Being a restaurant owner is a big challenge. Not only do you have to strive to get noticed in such a competitive industry, but you also have to manage a variety of costs to ensure you turn up a profit.
If you don’t know where each penny goes, you risk making mistakes that severely affect your profit or even stop you from breaking even.
In this article, we will tackle one of the biggest expenses of your business: restaurant fixed costs. We will guide you to identify them, add them up, and reduce them.
Why you must be on top of your restaurant expenses
Keeping track of all your costs and conducting a monthly expenses audit will help you:
- Ensure profitability: how do you know if you are making a profit if you don’t track how much you spend and how much you sell? By calculating your costs each month, you have a clear view of how much money you are making;
- Create a great menu pricing strategy: if you don’t want to bleed money, your menu prices must reflect the cost increase. For example, if you move to a more expensive location, you should up your menu prices;
- Find ways to improve: you may notice you are overspending in certain areas and you are not getting the results you had hoped for. With this knowledge, you can create a new plan and do better next month.
If you want to learn about the other expenses that are not restaurant fixed costs, check out our detailed guides:
- Restaurant Startup Costs: How to Calculate and Lower the Initial Expenses
- What Are Variable Costs for Restaurants & How to Keep Them Down
- Restaurant Food Costs: How to Manage the Rising Inflation without Losing Customers
- 5 Tips on Efficient Management of Restaurant Labor Costs
What are restaurant fixed costs
Restaurant fixed costs, just as the name suggests, are expenses that don’t change each month. As opposed to variable costs that change according to the number of orders, fixed costs stay the same, no matter the profit.
For example, rent is a fixed cost because you have a signed contract for the same amount each month. However, ingredients are a variable cost because the price of flour can change overnight.
To calculate fixed costs, you have to identify all expenses that don’t change over the course of a month and add them up.
Examples of fixed costs in a restaurant
Use this list of fixed costs for a restaurant to help you calculate your overall restaurant fixed costs:
- Rent or mortgage
- Taxes and permits
- Insurance
- Utility bills such as water, gas, electricity, sanitation
- Salaried wages
- Technology fees such as point of sale, kitchen management system, or online ordering system
5 tips to reduce restaurant fixed costs
While restaurant fixed costs are rather hard to lower, there are some workarounds you can use to increase your profit. Try these ideas if you want to significantly reduce your non-variable costs:
1. Rethink your location
The biggest part of your restaurant’s fixed costs will always go to restaurant occupancy unless you were fortunate enough to afford to buy the space upfront. If you have a mortgage, there isn’t much you can do to lower it as you have a binding contract.
But, if you are on a lease, you can try to renegotiate the rent with the owner. You can offer to sign a contract for a longer period in exchange for a smaller rent. They may appreciate the security of having lent the space long-term rather than risking having it empty if they don’t find other interested parties.
If you are in the first stages of opening a restaurant and haven’t chosen a location, you may consider picking a cheaper place with less foot traffic and focusing more on online sales.
To reduce costs even more, consider opening or transforming into a virtual restaurant. You will pay for a smaller space and eliminate most costs related to serving customers in the location.
You will need an efficient online ordering system to allow customers to comfortably order food from your online restaurant. If you want to save money, check out the free system from GloriaFood that will streamline your online ordering process and create an amazing experience for your customers.
2. Renegotiate with your suppliers
If your restaurant is located in a larger city, you may have access to more than one supplier for your utilities. This may not be the case for the main ones such as water and gas, but you will have options for electricity, internet, and phone services.
Shop around, and ask other providers for offers, and you may find the same services at better prices. Furthermore, take a look over your subscriptions to see if there are some you automatically pay for but don’t need anymore.
Read more: How to Choose the Best Restaurant Suppliers for Your Business
3. Lower your technology fees
More expensive doesn’t always mean better. Technology is a must for your restaurant if you want to make your and your employees’ jobs easier, but it doesn’t mean you should spend all your budget on it.
Here are a few must-have pieces of technology you can get from GloriaFood:
- A free online ordering system you can install in just 10 minutes;
- A free table reservation system you can add to your website with a simple code;
- A sales and SEO-optimized website that costs less than a pizza for a monthly subscription;
- A free Reports module that gives you access to valuable restaurant data analytics;
- A free Promotions module with optional paid features to attract more clients;
- A cheap email marketing feature to convince old clients to come back.
4. Use energy-efficient equipment
Your energy bill is part of the restaurant’s fixed costs because you usually use the same amount of energy each month. But you can reduce it with these simple measures:
- Switch to LED lighting throughout the whole space, both the dining area and the kitchen. They use less energy than traditional lighting sources and they last more;
- Choose energy-efficient equipment that needs way less energy to accomplish the same tasks;
- Clean your equipment regularly. Have a maintenance cleaning done once a month to clean each part of your equipment because dust accumulation can hinder the way something works and make you pay more.
Read more: Restaurant Equipment List You Need to Open a Successful Restaurant
5. Use a scheduling software for employees
Even if you have salaried employees, you will end up paying them more if you ask them to work overtime. Ignoring unpreventable events, this is usually a scheduling problem.
Therefore, implement a scheduling software that will give you a better overview of all your employees and the hours when they will be at work. You will be able to easily make changes and ensure you are not understaffed or overstaffed.
Read more: 5 Ways to Make Your Restaurant Employee Scheduling Easier
Final Words
Take time at the end of each month to calculate your restaurant’s fixed costs and find areas where you could reduce expenses. You can always rely on the integrated GloriaFood solution to help you do your job better on a small budget.
You might also like:
- How to Calculate & Reduce Restaurant Overhead Costs
- Restaurant Finance Management: 10 Useful Tips to Lower Costs
- 25 Safe & Smart Cost Reduction Strategies in Restaurants
