisible to their customers.

2. Don't try to be everything to everyone
Streamlining the number of dishes on offer will help to reduce food costs while also improving execution.

3. Do your operational efficiency sums
Chefs should look at the operational impact of specific menu items to see if the way that certain dishes are prepared affects profitability or throughput. Some menu items may be very profitable but slow down service. It's all about understanding where those operational bottlenecks occur.

4. Understand customers' price barriers
There are certain price barriers that consumers are reluctant to cross. Chefs are better off re-engineering portion sizes or the ingredients served with a dish rather than raising prices to levels that may be prohibitive. Multi-site operators should first explore crossing price barriers with their least sensitive dishes in their least sensitive locations.

5. Be unique
If an operator offers burgers or pasta with chicken in a cream sauce, diners are going to have an idea in their minds about what each dish should cost. However, if operators get creative with menu items, using lesser-known ingredients, customers are less likely to have a frame of reference for price, which in turn means they will be less likely to balk at any price increases.

6. Leverage loyalty
Unlike restaurant chains, independent operators have a lot to learn about their customers. Savvy operators need to reach out to their customers through social media or point-of-sale data to provide incentives for repeat visits.

7. Greater efficiency will offset inflation
Operators should turn to technology, not only to deliver that all-important dining experience, but also to get ahead of the competition in terms of increased efficiencies. The beauty of technology is that it seamlessly steps in as a silent partner to take care of the customer journey, leaving staff to deliver on the experience.

8. Keep price changes small and often
For many operators, rising costs will have to be passed on as higher prices. This is much easier for customers to swallow if it is done in small increments over time.

9. Change your hours of operation
A restaurant open for breakfast, lunch and dinner may not need to be open between 3pm and 5pm. That gives operators room to fine-tune their opening hours and, in turn, their staffing requirements. This is where independent restaurants can reap the benefits of flexibility.

10. Don't reduce staff
There's a saying in the industry: food brings them in, and service drives them out. It's important to remember that cutting back on service is not the answer.

Mark Kuperman is chief operating officer at Revenue Management Solutions

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