Cost control for restaurants is key to ensuring business profitability. Companies in the hospitality sector face one of their biggest challenges when it comes to analyzing and controlling restaurant costs. At Controliza, we want to provide some tips so that restaurant cost control doesn't become a major problem.
What is cost control in a restaurant?
Cost control in a restaurant is the continuous process of measuring, analysing and adjusting every expense your business generates —raw materials, staff, energy, waste and purchasing— to protect your margin without lowering service quality. It's not cutting for the sake of cutting: it's knowing, dish by dish and day by day, how much it costs to produce what you sell and where money is leaking. The two costs that weigh most are food cost (what you spend on food and drink) and labour cost; between them they take the biggest share of revenue, so that's where profitability is won or lost.
The food cost formula and your target ratios
Your food cost is the percentage of sales spent on raw materials. It's calculated like this:
Food cost % = (dish raw-material cost ÷ selling price excl. VAT) × 100
Example: if a dish costs you 3 € in ingredients and you sell it for 12 € excl. VAT, your food cost is (3 ÷ 12) × 100 = 25 %. The lower it is, the more margin you keep for staff, rent and profit. The bands the industry uses as a reference:
- Food cost: 25–34 % of sales. Above 35 % the margin suffers.
- Labour cost: 25–35 %, depending on the type of service.
- Prime cost (food cost + labour): ~60 % as a healthy ceiling. It's the number that really tells you whether the restaurant is profitable: if it spikes, no volume will save it.
These are a reference, not a rule —fine dining runs a higher food cost and fast casual a lower one—. What matters is measuring yours and watching the deviation between what a dish should cost (per the recipe cost card) and what it actually costs (per real consumption). To see it per site, food cost per location and the KPIs that matter most in a restaurant help.
Recipe costing, step by step: the foundation of everything
The recipe cost card (or spec sheet) is the cost sheet for each dish: without it, controlling costs is guessing. Doing it right is five steps:
- List the ingredients and exact quantities per portion (in grams or millilitres, not "a bit").
- Enter the unit purchase price of each ingredient (per kg or litre), exactly as your supplier invoices it.
- Apply yield loss for each product (what's lost when trimming, cooking or defrosting): the real cost per portion is higher than the purchase price.
- Add up the net dish cost = sum of (quantity × price × yield loss) for every ingredient.
- Work out the margin: compare that cost with the selling price and get the dish's food cost.
A short example, a pasta-and-tomato dish:
| Ingredient | Quantity | Purchase price | Cost |
|---|---|---|---|
| Dry pasta | 100 g | 1.80 €/kg | 0.18 € |
| Crushed tomato | 120 g | 1.20 €/kg | 0.14 € |
| Oil, garlic, salt, cheese | — | — | 0.20 € |
| Raw-material cost | 0.52 € | ||
| Selling price (excl. VAT) | 8.00 € | ||
| Dish food cost | 6.5 % |
A cost card only works if it's alive: one with prices from months ago gives you a false food cost. When a supplier raises the price or changes the portion size, the margin slips away unnoticed —which is why it helps to back your cost cards with a tool that keeps them up to date, like Controliza Kitchen, and to cross real consumption with Inventory.
How can you control costs in restaurants?
To begin with, you need to keep product costs in mind. This is one of the biggest challenges in the restaurant industry, especially given major factors such as price fluctuations. The cost of raw materials is currently the main issue facing any hospitality business. Whether due to excessive prices or shortages, controlling restaurant costs is becoming increasingly difficult.
It’s also important to understand that restaurant cost control must cover more than just food, including areas such as staff turnover, the productivity of administrative teams, and spending on marketing activities. There are different ways to improve processes and increase profits without compromising the quality of your dishes.
The challenge, of course, is to control costs while maintaining a high level of customer service. Cost control is an ongoing practice aimed at reducing expenses and increasing profitability.
7 ways to control costs in restaurants
Real-time stock system
If you want to effectively reduce your restaurant’s costs, the first step is to keep your entire storeroom under control in real time, both incoming and outgoing stock. Having a fully integrated management system that shows exactly what enters and leaves your inventory in real time will allow you to know precisely what quantities should be in stock, how much is used in each preparation, and when it needs to be replenished. It’s a simple way to control costs through solid planning and organization supported by digital tools.
