How to Reduce Expenses in a Restaurant

Managing restaurant costs is important for maintaining profitability in an industry known for tight margins. For every dollar a customer spends, restaurant owners typically see only 3% to 5% as profit, making cost control essential.

However, cutting costs without sacrificing quality or customer satisfaction is no small feat. Customers expect exceptional food and service, so operators must carefully balance savings with value. Cost “levers,” like labor, food, utilities, and equipment and supplies, make up nearly 100% of operating costs.

Let’s explore strategies for each cost lever to optimize your spending so that you can reinvest in growth.

1. Simplify your menu to cut unnecessary dishes and expenses

A well-curated menu helps a restaurant focus on high-profit, low-cost items, which makes it easier to cut restaurant costs and improve overall quality. With a shorter menu, you can save money by reducing the variable costs of extra ingredients and elaborate dishes.

One way is to remove items that do not sell well. For example, if a restaurant spends extra time and money on preparing a dish that few customers order, it’s better to take it off the menu.

Next, focus on high-profit, low-cost dishes. These are menu items that require common ingredients and can be prepared quickly by staff. For instance, a salad that uses seasonal local vegetables can be both low in cost and attractive to customers looking to eat healthy.

Another benefit of a shorter menu is that it makes inventory management simpler. With fewer ingredients to track, your restaurant can work more effectively with suppliers. This minimizes mistakes in orders and reduces the costs associated with excess stock that may spoil.

Review your current menu and identify items with low sales or high costs. Ask your staff for feedback on which dishes are time-consuming or error-prone.

Then, focus on creating a menu that features a mix of your restaurant’s best-selling dishes along with new options that can be used across multiple dishes, like roasted chicken, which could appear in salads, sandwiches, and main course plates.

2. Highlight high-profit dishes on your menu

Menu engineering can boost revenue by as much as 35%. While this is more of a strategy to increase profits, it also helps reduce expenses by drawing attention to dishes that are cost-effective to produce.

One of the best ways to do this is by placing high-profit dishes in the top-right or top-left corners of the menu. These positions, along with the center, are part of the “Golden Triangle,” which are parts of the menu that customers’ eyes naturally go first.

Another way to grab the attention of diners is to use bold fonts and clear visuals. For example, you can highlight cost-effective items with bolding or icons so they stand out on the menu.

Consider adding short descriptions that highlight the dish’s origin, cooking method, or special ingredients to make them more appealing. This can make customers more likely to choose these dishes, saving you money from costly ingredients and increasing your profit to boot.

3. Reduce food waste through portion control

Portion control helps reduce waste and food costs while keeping costs in a restaurant low. Invest in a set of reliable scales and standardized spoons so that your staff can measure dishes accurately and avoid wasting ingredients.

For example, if you serve a dish with rice, a digital scale helps you serve the same amount every time. The same applies to bars, especially since 10% to 15% of drinks served are found to be overpoured and undercharged.

Make sure your staff understands the importance of precise portioning. Create clear guidelines and provide training on how to measure ingredients consistently.

Another way to reduce food waste is to offer smaller portion sizes or customizable dishes. Smaller portions can appeal to customers looking for a lighter meal and can lower your variable costs at the same time.

If a dish on your menu uses ingredients that are expensive, try offering a half portion, reducing cost while giving customers the option to set the right amount of food they can eat.

For example, a steakhouse might offer an 8-ounce filet instead of a 12-ounce cut, or a seafood restaurant could provide a half-portion of salmon.

Make it a part of your regular management routine to check the portions served. Review your portion control practices with kitchen staff at least every quarter, and be open to their suggestions for improvement.

4. Avoid overstaffing by analyzing peak hours

Inefficient staffing, specifically overstaffing, can inflate your payroll costs. The average labor cost percentage for restaurants falls between 25% and 35%. Full-service or fine dining restaurants spend the most on labor due to staff’s specialized skills.

To manage your restaurant labor cost percentage and keep it at a minimum, use restaurant analytics to help you see when customers flood in and when there are fewer orders so you can schedule the right number of staff.

For instance, 7shifts lets you forecast sales and labor projections automatically so that you can set accurate schedules. The restaurant employee scheduling software integrates data from your POS system to compare labor costs against sales. This gives you a clear picture of your restaurant’s labor costs, showing you how much you’re spending during peak hours versus off-peak times.

5. Hire and train the right staff from the start

Aside from optimizing your team’s schedule, you should also be more mindful of who you hire. The true cost of restaurant employee turnover amounts to nearly $6,000 due to productivity loss and the expenses that entail recruitment, hiring, and training.

Start by looking for candidates who share your restaurant’s values and passion for food and service. Ask restaurant job interview questions about how they work in teams and handle busy shifts. This helps you choose staff who will provide great service to your customers.

Once you’ve hired the right staff, the next step is to invest in ongoing training and development. Training helps your team to learn the right ways to prepare dishes, handle busy times, and use restaurant tools effectively.

