Three Data-backed Strategies to Reduce Restaurant Operating Costs Without Sacrificing Service Quality

When restaurant operators think about reducing operating costs, they often think they have to make large, sweeping cuts. While the fastest, easiest option might seem to be letting a number of employees go or drastically changing service hours, such extreme measures can actually backfire. According to the latest 7shifts 2025 Restaurant Labor and Cost Profitability Report, labor costs reaching up to 30 percent of revenue and food inflation ranked as the top concern by 52 percent of restaurant operators in 2025, therefore finding ways to reduce expenses without compromising quality has never been more critical. Here are three ways to reduce your costs without experiencing backlash or sacrificing service quality. 

Staff Appropriately

When restaurants cut employees or reduce tables, they don’t end up with fewer expenses–they end up with burned-out, disgruntled team members who aren’t operating at their best. This leads to a decrease in the service they provide customers and may even lead to them quitting. From there, you’re forced to vet and hire more employees on a revolving-door basis, and according to CareerBuilder, “introducing the new cost of hiring someone to replace the employee who left.”

The true cost of employee turnover is significantly higher than most operators realize. Replacing a front-of-house employee costs an average of $1,056, while back-of-house replacement jumps to $1,491. Management replacement is even more expensive at $2,611 per position—nearly 150 percent higher than front-of-house costs. For a typical restaurant with 50 percent annual front-of-house turnover, this translates to over $10,000 spent on replacing staff alone.This can be astronomical for a restaurant from a purely financial perspective, but the effects on morale are just as damaging. 

With all this in mind, rather than firing staff members in a knee-jerk attempt to save money, consider adjusting how you’re staffing your schedule instead. Revisit when you’re busiest, and reassign your team based on demand.  Cross-training staff has emerged as the most widely implemented and effective labor management strategy. This significantly outpaces other strategies like reducing headcount (38.6 percent), proving that operators prioritize workforce versatility over simple staff cuts. 

It's worth noting that restaurants with high labor costs (>40 percent) are more likely to reduce staff headcount (71 percent) compared to those with moderate costs (13.5 percent). However, operations with lower labor costs maintain a more balanced application of multiple strategies rather than relying on any single approach. This stark difference suggests that high labor costs may trigger reactive cost-cutting rather than strategic moves. At the same time, restaurants with healthier finances can afford to implement more balanced, service-preserving approaches.

You can also consider whether opening an hour later or closing an hour earlier might keep your employees from burning out while not dramatically limiting hours of operation or disappointing customers. These approaches help maintain morale and ensure you're maximizing efficiency without sacrificing the quality of service.

Embrace Technology

It might seem counterintuitive to purchase technology to save money, but implementing the right tools can improve efficiency and staff satisfaction, which can ultimately reduce costs. Consider enabling your employees to take specific actions from their phones, like checking their tips, schedules and payroll. Empowering your team with these tools'll streamline operations and create a more engaged, productive workforce, leading to long-term savings.

Additionally, many POS or reservation systems can help collect guest data. Restaurant software has deep capabilities that can even save diner preferences like their favorite table, drinks, dietary preferences and more. When you use technology like this, you equip your servers to deliver a better experience and potentially offer personalized suggestions with a higher markup.

Invest in Your Staff Experience

Finally, remember that the environment you create for your staff matters. Give employees the courtesy of sharing their schedule as far in advance as you can so they have more time to plan around it. Aim to offer consecutive days off in the general schedule and a fair amount of PTO so your team can get the rest they need and have time to enjoy other aspects of their personal lives.

While it can be difficult for small businesses to do so, see if you can begin offering benefits to your staff. It’s rare in the restaurant industry for employees to get health and retirement benefits, so being able to provide this can set you apart from competitors and help improve team member retention. Even if it seems out of reach, consider plans under the Affordable Care Act or through third parties such as OS Benefits.

Equipping your servers to earn as much money as possible is also important. Encourage them to use suggestive selling to introduce customers to new items and create a better experience. When guests enjoy a wider variety of foods and drinks, the bill increases–and so does the tip. Also, by personalizing recommendations, servers can create a memorable experience that encourages repeat business and larger checks regularly.

Offering benefits, creating a positive work environment and setting your team up for success not only fosters loyalty and reduces expenses, but also enhances the overall customer experience, driving both satisfaction and revenue.

Final Thoughts

When you prioritize smart staffing, embrace technology and invest in your team’s well-being, you can reduce operating costs without sacrificing service quality. Over time, this will lead to a better work environment and a healthier bottom line. Rather than focusing solely on cost-cutting, successful restaurants adopt a multi-faceted approach to profitability that emphasizes revenue growth through menu engineering, upselling initiatives, and new revenue streams.

While labor costs remain a critical concern (83 percent of restaurants rank it in their top three challenges), and most restaurants aren't hitting their labor targets (only 36 percent achieve their goals). Small, thoughtful changes can create long-term benefits for your staff and your restaurant.