Digitize restaurant processes.
Digitizing the daily tasks that add the least value and consume the most time, such as collecting information from sales delivery notes or planning each team member’s daily duties, is a great way to control costs. A purchasing tool that lets you digitize the entire delivery note-order-receipt process is an effective way to keep costs under control. You’ll no longer need part of your staff spending excessive time on these tasks, and it will also help you minimize errors.
Know what you’re going to sell.
If you know what you’re going to sell and how your business is affected by variables such as weather, the calendar, delivery promotions, or events, you’ll be able to organize staffing, purchasing, and marketing actions more effectively. That’s why it’s so important to have a predictive tool that can learn from your business and forecast what will happen in the coming weeks, helping you control restaurant costs and maximize profitability.
Offer daily menus and control waste.
As we mentioned, most of a restaurant’s costs come from the food it purchases. Ingredient prices change almost daily, which creates significant inflation in the final product cost. Creating a daily menu to use ingredients that are close to their expiration date would be a way to reduce waste and make the most of surplus products that would otherwise be thrown away.
Organize purchased products and negotiate prices with suppliers.
Through our work, we often help organize purchasing departments, and one of the most common problems is disorganized buying, along with the wide variety of suppliers and products that are usually purchased. In many cases, we help clients reduce their purchasing spend by an average of 10% simply by grouping products and suppliers together, and even more if it’s a group with several locations. Obviously, the more products you consolidate with a single supplier, the greater your negotiating power and the better the price you can secure. This is essential for restaurant cost control.
Optimize staff and diners.
Implement an online booking system with seating slots for your busiest days. You should also hold meetings with your waitstaff before service to plan recommendations for the products you need to sell as soon as possible. Finally, you should implement a system that analyzes how external variables such as sporting events, public holidays, or the weather affect demand at your venue and generates demand forecasts for the coming days. This way, you’ll be able to organize your team, boost slower days with marketing actions, and buy only what you need.
Identify and control variances.
Here’s a simple example: a restaurant discovered that after just one summer, more than 500 beer bottles had gone missing. What was the problem? Someone may have been giving away too many complimentary drinks, too much beer may have been consumed between shifts, waste may not have been recorded, or there may even have been theft. People who work in hospitality know these things happen, but often they don’t know how to solve them properly, let alone control them. That’s why a tool that uses purchasing and sales data to identify these kinds of issues before they get worse is becoming increasingly important for businesses of any size.
Conclusion
Cost control must be an ongoing process in order to maximize profitability. Today, keeping tight control is vital if you want to survive in the market and not fail trying.
Hospitality costs consume most of a business’s revenue, and they keep rising due to inflation. It is just as important to have the right tools in place so you can maintain full control over the business and increase profitability without affecting service quality. Every business has its own methodology, but competition is growing and the sector is becoming more professionalized. That’s why it’s not only important to make the most of the tools that allow you to control your business, but also, now more than ever, necessary and possible to stay ahead of the future and make the right decisions in time.
If you want to learn more about our tools or about restaurant cost control, visit our website and follow us on LinkedIn to stay up to date with industry news and the best tips for your business.
How to control costs in restaurants?
To begin, we must consider the cost of products. This is one of the biggest problems in the restaurant industry, especially considering current influential factors such as price fluctuation. The price of raw materials is currently the main problem any hospitality business faces. Whether due to abusive prices or scarcity, controlling costs in the restaurant industry is becoming increasingly difficult.
Furthermore, restaurant cost control must consider aspects beyond food, such as staff turnover, administrative area productivity, or marketing expenditure. There are different ways to improve processes to increase profits without compromising the quality of your dishes.
The challenge, of course, is to control costs while maintaining a high level of customer service. Cost control is an ongoing practice to reduce expenses and thus increase profitability.
7 ways to control costs in restaurants
Real-time stock system
If you want to effectively reduce restaurant costs, the first thing is to keep the entire warehouse under control, both what comes in and what goes out, in real time. Having a fully integrated management system to know exactly what enters and leaves the warehouse in real time will allow you to know precisely the quantities that should be in the warehouse, how much is used in each preparation, and when to restock. A simple way to control costs based on good planning and organization supported by digital tools.
