Balancing rising costs while trying to stay profitable has become a challenge for many in the hospitality industry. In fact, 98% of operators point to increased labor costs as a major hurdle, and about 97% blame higher food expenses for squeezing their margins.
The good news is that technology is stepping in to help. With tools like AI and advanced analytics, restaurant owners can save time, streamline their expenses, and ultimately improve their bottom line.
In this article, we’ll look at some of the biggest costs restaurants face and how smart tech solutions can make managing those expenses easier.
Cutting Food and Inventory Expenses
Food costs are one of the biggest challenges for restaurants, often accounting for 28-35% of total revenue in profitable establishments. With prices steadily increasing, many restaurant owners are under constant pressure to find ways to control these costs. As a result, operators are having to get more creative with how they manage expenses, and one of the most effective strategies is cutting down on waste. Manual methods, like training staff to reduce food waste, are a great start. Teaching zero-waste cooking techniques, for example, can make a big impact. By being mindful of what’s thrown away, you can stretch your inventory further and keep costs under control. But beyond manual strategies, restaurants owners now have access to new technology like AI-powered menu engineering. AI tools can analyze which menu items have the highest profit margins and position them to sell. This means tweaking your menu to highlight those dishes that contribute the most to your bottom line. In addition, AI solutions, such as 5-Out, can track and calculate food costs weekly or monthly, helping you stay on top of your inventory. These systems can also detect changes in stock, automate invoicing, and update pricing in real time. By automating these tasks, the burden is taken off your staff, making food purchasing more efficient and less stressful. Reducing Labor Costs As mentioned earlier, rising labor costs are a major challenge for restaurant owners and operators. Not only is it difficult to find skilled talent, but ensuring wages stay competitive without causing frequent turnover adds to the complexity. Ideally, labor costs should account for around 30% of a restaurant’s revenue. However, it’s crucial to account for all the associated expenses, such as wages, benefits, taxes, and training, when calculating these costs. Fortunately, technology is offering ways to manage labor expenses more effectively. Scheduling software, for example, is a helpful tool that can be bundled with payroll management and other systems to simplify workforce management. These tools help avoid over- or understaffing, keeping operations running smoothly and efficiently.Using AI to Manage Labor
AI is also playing a growing role in managing labor costs. One example is AI-powered technology that answers the phone, handling basic customer inquiries without needing a staff member. This type of automation is incredibly valuable, as nearly 50% of consumers are less likely to dine at a restaurant if they can’t get in touch. With AI handling simple tasks, your team can focus on more complex and personalized customer service without sacrificing efficiency.Marketing Investments
Until recently, marketing wasn’t always a top priority for restaurant owners. But now, more operators are realizing how crucial it is to their success. In fact, restaurants now dedicate an average of 40% of their budgets to digital marketing, with 84% either increasing or maintaining their marketing spend. Technology has been a huge force in this space, offering new ways to reach and engage customers. From social media advertising to email campaigns and personalized promotions, tech tools help restaurants connect with their audience in a more targeted and efficient way. Many restaurants are now implementing marketing automation technology, which simplifies the process of communicating with guests. These systems can send automated messages, offer loyalty rewards, and invite customers to leave reviews. The beauty of this automation is that it allows restaurants to stay engaged with their customers without putting extra strain on their staff. Many AI solutions take this even further by generating months’ worth of personalized messages, from promotions to event reminders, helping restaurants stay connected with their audience. These AI tools often integrate with online ordering systems and websites, creating realistic and relevant communications that feel authentic. On top of that, these AI systems collect valuable data from customer interactions, which can be used to fine-tune future marketing efforts, improving customer retention and increasing sales. All of this automation saves time for restaurant staff, allowing them to focus on delivering great service while still driving growth.Making Use of Data
While cutting costs with technology can offer big savings, it starts with an upfront investment. Currently, restaurants spend only about 7% to 10% of their gross annual revenue on technology. Many experts predict this number will rise as more operators turn to tech to solve operational challenges. With such a small percentage of your budget dedicated to technology, it’s crucial to choose solutions that deliver the most value. While there may not be a true ‘all-in-one’ system, finding platforms that consolidate most of your tech needs can help reduce costs and simplify operations. By centralizing multiple tools, you can also gather a wealth of data, which can be incredibly valuable for making smarter business decisions down the road. This is where F&B Insights comes in. As the only platform that helps you sell your monthly sales data to suppliers, F&B Insights gives you a unique opportunity to monetize your information. Suppliers are eager to see how their brands perform in your venue, and by leveraging nationwide market intelligence, you can see how nearby venues price similar items, giving you the confidence to adjust your pricing without risking demand. F&B Insights can integrate seamlessly with your current POS, making it easy to pull sales data for suppliers and even run supplier-sponsored training programs. It’s a powerful way to turn data into profit and make better business decisions. Ready to make your data work for you? Get in touch with F&B Insights today and see how we can help you boost your bottom line.