A clear training program can also help staff feel valued and part of a restaurant family, which makes them more likely to stay. When employees are well-trained, they work more efficiently, reducing costs due to errors and waste. That’s why it’s one of the effective ways to reduce restaurant turnover.

6. Upgrade to energy-efficient appliances

Upgrading to energy-efficient appliances can help you reduce restaurant kitchen costs. Replacing old kitchen equipment, such as ovens and refrigerators, with ENERGY STAR-rated models may have a higher cost at first, but the initial investment pays off in the long run by lowering your fixed and variable costs.

Moreover, using energy-efficient lighting like LED bulbs can reduce your electric bill by using 75% less energy compared to incandescent bulbs. These now come in various color temperatures and styles, making them suitable for different restaurant ambiances.

Another easy step is to install a smart thermostat in your restaurant. A smart thermostat adjusts the temperature automatically when your restaurant is empty or during slow hours, which helps reduce energy consumption by 10% to 15%.

To get started, evaluate your electricity bill for the past three months and calculate your average energy usage. Check peak consumption periods and potential areas for improvement, such as inefficient lighting or outdated appliances.

7. Implement water-saving strategies

Another restaurant utility cost to consider is your water usage. The average sit-down restaurant uses around 3,000 to 7,000 gallons of water per day. Costing around $8,000 per year, water-saving strategies can significantly lower your operational expenses.

An easy tip is to soak dishes in water before washing them. Soaking helps break down the grease and food residue, making dishwashing more efficient and reducing water consumption.

Another way to cut costs is by installing low-flow faucets. Low-flow faucets use less water by 40% to 70% than traditional ones.

It’s also important to encourage staff to be mindful of water use. Remind people on duty to turn off taps when they are not needed and to use water wisely.

8. Consolidate vendors to cut costs on delivery

Simplify your ordering process and minimize delays or errors that can drive up restaurant costs. If your restaurant orders from six suppliers and combines these into two main vendors, you can reduce the number of delivery charges and lower your overall variable costs.

Think about it. By consolidating vendors, you’ll streamline your supply chain and potentially negotiate better pricing. Fewer vendors mean more predictable ordering cycles and simpler inventory management, which reduces administrative work.

Another important aspect is building strong relationships with your suppliers. Regular communication and a good working relationship can lead to benefits such as priority service, better delivery schedules, and even discounts when food costs rise unexpectedly.

Start by reviewing your current vendor list and order history. Identify which suppliers provide the most items and then contact them to discuss bundled orders and bulk discount opportunities.

Calculate projected costs before and track expenses after consolidating vendors to see how much you are able to reduce. If the strategy doesn’t yield the best results, consider rotating suppliers or exploring alternative procurement methods.

9. Make the most of social media for restaurant promotions

Social media marketing is the most cost-effective option for restaurants to reach their target audience. You can allocate as little as 3% to 6% of your advertising budget to restaurant social media marketing and still see significant engagement and brand awareness.

You don’t even have to spend on ads. You can hire a social media intern or train an existing staff member to manage your restaurant’s social media accounts.

Have them plan creative campaigns that show off your best dishes, behind-the-scenes looks at your kitchen, and fun moments with your staff. They should also reply to comments and messages promptly to keep engagement high.

Another idea is to run contests and giveaways on Facebook. By doing so, you can encourage customers to share your posts and tag their friends, which creates organic growth at almost no cost.

Use in-app analytics, whether you’re using Instagram, Facebook, or TikTok (or Xiaohongshu), to track which posts get the most engagement. Then, adjust your marketing strategy to focus on what works and reduce marketing costs even more.

10. Negotiate to minimize your rent or lease terms

Rent is one of the top three expenses that take up a chunk of your restaurant budget. Negotiating your rent or lease terms is a smart way for a restaurant to reduce restaurant costs and cut expenses.

Talk with the property owner about your current situation and ask if you can reduce the cost of rent, especially during slow seasons when customer traffic is lower. You can propose a temporary rent reduction to help cut costs during these lean months.

Another option is to suggest revenue-sharing arrangements. This means your restaurant and the land owner split part of the monthly revenue during busy times instead of paying a fixed cost each month.

If your restaurant has extra space that’s not in use, consider subleasing it to other businesses. Subleasing is a great way to bring in extra money, which can help offset your rental expenses.

For instance, you could rent a section of your space to a local coffee vendor during early morning hours when your dining area is quiet. You could also rent out your kitchen during off-hours to catering businesses or food truck operators looking for a commercial kitchen space.

Make sure to review your lease agreement carefully and, if possible, work with a lawyer who understands restaurant contracts. They offer expert guidance by finding hidden clauses or suggesting amendments that reduce your lease costs.

11. Consider reducing operating hours during slow periods

Check your POS data if there have been low-traffic hours in the past six or 12 months. If it shows that your restaurant is quiet between 2 PM and 5 PM, it may be best to close during these times rather than spend on labor and utilities without significant returns.

