Compeat’s Guide to Reducing Variable Costs in your Operation – Part 4

This guide will discuss the foundational practices that need to be in place to track and lower food, labor, and overhead costs.

Part 4: Reducing Overhead Costs

Your overhead costs are the costs that are not food or labor. They can include costs such as rent, utilities, linens, etc.

There are some overhead costs that are not controllable. But since the restaurant business is such a low margin industry, you need to shave pennies everywhere that you can, so it is important to question every line item in your budget.

Renegotiating contract rates for rent, insurance, and suppliers can cut your overhead costs. There are many other small, creative ways to control “uncontrollable” costs at a manager level. These small changes can add up to big savings. Here are a few areas to consider:

Electricity. Running the daily lighting, air conditioning/heating, and equipment can rack up huge electricity bills. If you are not already on an automatic timer system, implement a start/stop plan for lights and appliances. Your openers may arrive two hours before the restaurant opens, but that doesn’t mean that you have to turn everything on at that time. Make sure that you are only powering on the equipment that you need, when you need it. Additionally, when possible turn off equipment when it is idle. Idle equipment still costs money if it is turned on. Does your bar stay open until 2AM but you stop serving food at midnight? Make sure your employees know which pieces of equipment should be turned off by what time.

Check with your electric company about how to save money. Believe it or not, they actually want to work with you on how to reduce your energy consumption. Most major companies have guides available online on how you can lower your commercial energy costs. Many even have guides specific to restaurants available. Call and see if you they will send someone to your site and give you very specific tips based on your operation. The same is true with your water. The restaurant business accounts for 15% of all US water consumption, making the water utility companies eager to help with conservation programs and in some cases even offer incentives.

Linens. Now this may seem petty but locking up your linens can be a real money saver. If employees have unlimited access to linens, they will use as much as they see necessary without regard to costs. Introduce a system where you divide up your linens based on shifts upon receipt of the shipment. Then wait staff and kitchen employees can be handed an apron and a certain number of towels at the beginning of their shift. They must have manager issue additional linens should they need them. This not only reduces usage; it helps you order better next time because you have threshold count and are aware of exactly what is being used.

Smallwares. Smallwares are any of the small items that a restaurant need that are not equipment and cost less than $500. This category includes glasses, eating utensils, dishware, pots and pans, utensils, etc. This is a major purchase when a restaurant opens but there needs to be a line item in the monthly budget for replacing lost, stolen, or worn smallwares.

If you feel that you are spending too much on smallwares, this could be a place to control costs. Employees often don’t think about how quickly these small costs can add up. How many knives/forks/spoons are being tossed out daily? How many broken glasses do you replace each month? Whether this is intentional or not it is worth training employees of the proper handling of these items.

Almost every expense can be controlled at some level. Even the smallest savings add up to make a difference to your bottom line. As Benjamin Franklin once said: “Beware of little expenses. A small leak will sink a great ship.”

Download the Full Guide Here.

Read also:

Restaurant Guide to Menu Engineering

Restaurant Fraud Prevention Checklist

Complete Guide to Running a Restaurant