The number of restaurants falling into insolvency has increased by more than 60% in the past year, amid worker shortages and the cost of living crisis. In this latest bog article we take a look at some cost reduction techniques for restaurants and how Beacon can support you during this slow down in consumer spending.
It's no secret that the restaurant industry has been struggling recently. Workforce shortages and the cost-of-living crisis have forced customers to cut back on spending, resulting in a sharp increase in restaurants falling into insolvency.
According to new data from the accountancy firm UHY Hacker Young, 1,406 restaurants in the UK closed their doors in the 12 months to May, up 64% from the previous year. In proportional terms, that is an even more considerable increase in closures than for the wider hospitality industry, which saw a 56% rise in insolvencies over the same period.
The UK saw several high-profile restaurant businesses shut down dozens of their sites at the height of an epidemic. Byron, Gourmet Burger Kitchen, and Italian chains Strada and Carluccio's were some of the casual dining brands forced to shed dozens of sites as repeated lockdowns left the chains haemorrhaging cash.
Previous research from UHY found that losses at the top 100 restaurant groups had risen to more than £800m during the six months prior. As a result, many of these brands were forced to undergo significant restructuring programmes during the pandemic to ensure the future financial success of the businesses.
However, restaurants that only just managed to survive the pandemic thanks to government support packages and business rates holidays are now facing fresh challenges in the form of rising inflation, post-Brexit labour shortage and customers with less disposable income due to the current cost-of-living-crisis.
Inflation, driven partly by the war in Ukraine, reached a 40-year high of 9.4% in June and could rise as high as 12% by October, according to some forecasts. This situation has strained household budgets, forcing people to cut extra costs, including eating out. In addition, the annual energy price cap is also set to increase from just under £2,000 to more than £3,000 in October, adding to the average household's financial burden. As a result, businesses are facing tough times ahead as consumers tighten their belts.
As any business owner knows, reducing operational costs is essential to maintaining a healthy bottom line. But in times of financial uncertainty, keeping costs under control can be even more challenging when commodity prices rise. Thankfully, you can do a few things to help stabilise your expenses and keep your business running smoothly. In this blog post, we look at some key recommendations that will help you ensure that your business can weather any economic storms.
Make Your Menu Work Harder
Menu management and recipe creation is an ongoing and time-consuming process. In addition to ensuring that dishes are enticing and appetising, there's also the critical task of ensuring that recipes are cost-effective.
Ingredient costs can fluctuate daily, and it can be difficult to keep track of all the changes. This volatility makes it hard to forecast plate costs accurately and can lead to significant losses for kitchens if not effectively managed. In addition, without knowing the actual price of the dishes you are serving, you are entirely in the dark regarding establishing profitable pricing for your menu.
This is where Beacon can help. We can advise you on the best menu management and recipe costing solution for your needs, as we have relationships with all the major software providers. We can also help you to reengineer your menus, increasing your menus performance and plate cost, so you see significant gains in profitability.
Reduce your food waste
Can you believe that restaurants in the UK produce 199,100 tonnes of food waste every year, costing the food industry £682 million annually! The equivalent of 320 million meals is thrown away every year by restaurants in the UK; that's five times the population of the UK! Not only is food waste causing irreparable damage to the environment, but it is also impacting profits in the restaurant industry and costing restaurant owners a small fortune.
Recent research put this wastage down to the following three factors: preparation (45%), customer leftovers (34%) and spoilage (21%). These figures suggest that restaurants across the UK are overbuying food stock and overfilling customer plates, too. Reducing wastage is crucial for any food business, and there are plenty of simple ways to do this. For example, rather than sending peels, seeds, skins and bones straight to the bin, you can use them to make soup stocks, generating value.
To minimise overproduction, you can switch from bulk production to smaller batches, revise order quantities regularly and prepare daily production estimates. You can also minimise using single-dish ingredients, as ingredients that don't have a multi-use across your menu can also contribute to food wastage.
Of course, automated systems can support you with this, and Beacon can advise you on the best one for your business. However, we also work with food waste apps like Too Good To Go that turn food waste into profit. Therefore, we can provide a complete cost-reduction plan to reduce the risk of wastage at every milestone in the dish creation process.
Our business waste supply partners can also provide waste audits to help understand your business's specific commercial food waste collection needs. This activity helps them can tailor their services to best suit you. It also allows you to see where improvements can be made and how much waste could potentially be saved through making some simple changes.
Optimise your staffing levels
Anyone who has run a hospitality business knows that labour is one of the highest costs. It's crucial to have the correct number of staff working at the right time to keep customers happy and profits high. Too few staff and customer service will suffer, and too many staff and your profit margin will shrink. So how do you find the right balance?
One way is to look at your sales reports yearly to identify any peaks or trends. You should also be aware of upcoming local events that could generate more footfall. And finally, it's essential to pay attention to the weather forecast. For example, if it's going to be a hot day and you have an outdoor terrace, you'll want to make sure you have enough staff on hand to deal with the demand.
Ensure your utility providers remain competitive
Energy prices have been rising steadily for years, but there's been a particularly sharp increase in the past few months. This is especially bad news for businesses in the hospitality industry, which are already operating on tight margins. As a result, many hotel and restaurant owners are reporting price hikes of more than 200%, and some energy providers have even stopped issuing quotes to business customers.
The war in Ukraine has led to shortages in gas and electricity supplies, which has exacerbated the situation. Many businesses are struggling to keep their doors open as a result. In addition to risk premiums and significant up-front renewal deposits, hospitality businesses now must contend with some utility providers refusing to take on or renew contracts linked to the sector.
Some providers have initially quoted for a business and then reneged on signed agreements, leaving companies with little choice but to find a new provider. This is a complex and time-consuming process, which often results in businesses accepting less favourable terms. If you have been facing similar difficulties, speak to your Beacon Procurement Services Manager. Our Utility partners are chosen for their hospitality experience and commitment to securing the best possible results for customers, no matter how volatile the market.
If you're looking for more ways to reduce your restaurant overheads, your Beacon Procurement Services Manager (PSM) is a great place to start. They can help you identify areas where you may be able to get better value from your supply chain. Alternatively, you can book a complimentary procurement audit with them. This will give us a chance to take a closer look at your monthly spend and see if there are any opportunities for efficiencies. If you're not sure who your PSM is, just drop us a message via Live Chat or complete the contact form below and we'll get them to contact you at a date and time that suits you. Start making the most of your Beacon membership today.