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Tips on how to combat historical inflation for restaurant owners

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The hospitality industry has never been for the faint-hearted. It takes determination and grit to make it in such a competitive industry, but even with that the profit margins are getting smaller and smaller following significant inflation on the increase globally. The rise has been driven in part by pent-up consumer demand after the pandemic with no clear end in sight.

In a recent survey conducted by Deliveroo, it was reported two-thirds of Australian restaurant owners have jacked up prices to counter rising meat and vegetable costs which have impacted their bottom line. A further 4 in 10 hospitality businesses reworked their menus to save money – and the same number shed staff.

The grim outlook is in the HospoVitality biannual survey by Deliveroo, which surveys 10,000 restaurant owners across the country to evaluate how they were doing on a range of topics like staff, produce and business prospect. The survey carried out between May 23 – June 16 found the coming 6 months will be make or break for many. Respondents cited rising produce costs (85%), rents (75%), staff salaries (75%) and energy bills (67%) as their greatest concerns.

Already this year the survey showed 66% of restaurants had hiked up prices to counter increasing meat, vegetable and fruit costs. As a restaurant owner, you’re undoubtably seeing the impact of these variables on your profit and loss. Raising your prices might be inevitable, but it’s not a long-term tactic you should depend on because it can drive away customers. Below you’ll find a series of tips to cut costs and increase profits without messing with the quality of your food and service.

OK, that’s the bad news out of the way. Here we explore some way to combat the impact on your hospitality business…

Reduce food waste

Food costs account for around 35% of most restaurants’ total costs. If you’re not on top of monitoring inventory, a big chunk of your budget is at risk. Don’t just count your inventory, dig into the numbers and understand where you’re losing money because of waste or over-portioning.

There are a ton of apps out there that can help you with inventory management by eliminating the need for manual counting. Food waste doesn’t just happen at the back-of-the-house either. If you notice your customers aren’t finishing their dishes, look into whether the kitchen needs to decrease portion sizes.

One fun way to combat food waste is to get creative with your recipes by making sure they’re optimized to use as much of your ingredients as possible — you’d be surprised how delicious roasted potato peels are…

Make creative ingredient substitutions

Almost 75% of restaurant managers report food costs as one of their biggest challenges.

If you can relate, it’s time to take a closer look at your inventory costs. Is there an ingredient you use a lot that’s seriously cutting into your bottom line? Maybe one of your bestselling dishes is great at bringing in revenue but it includes a pricey ingredient that’s impacting your profit.

Explore ways you can swap that ingredient for something less expensive and calculate how much you’ll save. Then figure out how you can do the swap in a creative way that maintains demand for the dish. Maybe Margarita Mondays feature a lemony twist on the classic or your signature salad comes topped with dried chickpeas instead of almonds.

Do a proper menu audit

To do this properly, you’ll have to take a good look at your menu and know the profit you make on each dish (or do a little math to figure it out). Segment your items into four groups and make some adjustments based on their performance:

1. High profitability and high popularity – People love these and you’re making money on them. How can you better highlight and promote these items

2. Low profitability and high popularity – People love these, but they’re costing you. Can you experiment with different ingredients or cut down on portion size.

3. High profitability and low popularity – Try and understand why these items don’t appeal to people. Is it the price, is it how you’ve positioned them? Can you change that by making them a weekly special or promoting them in a different way?

4. Low profitability and low popularity – If no one likes them and they aren’t making you money, take them off the menu. If you’re not ready to make the cut, try increasing demand by adding them to a limited-time seasonal menu. Or, at the very least, do a menu audit to make sure you’re not overstocking ingredients for a dish you rarely serve.

Get online ordering (if you haven’t already)

Just because wages have gone up doesn’t mean you should get rid of half your serving staff, but offering take-out is a great way to sell more without having to increase server labour costs. There are some great online ordering platforms that don’t take a percentage of your sales and allow you to retain existing staff for deliveries

With the rise of Uber Eats, Deliveroo, DoorDash, and the list goes on, ordering online is one of the most popular ways people interact with restaurants. Offering online orders can expand your customer base with relatively low investment: a point of sale system to process the transactions (keeping online and in-person orders separate is important) and a kitchen to keep up with demand.

Re-think your payments provider

When was the last time you took a look at your payment provider? This ever-growing space has become fiercely competitive post-pandemic and it’s time to pay more than lip-service to payment innovation. Before COVID, the industry was predominantly cash-based. Many brands were reluctant to invest in innovative payments and data-commerce ahead of the curve. This meant that they lagged behind other sectors in terms of integrating physical, digital, and mobile channels and updating their payment systems.

Look for a point of sale (POS) and payments provider in one to save on ongoing support and software fees. New payment methods and strategies have reshaped customer-interactions and created new expectations in terms of speed and convenience. They are also allowing restaurants to capture even more data at the sales point and to feed this back into the business to enrich CRM and loyalty applications.

So there you have it. Some simple but very effective ways for you to maintain your restaurant’s profitability as costs rise. Along with these tips, it’s important to constantly evaluate your strategy, re-evaluate partners, and ask if you’re staying relevant, if your diners are coming back, and above all if you’re creating a great food experience that puts your customers first.