Digitize restaurant processes
Digitizing daily tasks that add the least value and consume the most time, such as collecting delivery note information, or planning daily tasks for each staff member, is a good way to control costs. A purchasing tool that allows you to digitize the entire delivery note-order-reception process is an effective way to control costs. You'll no longer have to have part of the staff spending excessive time on these tasks, and it will also minimize errors.
Know what you're going to sell
If you know what you're going to sell and how your business is affected by variables like weather, calendar, delivery promotions, or events, you can organize your staff, purchases, and marketing actions. That's why it's so important to have a predictive tool that can learn from your business to predict what will happen in the coming weeks and thus control restaurant costs and maximize profitability.
Offer daily menus and control waste
As we've mentioned, most restaurant costs lie in the food purchased. Ingredient prices change almost daily and this generates significant inflation in the final product cost. Creating a daily menu to use food approaching its expiration date would be a way to reduce waste and make the most of surplus products that would otherwise be wasted.
Organize purchase products and negotiate prices with suppliers
In our work, we often organize purchasing departments, and one of the most common problems is disorganization in purchases and the variety of suppliers and products usually bought. We often help clients reduce their purchasing expenditure by an average of 10% simply by grouping products and suppliers, even more if it's a multi-location group. Obviously, the more products you group with a single supplier, the more negotiating power you'll have and the better price you'll achieve. Essential for cost control in restaurants.
Staff and diner optimization
Incorporate an online reservation system with shifts for busiest days. Additionally, you should hold meetings with waitstaff before services to plan recommendations on products you need to sell quickly. Finally, you should implement a system that analyzes how external variables like sporting events, holidays, or weather affect demand and provides demand forecasts for upcoming days. This way you can organize your staff, boost slower days with marketing actions, and buy only what you need.
Deviation identification and control
Here's a simple case: a restaurant discovered that after just one summer, more than 500 bottles of beer had disappeared. What was the problem? Someone might be overdoing the complimentary drinks, too much beer is being consumed between shifts, waste isn't being counted, or you might even be experiencing theft. People working in hospitality know these things happen, but often don't know how to address them properly, let alone control them. That's why a tool that uses purchasing and sales data to identify these problems early before they worsen is increasingly important for businesses of any size.
Conclusion
Cost control must be a continuous process aimed at maximizing profitability. Today, maintaining good control is vital to survive in the market. Costs in hospitality consume most of a business's revenue and are increasingly high due to inflation. Equally important is having the right tools to maintain total control over the business and increase profitability without affecting service quality. Every business has its methodology, but competition is growing and the sector is becoming more professionalized. Therefore, it's not only important to leverage tools that give us control over the business, but it's also now necessary and possible to look ahead and make the right decisions in time.
If you want to know more about our tools or about cost control for restaurants, visit our website and follow us on LinkedIn to stay up to date on industry news and the best tips for your business.
Frequently asked questions about cost control
What is a good food cost for a restaurant?
Between 25 % and 34 % of sales is the healthy reference band. Above 35 % the margin suffers; well below 25 %, either you have a very efficient model or you may be sacrificing quality. What matters is measuring yours and its trend, not nailing a single number.
How do you calculate the cost of a dish?
With the recipe cost card: you add up the cost of each ingredient (quantity × purchase price × yield loss) to get the dish's raw-material cost, then divide it by the selling price excluding VAT. That percentage is the dish's food cost.
What is prime cost and why does it matter?
It's food cost + labour cost, the expense that dominates a restaurant. Keeping it around 60 % of sales is the benchmark of a healthy business; if it spikes, profitability disappears no matter how much you sell.
Where is money lost without you noticing?
Through deviations you don't catch in time: outdated cost cards, unrecorded waste, supplier price increases that slip through at goods-in, and off-contract purchasing. All of that raises the real cost without showing up until month-end close. Catching it in the moment —not a month later— is what protects the margin.
If you want to go deeper, we recommend reading Uncontrolled Purchasing: Why Your Chain Needs an Automatic Approval Workflow.