You can have your staff go on a split shift, where full-time employees get a longer break during the workday typically during the slow period. For example, a server might work from 11 AM to 2 PM to cover lunch, then take a three-hour break, and return for their second shift from 5 PM to 10 PM to cover dinner.

You can also operate with a reduced menu and less staff during these slow hours. A smaller menu means you need fewer ingredients, which helps to reduce food costs. It lowers labor costs as well because you don’t have to schedule as many employees when business is slow.

Another way to reduce restaurant costs is to shift your focus to takeout or delivery services during slower hours. By promoting takeout options on your website and through social media, you can attract customers who might not be able to visit in person, like those who are working in their offices.

12. Switch to cost-effective cleaning solutions

Restaurants spend an average of around $200 to $400 per month on cleaning supplies. This includes the cost of cleaning supplies, disinfectants, sanitizers, and other essential hygiene products.

One way to minimize cleaning costs is by buying cleaning products in bulk. Compare prices from different vendors and negotiate bulk purchase agreements.

Make sure to calculate how many you need. For instance, check how many bottles of dishwashing soap your restaurant goes through in a month. Then, purchase a quantity that provides a slight surplus without overbuying, which can also tie up your capital in excess inventory.

Look for concentrated cleaning solutions that can be diluted, which you can stretch to extend their usage. Additionally, invest in reusable microfiber cloths and mops instead of disposable paper towels.

For cleaning equipment, like commercial floor scrubbers and steam cleaners, you can buy professional-grade ones to guarantee durability. If buying isn’t an option, you can rent, which is more cost-effective for tools you’ll only use occasionally.

13. Find cost reduction opportunities in alcohol inventory

If you own a bar, reducing alcohol inventory costs can significantly impact your bottom line, especially since operating costs can go as high as $24,200 per month.

First, review your current alcohol inventory and analyze sales data. Check which liquors, wines, or beers generate the highest profit margins. Next, contact your suppliers to negotiate bulk discounts for the high-margin items you decide to keep.

You can also promote house cocktails that use common ingredients across drinks more. Using shared ingredients like a base spirit, mixer, and standard garnish can keep the cost of making each cocktail low.

Offering wine by the glass instead of by the bottle is another way to reduce restaurant costs and minimize waste. Serving wine by the glass gives you better control over portions and helps avoid wasted wine if a bottle is not fully consumed.

14. Switch to digital menus to reduce expenses

Digital menus reduce the need to print new menus for every dish that’s added or removed. Let’s say you change your monthly specials based on seasonal ingredients, or you have to modify prices to keep up with inflation.

With digital menus, you and your staff can instantly implement these changes without worrying about printing costs. It’s also easier to upsell your dishes through suggested pairings by tracking customer preferences.

Creating a digital menu is as easy as adding a dedicated page to your website. This way, both in-house customers and potential diners can easily access your menu online.

Use a mobile-responsive design so that the menu looks great regardless of whether customers open it on smartphones and tablets. Include high-quality food images, clear pricing, and easy navigation.

Then, you can print QR codes and place them on your tables so customers can quickly scan and view your menu directly on their devices. Additionally, digital menus can be easily updated with nutritional information, allergen warnings, and special dietary options, making them more informative.

While you don’t have to integrate online ordering, you can consider adding this feature for your customers’ convenience. Online ordering can improve their dining experience by reducing wait times.

15. Put up self-order or self-checkout kiosks for takeout

If you run a quick-service restaurant, you can cut labor costs with self-service systems that let customers place orders and pay without waiting for extra staff. These reduce labor costs by minimizing the number of front-of-house staff needed during peak hours.

Self-service kiosks also decrease human error in order taking and can process transactions faster. As a result, your staff can focus on preparing food and expediting orders, leading to happier customers.

Moreover, because they technically showcase digital menus, self-service kiosks make upselling and promoting new dishes easier. This potentially increases the average transaction value while providing a more efficient and modern dining experience.

Use your POS system to track when you have the most orders and where delays happen. Having this data helps you decide the number of kiosks needed to reduce expenses and improve efficiency.

Next, look for self-service systems that accept multiple payment methods and can sync with your menu easily. Many modern kiosks are designed with touch screens and clear visuals.

While installation may entail a substantial upfront cost, restaurants have reported significant returns. One multi-location ramen restaurant slashed labor costs by $1,050 per week, while another that sells burgers saved $499 per week.

15 ways to reduce restaurant expenses

Consider these strategies to cut your restaurant’s operating costs so that you can direct more capital to your business’ growth.

Set a reminder for yourself to review the same data in 30 days and see what has changed. Have certain costs been reduced? Is there still more work to be done? Did you learn anything surprising?

The work of restaurant cost reduction is never complete, but when you can learn from what works and what doesn’t, you will get better at it over time.

Reduce labor costs with 7shifts. Our restaurant scheduling software offers automated scheduling suggestions and shift forecasting to help you plan more accurately. This way, you avoid overstaffing during quiet periods and make sure there’s enough help during rush hours, saving you from unexpected overtime costs.