How to Control Food Cost in Restaurant and Improve Operational Efficiency

Are rising food costs eating into your restaurant’s profits? If reviewing your financials feels like a gut punch, you’re not alone. Many restaurant owners struggle to balance quality, efficiency, and cost control while keeping customers happy.

With food costs typically accounting for 28% to 35% of total revenue, even a slight reduction in expenses—just 2% to 5%—can lead to substantial savings. For a restaurant generating $83,000 in monthly revenue ($1 million annually), this means an additional $1,600 to $4,200 in profit every month.

So, how can you take control of your restaurant’s costs while maintaining quality and efficiency? Let’s break it down.

Mastering Menu Engineering for Maximum Profitability

A well-designed menu isn’t just a list of dishes—it’s a strategic tool that influences customer choices and maximizes profits. Menu engineering helps identify which items contribute the most to your bottom line and which are draining your resources.

Start by categorizing your menu items:

• Stars – High profitability, high popularity. Feature these prominently.
• Plow Horses – Low profitability, high popularity. Optimize costs without compromising quality.
• Puzzles – High profitability, low popularity. Improve presentation, pricing, or placement to boost sales.
• Dogs – Low profitability, low popularity. Consider removing them from the menu.

📌 Pro Tip: Customers spend less than 109 seconds reading a menu. Strategic design—highlighting high-margin items and using descriptive language—can guide them toward more profitable choices.

The Secret to Smarter Inventory Management

Controlling inventory is crucial for cutting food costs and preventing waste. Relying on guesswork leads to spoilage, theft, and unnecessary expenses. Here’s how to streamline your inventory process:

1. Use a Digital Inventory Management System

Ditch the spreadsheets—real-time tracking tools prevent stockouts, track usage patterns, and send low-stock alerts.

Best Restaurant inventory management software

2. Conduct Regular Inventory Checks

Frequent stock checks (at least weekly) help detect discrepancies before they impact costs.

3. Implement the FIFO Method

First In, First Out ensures older ingredients are used before newer ones, reducing spoilage.

4. Set Par Levels

Maintain minimum stock levels to avoid over-ordering while ensuring availability.

5. Adopt Cycle Counting

Instead of a full stock audit, count smaller portions of inventory daily to catch errors faster.

Cutting Food Costs with Smarter Supplier Strategies

Building strong relationships with suppliers can lower costs without sacrificing quality. Here’s how to negotiate better deals:

1. Compare Suppliers

Don’t settle for the first quote—compare pricing, quality, and reliability before making a decision.

2. Join a Purchasing Group

Bulk-buying with other restaurants can unlock discounts and reduce costs.

3. Buy in Season

Seasonal ingredients are cheaper, fresher, and more flavorful—incorporate them into your menu.

4. Consider Bartering

Negotiate creative deals, such as offering meal vouchers in exchange for better rates.

Reducing Labor Costs Without Sacrificing Quality

Alright, let’s face the elephant in the room: labor costs. These can be a real budget-buster if you’re not careful. But here’s the good news: with some smart strategies, you can trim these costs without turning your restaurant into a ghost kitchen.

1. Scheduling 

First things first, let’s talk scheduling. Are you staffing based on gut feeling, or are you using data? If it’s the former, it’s time for an upgrade. Use your POS system to analyze peak hours and slow periods. Then, schedule accordingly. There’s no need for a full crew during the Tuesday afternoon lull.

2. Cross training 

Cross-training is another secret weapon in your arsenal. When your staff can handle multiple roles, you’ve got more flexibility in scheduling. Plus, it keeps your team engaged and learning. It’s a win-win!

3. Technology 

Now, let’s chat about technology. Have you considered self-order kiosks or tableside ordering tablets? These can help reduce the number of staff needed for taking orders, allowing you to reallocate your human resources more efficiently.

4. Reduce Turnover 

High staff turnover increases recruitment and training costs. Offering clear career growth, fair wages, and a positive work environment retains employees longer.

