If you’re a restaurateur or restaurant operator and you’re not paying attention to your gas, electric and water bills – you should be.
As you can imagine, on top of the major restaurant costs of food and labor, equipment and a POS system, restaurants spend a lot on utilities. In fact, foodservice businesses use an average of 38 kilowatt-hours (kWh ) of electricity and 111 cubic feet of natural gas per square foot, which is about 2.5 times more energy used in other types of commercial buildings. What’s more, restaurants typically have such narrow profit margins that reigning in your utility bill could have a sizable impact on your profits.
And heavy energy use equals expensive energy bills. According to one study, restaurants in the U.S. spend an average of $2.90 per square foot on electricity and $0.85 per square foot on natural gas annually, which breaks down to about 3% to 5% of your restaurant’s overall operating costs.
Let’s crunch some more numbers.
Restaurant Utilities Costs By the Numbers
Industry experts agree that if your energy costs are higher than 5%, you need to take steps to lower your utility bill.
If you’re working on a budget to open a new restaurant, consider that your overall costs will fall somewhere in the range of $275,000 to $450,000 depending on the type of restaurant, according to financial and marketing services firm Rewards Network.
After you take care of the big expenses of construction build-out and equipment purchases, about 20% of your budget will be left to pay for everything else includeing: utilities, insurance, rent, furniture, permits, signage, and more. For utilities, you’ll want to factor in any deposits due when initiating service for electricity, gas and water as well as the first month of use.
Take a look at your Profit and Loss statement, and you’ll see that your utilities are a variable expense that changes from one month to the next.
Once you’ve been in operation for a while, you will start to recognize trends in usage and cost, which can help you finetune your energy costs. By and large, industry experts agree that if your energy costs are higher than 5%, you need to take steps to lower your utility bill. That may mean initiating an energy audit via your local utility company, a state agency, or through a third-party company. The first steps though are to pinpoint possible areas of energy waste and consider the complexity of the solution.
Utilities such as water, phone and internet access should be relatively fixed costs over time. Your time is better spent examining more variable utilities such as electricity use, which rises and falls depending on seasonal needs, air conditioning, and heating. Gas or oil may also fluctuate in price depending on international markets.
And while you can’t affect the weather or the world market, there are some short and long-term actions you can take to make sure you’re using energy efficiently in your restaurant. Not only will you feel good about how using energy more efficiently will be better for the environment, it’s also good for your bottom line. One study found that achieving just a 20% reduction in energy costs will translate directly into an additional 1% in profit.
5 Ways to Cut Restaurant Utilities Costs Now
1. All Of The Lights
Don’t overlook your lighting and its energy use. Lights are typically on for anywhere from 16 to 20 hours a day in a restaurant!
- Keep bulbs and light fixtures clean to allow them to work properly and shine as brightly as possible.
- If natural sunlight is available, dim the lights wherever possible.
- Switch to Compact Fluorescent Lightbulbs (CFL) throughout your operation, including your walk-in refrigerators and kitchen ventilation hoods. (One restaurant owner replaced 20 100-watt bulbs with CFLs that used less energy, helping the restaurant to save more than $400 per year.)
- Install occupancy sensors in rooms with occasional use such as bathrooms, walk-in coolers and other storage areas.
- Use signs with LED lights as opposed to those with incandescent bulbs. While incandescent bulb would use 40 watts to illuminate exit signs and menu boards, LEDs use only 5 watts for the same amount of light.
For every 1,000 kWh that you can save by turning things off or down, $100 will be cut on your utility bill.
Lights, ventilation fans, and other equipment in restaurants can frequently be left running even though everyone has gone home for the night. Make sure energy is not being wasted in the off hours by:
- Using programmable features when available on equipment to automatically shut it down or keep thermostats appropriate when it’s not peak hours.
- Assign a staff member the responsibility for turning off cooking equipment, exhaust fans, lights, computers, and other back office equipment after last shift.
- Post checklists next to key pieces of equipment to remind operators about low-energy settings and when to set them.
3. No Dirty Filters
Filters should be changed regularly in everything from your water filtration system to your HVAC to ensure the equipment doesn’t have to draw more energy to produce the same effect.
- For HVAC, you may have to change the filters more than once a month if the restaurant is located next to a highway or construction site where the air is much dirtier.
- When water is not properly filtered, equipment can become less energy efficient due to calcification buildup and mineral deposits.
4. Monitor Hot Water
- Make sure you don’t have any hot water leaks, which can add up to hundreds of wasted dollars over one year.
- Install low-flow aerators, which can reduce the hot water used by each hand sink by 60%.
