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Five Simple Ways to Cut Costs

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1. Renegotiate Rent Terms

While you may be hit hard by declining food and beverage sales, it’s important to remember that the recession isn’t industry-specific. And now may be an ideal time to seek rent relief from your landlord.

In the U.S., many operators have already sought it and got it. Some are seeing as much as double digit rent reductions. Plus, more deals are being cut for rents based on a percentage of sales, reduced or eliminated common-area maintenance fees and additional time to make payments.

Whether landlords are concerned, compassionate or just afraid replacement tenants will be hard to come by in these uncertain economic times is moot.

It may be the simplest way to cut fixed costs.

However, if operators want to negotiate with their landlords, sharing as much financial information as possible is a good idea. It will allow your landlord to see why you need a reduction and prove you operate a viable business.

2. Tighten Up That Staff Meal Policy

If employee meals are recorded correctly, they are a cost of doing business and normally tax deductable, as a payroll-related expense, says Mike Walmsley of Cobalt Hospitality Consulting.

If you don’t record them, they are a hit to the bottom line,” he says. “You have no control, no idea of what’s been eaten and no way to monitor the situation.

It doesn’t need to be over-controlled, but you should have some idea of what the potential is to your food cost.

Here’s a policy to consider. For each shift, staff is permitted to select a limited number of items off the regular menu. These meals are recorded and the cost is credited to the food cost and a debit to the payroll costs. It’s basically transferring the cost from one place to another, but it’s accounted for and you can see the impact to the overall food cost.

“I have seen staff meals in large operations account for over 1.5 per cent of the food cost,” he says. “This is a huge number and I would want to have some accounting for it.”

Another option is to have one set staff meal made each day by the kitchen for all staff members. What’s used is recorded and like the first example, it is credited to the food cost.

As for the numbers, if your food cost was $45,000 a month, and unaccounted for staff food consumption was two per cent, that means $900 per month or $10,800 per year is unaccounted for, says Walmsley.

3. Keep Tabs On Your Product

If you don’t have a system in place to keep shrinkage and theft under control, it’s time to think about getting one.

“Restaurant and bar owners have been losing at least 20 per cent of their revenue due to slippage, collusion, and/or theft for decades. These substantial losses could result in many business failures. There are legacy beverage control systems out there, and although legacy systems control the pour, they could impact the guests’ experience also by slowing down service,” says Kelli Rain, vice-president of business development, Bevchek Global Systems, Inc.

Detailed point-of-sale systems that keep drink-making dummy-proof and record what types of alcohol are being poured will help you keep track of what, how and the amount of your product being used.

Hiring a third party to do internal audits and pinpoint the problems is another option.

Meanwhile, if insurance discounts are something you’re interested in, consider installing a security system with cameras, as it’ll lower your insurance premiums.

4. Cut a Deal With Your Supplier

If you’re hurting for business, so too are your suppliers. Opt for a strategic alliance, which may require you to sign a long-term contract at a reduced price, says Walmsley.

However, it will help keep your financials healthy today.

There may also be benefits to your business by going with one larger prime vendor (and a few small suppliers) as opposed to only small suppliers.

Some of the benefits suggested are lower “overall” prices, less bookkeeping, better service and more attention (because you’re a larger client), greater product consistency, less management time in purchasing and easier purchasing via electronic means.

5. Only Order What You Need

If you think ordering large bulk orders will save you money in the long-run because the price is slightly less, you’re mistaken, says Jim Laube, president of restaurantowner.com.

The problem with that thinking is that if you purchase more product, you’re likely to use and waste more. Think of it this way – if you have $20 in your wallet, you’re more likely to buy that extra coffee and muffin in the morning, than if you only had enough spare change to catch the bus home after work.

The same is true for excess product. If you’ve got a storage room full of product, kitchen staff will be less careful with their prep and wastage, says Laube.

By ordering only what you need, it will encourage kitchen staff to stretch the product further. In addition, investing in a large bulk order is the equivalent of putting your money in the storage room, allowing it to rot, be misused, or worse yet, stolen, he says. Keep your money in the bank until you need it. Only order enough product to get you to your next supply shipment.

Article courtesy of Liquor Canada Magazine