Restaurant Profits and Food Cost
As food prices keep rising, restaurant owners can’t help thinking about ways to deal with those eroding profit margins.
At times like this, it may seem like a good idea to shop around for better prices on your key ingredients. After all, what if you could:
* Negotiate better prices with your current supplier?
* Make several suppliers bid for your business?
* Switch to new suppliers altogether?
This is a natural response. But you could be shooting yourself in the foot.
Trying to get a better price on chicken breasts can only get you so far. The benefit to your business may be short-lived and illusory: The only way food prices are going is up. And you could be trying to solve the problem from the wrong end.
Think about what you’d have to give away to get a better deal:
* Scenario #1: You sacrifice the food quality. If you are already a troubled restaurant, that could be the last nail in the coffin of your business.
* Scenario #2: You replace your old supplier with someone less reliable. Then one night you may leave more money on the table than you could have saved on the ingredients.
* Scenario #3: You throw yourself into heavy-duty negotiations that will suck up a lot of your time. You should know that your time has a high price tag attached to it and it may be better invested elsewhere.
Which brings us to the next point.
The fact that you can’t sustain the increase in food costs is a symptom of a bigger problem. If the menu is stale and unoptimized, if the concept is unexciting, and if you are doing a mediocre job of getting enough people to try your food, then don’t look for a bail-out from your supplier.
Sure, you shouldn’t be paying more than a fair market price for the ingredients. But you shouldn’t be paying much less either. If the basic economics of your business aren’t right, you’re fighting a losing battle against an enemy of your own creation.
That enemy’s name is “Poor Me” – and we’ve all met him at some point in our lives. He comes unannounced and turns a confident restaurant owner into a wimp who blames everything and everyone – government, weather, competition, economy, suppliers, even customers – for the lack of profits in his business. To have a fighting chance, you need to get out of the cost-saving penny-pinching nickel-and-diming mindset and start plugging chasmic holes in your marketing.
When you can get enough customers to come and gladly pay the prices your food is worth, then you’d better be ready to seize the night. And that’s the night when you need your supplier on your side.
Restaurant business is tricky because of the thin profit margins. Even a small fluctuation in food cost or labor cost can make the difference between making money and losing it. Contact RestaurantCommando.com to create more profits in your business.