Eliminating Food Waste: Every Dollar Saved Adds Up

Food waste isn’t just bad for the environment—it’s a direct hit to your profits. Cutting waste requires smart planning and execution.

1. Standardize Recipes and Portion Sizes

Reduce over-preparation by ensuring every dish is made consistently.

2. Track Waste Daily

Logging waste helps identify recurring issues and areas for improvement.

3. Use the Whole Ingredient

Think “root-to-stem”—turn scraps into stocks, sauces, and garnishes.

4. Offer Daily Specials

Use soon-to-expire ingredients in daily specials to minimize waste.

5. Implement Composting

Convert food scraps into nutrient-rich compost for a sustainable kitchen.

Financial Management: The Key to Long-Term Success

Mastering financial metrics ensures profitability and business sustainability.

1. Track Food Cost Percentage

The ideal range is 28–32%. Regular tracking prevents cost spikes.

2. Monitor Cash Flow

Forecast income and expenses to avoid financial shortfalls.

3. Set Aside Tax Reserves

Avoid last-minute tax stress by saving a portion of weekly revenue for tax obligations.

4. Develop a Budget & Stick to It

A well-structured budget guides purchasing decisions and operational priorities.

Tech Talk: Leveraging Technology for Cost Control

Technology is the ultimate cost-control tool. It improves efficiency, reduces waste, and enhances communication across teams. For restaurants aiming to streamline processes and maximize profits, tools like KNOW offer comprehensive solutions tailored to your needs.

Good technology doesn’t just handle one aspect of your restaurant—it powers your entire operation. From ensuring smooth day-to-day workflows to equipping your staff with the knowledge and tools to excel, KNOW helps you create a finely tuned machine that keeps costs in check and quality high.

1. Operations

Running a restaurant involves countless moving parts, but the key to success is consistency. With KNOW’s task management features, you can assign responsibilities, create checklists, and track progress—all in one place. Whether it’s monitoring food prep, cleanliness, or daily workflows, KNOW ensures that every task is completed efficiently and consistently across the team.

2. Training

Well-trained staff are the backbone of any restaurant. KNOW makes staff training simple and effective with its Learning Management System (LMS). You can create customized training modules that your team can access anytime, anywhere, ensuring everyone understands their role and expectations. Regular refresher courses and updates keep your team sharp and adaptable to changing operations.

3. Communication

Clear communication is essential to running a smooth operation. With KNOW’s employee communication tools, managers can share announcements, updates, and important news directly through the app. The built-in chat feature allows team members to connect instantly, fostering collaboration and quick problem-solving. Whether it’s adjusting schedules, addressing customer concerns, or celebrating achievements, KNOW keeps everyone on the same page.

4. Other Tools

Technology extends beyond internal operations. Systems like POS provide insights into sales trends and customer preferences, helping you make data-driven decisions. Inventory management tools simplify stock tracking and reorder processes, preventing waste and shortages. Kitchen Display Systems (KDS) replace paper tickets with digital displays, reducing errors and improving efficiency during service.

How KNOW Can Help You Optimize Your Restaurant’s Food Costs

Balancing exceptional food quality with cost-efficiency is a constant challenge. That’s where KNOW comes in—your all-in-one digital assistant designed to streamline operations, empower your team, and ultimately optimize your food costs without compromising quality.

Here’s how KNOW can help you take control of your food costs:

1. Boost Operational Efficiency

Running a restaurant smoothly requires consistent execution of tasks—from prepping ingredients to serving meals. KNOW’s tasks feature ensures that every team member knows what needs to be done and when. This consistency minimizes mistakes that could lead to waste, like over-preparation or underutilization of fresh ingredients.

2. Empower Your Team with Knowledge

Your staff plays a pivotal role in controlling food costs. With KNOW’s integrated Learning Management System (LMS), you can create custom training modules to educate your team on proper food handling, portion control, and standard operating procedures. Trained staff ensures precision in every dish, reducing waste and keeping food costs in check.

