To Keep Menu Prices From Rising, Some Restaurants Look For Ways To Cut Costs
Like any business, restaurants are always raising prices, but according to recent Consumer Price Index data, dining out has been growing five times faster than inflation.
There are a lot of reasons for climbing menu prices. For one, some restaurants have been doing away with tipping, which has naturally led to a price increase on menu items, generally around 15 to 18 percent, around the amount consumers have been asked to offer up. (Which means that if you were always a big tipper, you could come out ahead.) Rising food costs have also forced restaurant owners to raise prices. And as BurgerBusiness.com reported a couple months ago, some restaurants, due to fewer customers, have raised prices to make up for the lost income. That strategy may be helpful for now, but it doesn’t seem like a strategy that can continue indefinitely, since even higher prices will likely only drive more customers away.
So some restaurants naturally try and cut costs where they can, to avoid raising prices, for at least the time being. Last month, I wrote about how some restaurants will sometimes eliminate a small food item to save big money, but there are other creative ways eateries can trim their costs without getting rid of the actual menu. Here are three cost-cutting strategies that some experts are suggesting to restaurants.
Eliminating overcharging from suppliers. It’s easier than you might think to be overcharged, says Steve Daren, president of Buyers Edge, a company based out of New London, Connecticut, which helps restaurants track and verify that they’re paying the best prices on food invoices.
According to Daren, “We’ve found 35 percent of restaurant invoices from food distributors have at least one overcharge on them.”
That may sound crazy at first, at least to anyone who isn’t running a restaurant, bar or food service business. There can’t be all that many errors in bills from suppliers. How difficult is it to bill someone for food that you’re selling?
Apparently, pretty difficult. As Daren points out, “with food prices fluctuating daily and contracts varying from restaurant to restaurant, it is very easy for mistakes to happen.” He says that a lot of restaurant owners don’t notice they’re being overcharged because the owners don’t have time to pore over every single invoice, and sometimes the overcharges are really small, “a few pennies here and there,” Daren says.
But if you’re charged a few pennies more than you should be, for weeks, “the overcharge can add up to a significant amount of money,” he says. “Our analysis found that typical overcharges amount to about one percent of the total dollar amount of each invoice. One percent may not seem like a lot. But for a restaurant owner facing pressure from the increased cost of labor, facilities, equipment, and volatile food pricing, one percent every week of every month of every year adds up to a significant amount.”
On that note, are you paying your bills online? Your odds of not noticing a mistake have just gone up, says Dan Schneider, CEO and founder of SIB Fixed Cost Reduction, headquartered in Charleston, South Carolina, an expense management firm that specializes looking for ways for restaurants to save on bills.
“We’ve found that restaurants that handle their bills online are less likely to thoroughly scrutinize them for mistakes,” Schneider says. “When receiving and paying the bill is as simple as a couple mouse clicks, the particulars of the invoice often get overlooked. When someone has to take the time to open an envelope and review the bill by hand, we find that they are much more likely to scrutinize it more.”
That arguably is something all business owners and homeowners should think about.
Overspending on the Internet. Yeah, it’s nice for customers to be able to check your email on their phone while you wait for your order, and you’d hear from them, if they couldn’t, but many restaurants are paying for more Internet than they need, Schneider says.
“Many restaurant owners throw money away by picking plans that have lightning fast upload and download speeds, when they could most likely get away with paying less for slightly slower speeds,” Schneider says. “Unless everyone in the restaurant is watching Netflix or playing video games on their phones at the same time, there’s really no need for super high speeds and bandwidth.”
Ordering too much, or not thinking the order through. Restaurants waste a lot of food, and I mean, a lot. In California alone (and these numbers are from 2010, so maybe things are better… or worse), 1.5 million tons of perfectly good food are tossed in the trash, according to Integrated Waste Management Board. But even discounting that a restaurant might be ordering too much food and then having to throw it out, you might be ordering over-sized food items that you don’t really need.
“Lemons are a perfect example,” says John Davie, president of a restaurant buying group, Dining Alliance, a Waltham, Massachusetts-based company that helps more than 18,000 independent restaurants save money on everything from tomatoes to tablecloths.
“Restaurants order lemon wedges by the case-full, primarily to act as a garnish for tea or other beverages,” Davie says. “But far too often restaurants are wasting money on lemon wedges that are way too big. Guests don’t need an enormous wedge on the side of their iced tea glass to be happy. A smaller wedge will look just as nice. We’ve found that dropping in size from lemons that come 115 in a case to lemons that come 165 in a case can save restaurants 29 percent.”