6 Ways to Chop Your Food Costs

You may have known your COGS performance before the pandemic, but the changes to our industry over the last few years have made hitting those same numbers an extreme sport. With the changes to inflation, labor shortages, sales, the supply chain, etc. – can food cost percentages get back on a downward trend? With a restaurant management system (RMS), the answer is yes!

A restaurant management system is uniquely able to put powerful, near-real-time data at your fingertips by processing your invoices quickly, usually in as little as 24-48 hours. When combined with integrated daily sales data from your POS, this robust combination shows you everything going out and everything coming in, all in one place. All your team needs to do is snap a photo of the invoices to upload them and boom – you’re in business!

Seeing your financial data is just the first step. The second is what you choose to do with it.

Here are 6 key ways in which an RMS can help you consistently hit lower food costs:

1. Price alerts
2. Paying attention to detail
3. Plate cost management
4. Theoretical usage and waste tracking
5. Budget performance
6. Daily P&Ls

1) Price alerts

Depending on your menu, you probably have hundreds of ingredients coming through your restaurant at any given time. How do you ensure you’re getting the best deal on each item and paying what you expected? Or just making sure your top-performing plates are keeping their food costs where they should be?

Look for an RMS that offers price alerts, allowing you to configure settings that will trigger an email each time an invoice comes in under or over certain price thresholds.

You should also be able to check out how much the item has increased or decreased by percentage or dollar impact on the product. And we know you aren’t interested in how much you spend on say, avocados, from each specific vendor, so make sure your RMS categorizes all your avocados by “avocado” rather than keeping them separated by the dozens of vendor names your invoices might use.

With price alerts, you can make changes in the moment like negotiating with your vendor for a lower price or subbing higher-priced products out. These can be simple switches like using lemons instead of limes when lime prices turn sour, or even more strategic menu moves like whipping up a special when a protein’s price drops. Having technology there to watch your pricing data’s back empowers you to make profit-boosting decisions without any extra effort.

2) Paying attention to detail

Making sure you’re paying for the right quantities of what you receive is just as important as tracking those ingredients’ prices. If you get shorted on a delivery, or even if you don’t accept everything you order because the quality wasn’t up to snuff, an RMS can make sure you’re not paying more than you owe.

Your RMS should capture everything on an invoice (and we do mean everything), down to handwritten notes and corrections, while keeping a record in your system. While they may try their best, don’t rely on vendors to keep track of your credits! A cloud-based system with digitized records, including photos of the invoices, are a great way to make sure you’re not over or underpaying. No more late fees or last-minute “please still deliver our bread this week, I promise we’ll pay on time this time” phone calls.

3) Plate cost management

A good RMS will track your product counts and prices, but a great RMS will use those to help you build and price out your recipes. And when we say recipes, we don’t just mean menu item recipes. Have prepped items? Price those out too. Never again wonder what your food costs are on Grandma Joanie’s 64-gallon batch ranch recipe.

Because your restaurant management system pulls the most recent product prices from your invoices (regardless of whom you bought them from), all you have to do is plug in the quantities and the RMS does the math for you. You can target recipes to match a specific price or food cost percentage depending on what’s more important for that menu item.

Since you now have digital records of everything your staff prepares, the recipes are easily searchable, with clearly labeled quantities, and even have options to add plating photos and technique videos. You can even scale the recipes up or down – all helping ensure your food is prepared correctly, reducing waste, and – all together now – lowering your food costs!

4) Theoretical usage and waste tracking

In a perfect world, you’d turn and sell everything you buy. But thanks to perishable goods, the need to trim whole products, and the occasional human error, that’s nearly impossible. Thankfully, it's possible to close the gap with actionable data that empowers you to course correct during the period. How is this possible, you ask? We’ll tell you (that’s kinda what we’re here for).

Since a restaurant management system has access to your purchasing information from your invoices (what you’re buying), your sales data from your POS (what you’re selling including modifiers), and what you have on hand (thanks to inventory counts), it essentially comes down to a math equation to see what’s missing.

This means you’ll be able to pinpoint anything that’s potentially being wasted more than you’d expect to see, being over-portioned, or even stolen (like that chicken wing lady in Chicago). You’ll know which items are problematic and when it’s happening, so you can go back into the kitchen and make adjustments. An RMS can’t quite tell you why exactly the waste is happening, but it can show you where to start digging.

And if the sentence in that earlier paragraph about inventory made you shudder with fear, we’ve got some more good news. RMSs have made taking inventory even easier now, too. You don’t need clipboards or spreadsheets anymore – just use customizable digital sheets on a tablet or mobile phone to take counts (and it’ll save them even where there’s no wifi!). Prices are automatically updated for you as invoices come in.

5) Budget performance

Setting and sticking to budgets can help hit cost targets and keep spending on track. An RMS can help with this by automatically tracking your spending as a percentage of your dollar cost or with fixed dollar targets. You should be able to see your progress at any time during the period so you know where you stand on budget performance as invoices are processed.

Since all your data is stored in one place, you can dig into your most recent invoice and see what’s making the biggest impact if one of your budgets looks off track. Budgets can even be color-coded so if you’re doing well they look green, or if you’ve gone over you’ll be – quite literally – in the red. Don’t discount the effectiveness of a good color tool!

With multiple locations, you should be able to see how different stores rank amongst each other on spending, which can inspire a little healthy competition between managers or be used to incentivize bonuses if they meet targets.

6) Daily P&Ls

It’s often the case that operators don’t get their profit and loss (P&L) statements back from their accounting teams or bookkeepers until after the period has ended because traditionally invoices aren’t processed on a rolling basis. With a restaurant management system, this is no longer the case.

Because an RMS pulls in your daily sales information from your POS every night and invoice data is uploaded in 24-48 hours, you’re able to track your controllable P&L throughout the period (and your accounting teams are too!).

This means all those up-to-date, in-the-moment numbers are ready and waiting at your fingertips to make data-backed decisions about where to pull back or dive in with costs in your restaurant.

Imagine that you run a mac and cheese shop and unbeknownst to you, a mac and cheese video just went viral on TikTok. People can’t stop thinking about that ooey, gooey, lactosey (technical term) goodness and are flocking in droves to your store. Thanks to your daily P&L, you can see that your inventory counts are low while your sales are through the roof - and so are your staff’s overtime hours. Even if you haven’t been in the store to see it with your own eyes, you know from the real-time data that something’s up, so you can make some quick decisions and ensure that you’re getting as much revenue as you can from this opportunity bestowed upon you by the social media gods.

These six best practices are by no means exhaustive, but at the end of the day the message is clear: with faster numbers, you can make faster corrections and decisions, leading to more control over your food costs.

About the Author

Rachel Markus is the content marketing manager for MarginEdge, a restaurant management software company. Rachel currently resides near Sacramento, California with her husband, two fur children, and one stepson (who is human). When she's not whipping up food puns and restaurant industry content, Rachel likes to spend her time gardening, cooking, and binge-watching Matty Matheson videos.