3. Streamline Communication for Real-Time Adjustments

Efficient communication is key to cost control. With KNOW’s communication tools, managers can share updates instantly, such as menu changes, portion adjustments, or limited-time specials. This ensures your team is aligned and equipped to adapt quickly, helping reduce costly errors and ingredient overuse.

4. Enhance Quality Through Accountability

KNOW enables you to create checklists and monitor task completion in real time. For instance, you can establish daily prep routines or cleaning schedules to maintain food freshness and compliance with food safety standards. These small, consistent actions help cut down on unnecessary waste, contributing to significant savings over time.

5. Foster a Culture of Collaboration and Excellence

When your team is informed, motivated, and engaged, they contribute actively to the restaurant’s success. KNOW helps cultivate this culture by simplifying workflows, enabling staff to focus on delivering excellent service and maintaining the highest standards in food quality.

Ready to Reduce Costs and Elevate Your Restaurant’s Success?

With KNOW by your side, you’re not just optimizing food costs—you’re transforming your restaurant into a well-oiled machine that delivers operational excellence and customer satisfaction.

Book a free demo today to see how KNOW can help you achieve your goals. Let’s cook up some savings together!

Frequently Asked Questions 

1. What’s the ideal food cost percentage for restaurants?

Most restaurants aim for a food cost percentage between 28-32%. This range ensures that your menu pricing aligns with ingredient costs while maintaining profitability. If the percentage is higher, it could indicate inefficiencies like over-ordering, waste, or unoptimized pricing. Lower percentages may suggest either great efficiency or potential compromises in food quality. Regular monitoring is key to staying within this range.

2. How can I reduce food waste in my restaurant?

Reducing food waste involves a combination of strategies:

• Portion Control: Standardize serving sizes to avoid oversized portions.
• Efficient Inventory Management: Keep track of stock levels to ensure you’re using perishable items before they expire.
• Proper Staff Training: Teach employees how to handle, store, and prep food to minimize spoilage.
• Creative Menu Planning: Repurpose ingredients across different dishes to ensure nothing goes to waste (e.g., using vegetable trimmings for stocks or soups).
• Regular Audits: Evaluate food waste patterns and adjust ordering practices accordingly.

3. What’s the best way to negotiate with suppliers?

To negotiate effectively with suppliers:

• Build Relationships: Establish trust by consistently paying on time and maintaining open communication.
• Group Purchasing: Join a purchasing group or co-op to leverage collective buying power for better prices.
• Volume Discounts: Commit to purchasing larger quantities of key ingredients to secure cost reductions.
• Flexible Deliveries: Work with suppliers to schedule deliveries during off-peak times or accept slightly adjusted delivery schedules for reduced fees.
• Market Research: Stay informed about ingredient market trends to negotiate from a position of knowledge.

4. How often should I update my menu prices?

Updating menu prices quarterly is a good rule of thumb, allowing you to adjust for:

• Ingredient Cost Fluctuations: Monitor significant price changes in core ingredients like meat, seafood, and produce.
• Market Trends: Stay competitive by aligning with industry pricing standards.
• Operational Costs: Factor in rising labor or utility expenses.
• Menu Engineering: Evaluate which dishes are most and least profitable, then adjust pricing or replace underperforming items. Regular updates ensure profitability without surprising customers with sudden, steep increases.

5. What’s the most effective way to train staff on cost control?

Effective staff training for cost control includes:

• Hands-On Training: Teach staff how to measure ingredients accurately and prevent over-prepping or over-serving.
• Standardized Recipes: Provide clear instructions for portion sizes and preparation methods to maintain consistency.
• Visual Aids: Use charts, diagrams, or videos to illustrate proper portion sizes and storage practices.
• Incentive Programs: Reward staff who consistently meet cost-saving goals, such as minimizing waste or reducing prep time without compromising quality.
• Regular Feedback: Hold team meetings to review performance metrics and highlight areas for improvement.