How to Reduce Your Restaurant Food Cost Using Simple Data
There’s a little known and underutilized tool that can reduce a restaurant’s food cost by potentially 3% or more. All that is required is for a restaurant to gather some simple data and take a little action. How would you like to reduce your food cost by simply gathering data? Does this sound too good to be true? I promise you, it’s not. In this episode of my podcast, The Restaurant Prosperity Formula, I explain what kind of information you need to gather, where to get the information, what to do with it and what you can expect when you use it the way I explain. By the end of this lesson, you will be in a position to take action and put yourself down this path.
What are you going to do with this data? You’re going to use it with a game-changing tool that can potentially reduce your food costs by three or more points. Buckle up as we explore the power of the descending dollar report.
Your restaurant has spending power
The descending dollar report is a tool provided by most food purveyors. It lists all the products you've purchased, sorted by total dollar amount spent over a specific period, from highest to lowest. The key is to gather this data from all your vendors, creating an individual spreadsheet for each.
Take action: Gather comprehensive data on every item you purchase from each vendor. Request descending dollar reports in spreadsheet format for a specific date range.
Focus on restaurant purchasing power
Once you have all the data, combine it into one spreadsheet. Focus on the top 10 to 12 items that represent about 50% or more of your purchasing power. This is where you have leverage. Negotiate better prices by promising to buy all those products from your vendors.
Action step: Sort and analyze your top 10 to 12 items by money spent. Negotiate better prices with vendors for these high-purchase items.
Uncover hidden opportunities
Don't stop at negotiating prices; ask your sales reps about like or better-quality products at a cheaper price. Some products may not be on the regular list but could offer significant savings. This is a chance to leverage the tonnage of other high-volume purchasers and benefit from their negotiated prices.
Action step: Inquire about similar or better-quality products at a lower price. Uncover hidden opportunities for savings.
Managing your restaurant's finances goes beyond cutting costs – it's about smart resource management. By focusing on your descending dollar report, negotiating better prices, uncovering hidden opportunities, and leveraging technology, you're not just saving money, you're setting your restaurant up for long-term prosperity.
Remember, your restaurant’s business is valuable to vendors, and they are often willing to work with you to maintain a good relationship. As you embark on this journey, keep in mind that if you have a prime vendor agreement or work with a group purchasing organization (GPO), you've likely already found significant savings.