Restopro.uk - Mastering Restaurant Expenses

The Anatomy of Restaurant Expenses

Restaurant costs typically fall into four main categories, each requiring different management strategies. Controlling these expenses is what separates thriving establishments from struggling ones.

Food Costs 28-35% of food revenue

Beverage Costs 20-25% of beverage revenue

Labor Costs 25-35% of total revenue

Other Operating Costs 15-25% of total revenue

Prime Cost (food + beverage + labor) should typically represent 55-65% of total revenue in a healthy restaurant operation.

Cost Category Deep Dive

Food Cost Management

Target: 28-35% of food sales

Key Control Points:

Recipe standardization and portion control
Inventory rotation (FIFO system)
Weekly food cost calculations
Supplier price comparisons
Waste tracking and reduction

Red Flags: Food cost exceeding 35%, inconsistent portion sizes, high waste percentages

Beverage Cost Control

Target: 20-25% of beverage sales

Key Control Points:

Standardized pour sizes with measured tools
Regular inventory audits (especially liquor)
Bottle tracking for premium spirits
Happy hour profitability analysis
Theft prevention measures

Red Flags: Beverage cost exceeding 30%, inconsistent drink quality, missing inventory

Labor Cost Optimization

Target: 25-35% of total revenue

Key Control Points:

Sales forecasting for scheduling
Cross-training staff for flexibility
Overtime monitoring and control
Productivity benchmarks (covers/server)
Turnover reduction strategies

Red Flags: Labor cost exceeding 35%, frequent overtime, low covers per labor hour

Other Operating Expenses

Target: 15-25% of total revenue

Key Categories:

Rent/Lease: 5-10% of sales
Utilities: 2-4% of sales
Marketing: 3-5% of sales
Repairs/Maintenance: 1-3% of sales
Administrative: 1-2% of sales

Red Flags: Any category growing faster than revenue

Cost Control Strategies

Proactive approaches to manage each expense category:

Food Cost Strategies

Menu Engineering: Highlight high-profit items and adjust portion sizes on low-margin dishes
Seasonal Purchasing: Build menus around what's in season and plentiful
Waste Tracking: Implement a waste log to identify problem areas
Inventory Management: Use the PAR (periodic automatic replacement) system

Beverage Cost Strategies

Pour Control: Use measured pour spouts and jiggers
Menu Design: Feature high-margin cocktails and wines
Inventory Control: Conduct surprise liquor counts
Supplier Negotiation: Leverage volume discounts

Labor Cost Strategies

Scheduling Software: Match labor to forecasted demand
Cross-Training: Develop flexible staff who can work multiple positions
Performance Incentives: Reward productivity and upsell success
Turnover Reduction: Invest in staff development and retention

Operating Cost Strategies

Energy Efficiency: LED lighting, ENERGY STAR equipment
Preventive Maintenance: Regular equipment servicing
Vendor Audits: Review all recurring services annually
Technology Adoption: POS systems that reduce administrative work

Remember: Cost control isn't about cutting corners—it's about eliminating waste and inefficiency while maintaining quality standards.

The Cost-Percentage Mindset

Successful restaurateurs think in percentages, not just absolute numbers:

Why Percentages Matter

Allow comparison across different sales volumes
Help identify trends over time
Provide industry benchmarking capability
Enable menu price adjustments based on cost changes

Key Percentage Formulas

Food Cost %: (Cost of Food Sold / Food Revenue) × 100
Beverage Cost %: (Cost of Beverage Sold / Beverage Revenue) × 100
Labor Cost %: (Total Labor Cost / Total Revenue) × 100
Prime Cost %: (Food Cost + Beverage Cost + Labor Cost) / Total Revenue × 100

Track these percentages weekly. A 1% reduction in food cost on £1M in annual sales equals £10,000 straight to your bottom line.