How Restaurants Can Manage Food Costs During Disruptions

Experts have deemed recovery from the pandemic “complete,” but a new set of challenges has emerged for restaurants: labor shortages, disrupted supply chains, and extreme weather.

Amid these potential disruptions, operators need a fresh approach to managing food costs. Here are seven strategies to boost adaptability and resilience while safeguarding the bottom line. 

Understanding the Impact of Disruptions

Running a restaurant has always been a balancing act. But it goes beyond figuring out how to source the freshest ingredients at the best price. Currently, owners and operators across the country are grappling with:

• Worker Shortages: The restaurant industry is facing a severe labor crunch, with 45 percent of operators reporting they need more employees to meet demand.  
• Extreme Weather: By 2035, experts predict that higher temperatures alone will push up worldwide food prices by between 0.9 and 3.2 percent annually. Meanwhile, extreme weather events are likely to disrupt transportation routes, damage crops, and lead to shortages of key ingredients, resulting in price spikes that impact menus.
• Seasonal Shifts: They may be predictable, but they still add another layer of complexity to restaurant management. Sourcing the best ingredients at the right price requires a keen understanding of seasonal rhythms, strong relationships with suppliers, and flexibility to adapt menus on the fly.

Strategies for Managing Food Costs During Disruptions

Don’t be afraid to substitute ingredients

Your menu is not set in stone. Think of it as an adaptable tool. Master improvisation by identifying suitable alternatives for pricey or unavailable ingredients. Can you swap imported olive oil for a high-quality domestic option? Could a different cut of meat deliver similar flavors at a lower cost? With some creativity, you can maintain standards without increasing costs.

Embrace seasonality

Forging relationships with local farmers and purveyors unlocks access to fresh, cost-effective ingredients. This not only reduces reliance on vulnerable, long-distance supply chains but also allows you to craft dishes that embrace seasonal flavors.

Review inventory management strategies

Inventory isn't just a stockpile of ingredients. It's a living, breathing asset that requires careful attention to control costs under.

One way to stay agile? Embracing the "just-in-time" philosophy, which involves ordering perishable ingredients in smaller quantities and more frequently to reduce waste, free up storage space, and ensure every ingredient is at peak freshness when it hits the plate. 

Build stronger supplier relationships

Don't wait for a disaster to strike. By proactively building collaborative relationships with suppliers, you'll be prepared when crises inevitably arise. 

Keep these tips in mind:

• Diversify Your Network: Rather than putting all your eggs in one basket, partner with local farms and producers, specialty purveyors, and larger distributors to improve resilience in your supply chain.
• Form Open Lines of Communication: Share your needs and challenges and be receptive to their feedback. This builds trust and helps them anticipate your needs.
• Negotiate Strategically: Don't be afraid to negotiate on price, payment terms, and delivery schedules. The goal here is to open the door to mutually beneficial agreements.

Be transparent with staff

When the unexpected hits, clear and consistent communication becomes even more valuable. It's how you build trust, foster teamwork, and empower staff to navigate challenges alongside you.

Here’s how to communicate with staff transparently:

• Have an Open Book Policy: Keep your team in the loop about everything, like menu changes, supply chain hiccups, price adjustments, and new strategies. When your staff understands the "why" behind the decisions, they're more likely to embrace the "what," even when it involves changes or adjustments.
• Encourage Feedback: Create a space for your team to voice concerns, share ideas, and offer feedback. By being on the front lines, they’re likely to have valuable insights and creative solutions for your challenges.

Have an open dialogue with guests

Hiding behind vague explanations or trying to sneak in price hikes unnoticed are the fastest ways to lose guests’ trust and loyalty.

Instead, be upfront about any necessary adjustments. A simple statement like, "Due to the rising cost of ingredients, we've had to make slight adjustments to our pricing," can go a long way in building understanding. 

Explore new restaurant management software

Restaurants can no longer afford to rely on spreadsheets and guesswork. To keep food costs under control, real-time insights are key.

With restaurant management software, operators can take advantage of:

• Inventory Control: Monitor ingredient levels, track usage patterns, and identify potential waste areas. 
• Recipe Costing: Track ingredient prices, calculate portion costs, and pinpoint profitable menu items. Use this data to make strategic pricing decisions and adjust recipes to maximize margins.
• Sales Analysis: Which dishes are flying out of the kitchen, and which are lagging? Optimize menu placement and make decisions about promotions and specials.

The restaurant industry is a marathon, not a sprint. Use these strategies to create a more resilient operation that can weather any storm. Adapting in real time and making data-driven decisions will not only help manage food costs but also position your restaurant for long-term success in an unpredictable market.