Stop the Bleeding! Slash Food Costs & Skyrocket Restaurant Profits

Monitor portion sizes, negotiate with suppliers, and reduce food waste to lower COGS.

What's inside?

Ink illustration of a hand writing a restaurant menu surrounded by detailed drawings of ingredients and their costs, emphasizing the connection between menu planning and COGS.

Did you know that 60% of restaurants fail within their first year, and 80% close within five years? A leading cause isn’t a lack of passion or culinary talent—it’s poor cost management. If you’ve ever felt like your restaurant is bleeding money despite bustling tables, you’re not alone. Meet Jane, a dedicated restaurant owner who turned her struggling business into a profitable hotspot by mastering one crucial element: Cost of Goods Sold (COGS).

Let’s dive into how understanding and controlling your COGS can transform your restaurant’s finances and set you on the path to success.

In This Guide, You’ll Discover:

  • The Power of COGS: Unveil the formula that pinpoints where your money is going.
  • Boosting Profits: Learn how effective COGS management can increase your margins.
  • Smart Inventory Hacks: Optimize stock levels and slash waste dramatically.
  • Tech-Savvy Solutions: Explore top software tools that simplify inventory management.
  • Supplier Strategies: Negotiate better deals without sacrificing quality.
  • Menu Makeover: Craft a menu that delights customers and controls costs.
  • Real-Life Success: Read how one restaurant slashed COGS by 20% in just three months.

Meet Jane: Turning Struggles into Success

Jane owned a charming bistro with rave reviews but razor-thin profits. Frustrated, she discovered that her soaring food costs were the culprit. By implementing strategic changes in how she managed her COGS, Jane reduced her food costs by 15% and increased her profits by 25% within six months. Let’s explore how you can achieve similar results.

Understanding Restaurant COGS

Your Cost of Goods Sold (COGS) is a critical metric that represents the direct costs of producing the items your restaurant sells. This isn’t just about the steak on the plate; it includes everything that goes into serving your customers.

What Goes Into COGS:

  • Food and Beverages: Fresh produce, meats, dairy, grains, spices, coffee, tea, and alcoholic beverages.
  • Packaging Supplies: Take-out containers, disposable utensils, cups, and napkins.

By closely monitoring your COGS, you gain insights into where your money is going and how to manage it better.

Why Keeping an Eye on COGS Matters

Understanding your COGS empowers you to make informed decisions that can significantly impact your bottom line.

  • Increase Profits: Reducing your COGS by just 5% can increase your profits by up to 20%.
  • Set Competitive Prices: Knowing the exact cost of each dish helps you price menu items to cover costs and appeal to customers.
  • Reduce Waste: Identifying high-cost areas allows you to cut waste and improve efficiency.
  • Plan for Growth: Accurate COGS tracking aids in budgeting and forecasting for expansion or new ventures.

How to Calculate Your COGS

Calculating COGS might seem complex, but it’s straightforward with the right approach.

COGS = Beginning Inventory + Purchases During the Period – Ending Inventory

Example:

  1. Beginning Inventory: $8,000 worth of stock at the start of the month.
  2. Purchases: $12,000 spent on new ingredients during the month.
  3. Ending Inventory: $7,000 worth of stock at the end of the month.

COGS = $8,000 + $12,000 – $7,000 = $13,000

This means you spent $13,000 on the goods sold that month.

5 Strategies to Reduce Your COGS

1. Master Portion Control

Inconsistent portion sizes can lead to significant losses. By standardizing portions, you ensure customer satisfaction and control costs.

  • Use Measuring Tools: Invest in scales, portion scoops, and measuring cups.
  • Train Your Staff: Educate them on the importance of portion sizes.
  • Implement Recipe Cards: Provide detailed instructions for each dish.

2. Embrace Seasonal and Local Ingredients

Seasonal ingredients are often cheaper and fresher.

  • Plan Seasonal Menus: Adjust your menu quarterly to feature in-season produce.
  • Buy Local: Reduce transportation costs and support local farmers.
  • Market the Freshness: Customers appreciate and are willing to pay more for fresh, local dishes.

Specific Example: Switching to seasonal vegetables could reduce your produce costs by up to 20%.

3. Build Strong Supplier Relationships

Your suppliers can be your secret weapon in reducing COGS.

  • Negotiate Prices: Don’t hesitate to ask for bulk discounts or better terms.
  • Compare Vendors: Regularly review supplier pricing and offerings.
  • Long-Term Contracts: Secure stable prices by committing to longer agreements.

Specific Example: One restaurant saved 15% on meat costs by negotiating a yearly contract with a local butcher.

4. Upgrade Your Inventory Management with Technology

Modern software can revolutionize how you track and manage inventory.

  • Use Inventory Software: Tools like MarketMan, Toast POS, or Restaurant365 offer real-time tracking.
  • Automate Ordering: Set reorder points to avoid overstocking or shortages.
  • Analyze Data: Generate reports to identify trends and make informed decisions.

5. Minimize Food Waste

Reducing waste directly lowers your COGS.

  • Implement FIFO: “First In, First Out” ensures older stock is used first.
  • Creative Menu Specials: Use surplus ingredients in daily specials.
  • Staff Training: Educate your team on proper storage and handling.

Specific Example: By repurposing leftover ingredients, you can save up to $1,000 per month.

Real-Life Success: How One Restaurant Cut COGS by 20%

After struggling with high costs, The Green Spoon Bistro analyzed their COGS and implemented the strategies above. Within three months, they:

  • Reduced COGS by 20%
  • Increased Profits by 30%
  • Decreased Food Waste by 25%

Owner Mark says, “By simply understanding where our money was going, we turned our finances around without compromising on quality.”

Take Control of Your Costs Today

Managing your COGS is not just about cutting expenses—it’s about making smarter decisions that enhance your restaurant’s overall performance. Small changes can lead to significant savings and increased profits.

Ready to Boost Your Profits?

Let the experts help you navigate the complexities of restaurant finances. XOA TAX specializes in financial planning, accounting, and tax services tailored for restaurant owners.

Contact XOA TAX Today:

By taking these steps, you’re not just cutting costs—you’re investing in the future success of your restaurant. Start implementing these strategies today and watch your profits soar!

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