Labor costs and cost of goods (CoGS) are necessary expenses for restaurant owners to run and maintain business operations. It is crucial to optimize and sustain these costs and ensure they don’t affect your profits. Your restaurant’s back-of-house (BOH) is an important area of operations, which does not interact with your customers.
BOH usually includes the break rooms, kitchen, offices, storage areas, inventory areas, etc., which are not visible to your customers or guests. Managers, kitchen staff, line cooks, chefs, stocking management workforce, inventory management staff work in these areas and ensure everything goes smoothly. Read on!
How to Optimize Labor Costs and CoGS
Labor costs and CoGS are some of the most significant expenses for restaurant owners in the United States. It includes the amount of money restaurant owners spend on food supplies, ingredients, other goods, and labor required for operations. In addition, labor and CoGS are the highest variable costs, and it is crucial to managing them properly using the tools that align with your business.
Calculating, analyzing, and understanding these costs can help you visualize the amount of money that goes into your goods or items. Experts recommend achieving the goal of visibility and control over labor and CoGS to make informed decisions and generate higher returns on investments (ROIs). There are many ways to reduce labor costs:
- Control staff attrition rate
- Work on the salary structure
- Cross-train your team
- Invest in hiring the right staff
- Review performance
- Invest in automation technology (KEXY)
Here are a few key performance indicators (KPIs) you should focus on to optimize labor costs and CoGS.
Optimize the Goods
Analyze the list of goods you need for your restaurant operations and establish a solid plan to cut certain items. For example, some restaurants offer food items that usually go unnoticed and become waste, leading to draining your wallet continuously.
In that case, we recommend restaurant owners rank the goods and items by volume and calculate ingredients that go into each menu item and dish. Likewise, you must categorize menu items. For instance, separate the most popular and profitable menu items and make sure you offer them as specials to your guests.
Similarly, separate high-demand menu items that don’t contribute much to your profits. We suggest raising the price of these menu items over time to control costs. Some items have high-profit margins, but they are not very popular. So, put a question mark on these items and use visual elements, such as photos, to bring attention to them.
On the other hand, certain items are neither in high demand nor profitable for your restaurant. If you want to optimize the cost of these items, make sure you promote them or remove them from the menu entirely. A quality food and beverage inventory software like KEXY can help you optimize these operations.
Count Inventory Regularly
If you want to identify and control instances of theft, waste, and other issues, we recommend counting your inventory regularly. Research shows that restaurants’ food is wasted even before the staff serves it. Therefore, identifying waste events is essential to control the costs of goods.
When you schedule and count your inventory, you can make things more visible and control the costs of goods. Remember, inventory is the most critical BOH KPI that you need to optimize. Otherwise, you will suffer the consequences.
Using sophisticated and customized inventory management software like KEXY gives you valuable insights into your restaurant inventories. The software gives you real-time alerts when inventory items run low.
The cloud-based software with cutting-edge technology also allows you to keep track of waste events from a remote location using your smartphone. Therefore, it is wise to invest in this food and beverage inventory software.
Negotiate with Suppliers
If you want to streamline the cost of goods and optimize your menu items, make sure you reduce portions. Order a few ingredients while reducing portions from your suppliers. Analyze the type of ingredients you order and negotiate their prices with suppliers.
Ensure you do the negotiations before placing the order to get the best prices for the items you need. Remember, it is a daunting and time-consuming task to find the best prices for goods, but making efforts to get the job done will increase your bottom line.
During the negotiations, ask the suppliers to price match your competitors. Likewise, customize your payment schedule and ensure the order level is minimum. Many suppliers in the U.S offer support and help to restaurants during the Covid-19 pandemic. Therefore, you must ask your suppliers if they provide the same quality for a lower price.
Invest in a Quality Software
A recent research report shows that 37% of restaurant owners planned to reduce labor costs using restaurant software. Restaurant operators can increase efficiency and boost the speed of service using labor-saving technology.
Remember, you must choose a software system that integrates with other systems in your restaurants, such as POS system, inventory control system, and food prep. KEXY is a food inventory system that offers a wide range of features, including staff management.
When you adequately manage your restaurant staff, you can optimize the labor costs. Investing in such software frees up your managers’ and staff’s time to work on other crucial business areas. KEXY is a state-of-the-art and customizable solution for restaurants to:
- Reduce time spent on tasks like inventory management or placing orders
- Reallocate the labor budget to other business areas
- Streamline important business operations to reduce labor costs
KEXY can help you save time and money, allowing you to efficiently minimize your labor costs and CoGS. If you want to optimize these operations, make sure you use software like KEXY, one of the best inventory solutions available on the market.
Controlling or optimizing labor costs and CoGS is often challenging for restaurant operators, leading to complications, wasted goods, reduced productivity, increased costs, lower sales, and decreased ROIs. That’s why we recommend tracking data and gaining insights into your business operations to boost efficiency and increase profits.
However, this is impossible if you fail to invest in a food inventory system or food and beverage inventory software like KEXY. It is a cloud-based system that offers a wide range of features and tools, such as real-time inventory control, financial reporting, scheduling, accounting, and other features.