- Install a high-efficiency pre-rinse spray valve in your dishroom because traditional sprayers use 3 to 4 gallons of hot water per minute. This simple switch can save you $300 to $350 in water, sewer, and natural gas costs over a year.
5. Keep Temperatures Comfortable
- Keep rooms with large windows cool by applying a clear, heat-rejecting window film to cut down on air conditioning costs while making your dining room more comfortable.
- Install ceiling fans
- Turn off patio heaters when patio is empty
- If refrigerator and freezer doors aren’t closing or sealing properly, the equipment will run continually to maintain the proper temperature.
- Inspect refrigerator and freezer doors to make sure they are aligned properly
- Replace worn gaskets
- Check that automatic door closers are functioning
- Install or repair strip curtains for walk-ins (Strip curtains can cut outside air infiltration by about 75%)
3 Long-Term Utilties Cost Control Measures
1. Replace Outdated Equipment
Kitchen equipment that is 10 years old or older could be a significant source of energy waste in your operation.
- Wherever possible, upgrade to Energy Star equipment, which has been certified by a government-backed labeling program to identify appliances and electronics that have superior energy efficiency. These models may have a higher price tag but what they will save you in utility costs will make up for the price difference in no time.
- Make strategic Energy Star purchases, choose convection ovens, water heaters and refrigerators, which will give the best reduction in natural gas use. According to Energy Star, investing in commercial Energy Star appliances results in an average energy savings of 30%.
2. Use Smarter Equipment
High-efficiency cooking equipment such as induction cookware and lightwave ovens can be 15 to 30% more energy efficient than standard equipment.
- Install energy-efficient hand dryers for your bathrooms that don't use heating elements.
- Install evaporator fan controllers in walk-in coolers. These pieces of equipment often have forced-circulation evaporators with motorized propeller fans that run twice as often as they need to.
- Choose smart vent hoods. These use a photoelectric smoke or heat detector to determine the use and spend of the exhaust fan. While the technology is not cheap, most operators find that they make up the cost in energy savings in a year or two based on use.
3. Train Staff On Energy Use
Offer your staff dedicated training (and follow-up!) on how they can help reduce wasting energy. Consider your kitchen’s steamer, which is a piece of equipment that is expensive to run.
When users are consistent with energy best practices such as closing the door and using the timer, you could save $250 to $350 in annual energy costs on that one piece of equipment. As another example, restaurant chain Shari’s café and Pies instituted a standard start-up and shut-down schedule for their equipment, which results in $4,145 in savings in each of their 100 locations.
Recommended: How To Keep Restaurant Kitchen Equipment Costs Under Control
Advanced Restaurant Utilties Cost Managment
Energy managment and regulation can be more complicated than simply turning down thermostats and upgrading equipment. For more complex problem-solving, your operation may be a good candidate for commissioning, a process in which engineers verify and document the building’s energy-related systems to ensure they are designed, installed, and calibrated properly.
Commissioning usually costs between 5 and 40 cents per square foot but can result in a 15% energy savings on average, according to a study by Lawrence Berkeley National Laboratory. Check Energy Star’s directory of programs that offer commissioning to find one near you.
Energy Management Technologies
Among the emerging technologies available to restaurants such as scheduling software and web-based POS systems, there is also software that will give restaurant operators a big picture, real-time picture as well data analysis of their energy use.
A good energy management system (EMS) monitors spikes in utility consumption and alerts managers. Managers can then either address sudden spikes immediately (did someone leave the cooler door open?) or else, address rising energy use patterns with more oversight or training. A good EMS may also allow users to remotely control HVAC and prevent overnight heating or cooling mistakes. Energy management systems also allow managers the oversight to see if staff is sticking to any energy use best practices as trained. Read reviews of energy management systems on Capterra.
In the U.S. small business owners in 17 states may have the ability to shop around for utility providers as the markets have been deregulated. The competition can mean lower rates for gas and electricity. Check the Save on Energy website to find out if your location is in a deregulated market.
Long Story Short
Profitable and thriving restaurants keep utility costs under 5% of their total operating costs. For some, that may mean merely switching to more efficient light bulbs or updating key pieces of equipment to Energy Star models. On a larger scale, you may have to bring in a team of engineers to assess the total energy picture of your building or you may need to create a chain-wide schedule of equipment start-up and shut-down.
Energy efficiency knowledge and solutions have come a long way in recent years, there’s no reason any restaurant operator should let dollars leak out of worn-out fridge seals or HVAC left on all overnight.
Restaurant utilties costs–along with food, labor, kitchen equipment, and the POS system–is one of unending costs restauranteur's need to master to keep their buisness growing. Take control over all five of the major restaurant costs today with the tactics ond strategies in the Ultimate Guide to Restaurant Costs.