Where to Save Money when Running a Restaurant

where to save money running a restaurant business budget

If you start a new business, there is a legitimate chance that it fails. In fact, only 56 percent of small businesses make it to a 5th operating year.

One out of every five businesses closes their doors in the first year. There are many reasons why a business fails, but cash flow issues are amongst the top reported problems.

Cutting operating expenses is one way to keep a business afloat. Read on to learn where to save money when running a restaurant. Explore cost savings tips and tricks without skimping on restaurant quality and service.

Use Social Media for Advertising

Social media is an effective strategy for reaching out to prospective customers. There are many different social media platforms to utilize.

The biggest advantage of using social media is cost. It is free to sign up for major platforms like Facebook, Twitter, and Instagram.

You can make some headway with shares and likes from your friends or family. However, each platform allows you to reach a greater audience for a small price.

Take Facebook as a perfect example of reaching a local audience. With Facebook ads, you can tailor the audience to reach specific demographics.

For example, consider that your product or service is geared towards young women. Facebook can display your ad on the news feed of female users aged 18-34. Both Twitter and Instagram also allow you to promote posts to reach a greater audience.

Create Your Own Website and Blog

Many small businesses make the mistake of paying a developer for their website and blog. The cost of a new website ranges from $2000 to $8000, depending on the requirements.

While a professional website may be warranted at some point, there is a cheaper option in the short-term. There are many free website builders available online.

Two of the most prominent website builders are WordPress and Wix. Both options are easy to use and there are hundreds of YouTube tutorials for guidance.

Users can choose from hundreds of pre-built website templates. Additional features are added using free plug-ins or drag and dropping into the template.

The only fees you will have to pay for are website hosting. These fees are necessary regardless of who builds the website.

Shop Around for the Cheapest Utilities

Utilities are among the many monthly operating costs that your business will incur. These utility costs may include water, electricity, and natural gas. Other similar expenses include internet, phone, and security.

Some utilities are offered by a single source and you are locked into their rates. In other cases, there are multiple suppliers and you can select the most competitive rate.

For other operating expenses, look to bundle services to save money. Many companies offer cheaper rates if you bundle internet and phone.

Typically, there are multiple security companies to consider. Reach out to each one and get a service quote. The goal is to reduce monthly costs by finding the best service rates.

Control Resources and Energy Usage

Remember when your parents used to scold you for leaving the lights on? It is time to bring that old school approach to your business.

There are a number of tips to reduce resource and energy usage. In the restaurant business, this starts with running a full dishwasher. Running a half-empty dishwasher is a waste of energy and power.

This also means controlling the restaurant’s temperature. Obviously, you do not want guests to feel uncomfortable.

However, there are cooler times of the year that you can take advantage of. Open the windows in the fall and spring to bring fresh air into the restaurant. Then, shut off the air conditioner to reduce energy costs.

Manage Inventories and Eliminate Waste

One substantial cost driver in the restaurant industry is spoiled or rotten food. Business owners invest significant money in food inventory. You don’t want to run out of ingredients or supplies on a busy day, right?

The bottom line is that your restaurant takes a loss when spoiled food is tossed. To mitigate this risk, you need to devise a strategy to effectively manage inventories.

This may mean scheduling multiple deliveries per week of perishable items. It also could lead you to repurpose food when it reaches the latter half of its shelf life.

Optimize the Menu

A larger menu is directly correlated to the size of your inventory. The more dishes you offer, the more ingredients are needed.

Use data analysis software to track sales and see which menu items are most popular. While you may possess an affinity for a particular dish, running a successful business requires making good choices. If an item is not selling or has a low profit margin, it is time to move on.

Daily or weekly specials give you an opportunity for repurposed ingredients. They also allow you to scratch your creative itch without sacrificing the bottom line.

Investing in a Kitchen Equipment and Furnishings

Kitchen equipment and furnishings are two of the most substantial upfront investments. These are probably two of the highest items on your business startup checklist. Many new restaurant owners have a great urge to buy the best kitchen equipment.

However, this decision may put your business in a hole it cannot climb out of. When running a restaurant, it is imperative to have free cash flow available. Major purchases like kitchen equipment and furnishings are certain to drain the cash reservoir.

We recommend shopping for second-hand kitchen equipment and furnishings when possible. Remember, roughly 20 percent of businesses fail in the first year.

This means that you can leverage off another restaurant’s failure. Look to purchase second-hand kitchen and restaurant equipment or furnishings with a short amount of service time. Apply a fresh coat of paint or stain to furnishings to make them look new.

A Recap of Where to Save Money When Running a Restaurant

Running a restaurant is expensive and the odds of success are dicey. The ones that survive are frugal and manage their cash effectively.

Taking steps like reducing energy usage or optimizing inventory is certain to help. If you enjoyed this article about where to save money when running a restaurant, check out our blog for other great saving tips.

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