7 Major Restaurant Costs and How You Can Manage Them

Managing costs is one of the biggest challenges you face every day. If you don’t keep an eye on spending, profits can disappear quickly. 

The seven restaurant costs that you need to control in your restaurant are food costs, labor costs, rent and utilities, equipment maintenance costs, marketing costs, restaurant waste costs, and insurance and permits costs. 

You will read in detail about why you need to control this cost and how you can specifically tackle the problem of food costs. Learn more about how tools like Food Market Hub can help you in reducing food costs. 

1. Food Costs 

Food costs take up a huge part of your budget—usually around 28% to 35% of your total sales. If you don’t track it properly, waste and over-ordering can eat into your profits. One of the best ways to control this is by using supplier management software like Food Market Hub.

This tool helps you compare prices from different suppliers to get the best deal. It also tracks your spending patterns so you can predict future costs and adjust your orders. When you know exactly where your money is going, you can make smarter decisions and reduce waste.

2. Labor Costs 

Paying your team is another major expense, often making up 25% to 30% of your revenue. If you schedule too many people during slow hours, you lose money. If you don’t have enough staff during busy times, service suffers.

To control labor costs, track your busiest hours and adjust schedules accordingly. Cross-training employees can also help—when one person can handle multiple roles, you don’t need as many staff members on duty.

3. Rent and Utilities

Rent, electricity, water, and gas are fixed costs, but you can still find ways to save. Energy-efficient appliances and LED lighting can cut electricity bills. Negotiating your lease or sharing kitchen space with another business can also reduce rent expenses.

4. Equipment Maintenance 

Kitchen equipment breaks down over time, and repairs can be expensive. Regular maintenance prevents bigger problems later. Train your staff to handle equipment properly, and keep a small budget for unexpected repairs so you’re never caught off guard.

5. Marketing 

You need to promote your business, but overspending on ads that don’t work hurts your budget. Focus on cost-effective strategies like social media and email marketing. Track which campaigns bring in the most customers and put more money into those. You can use POS systems like EasyEat that can help you in sending promotional SMS to your customers and inform them about all the latest happenings in your restaurant. 

6. Restaurant Waste 

Food waste is a silent profit killer. The USDA estimates that restaurants throw away about 4% to 10% of the food they buy before it even reaches the customer. To reduce waste, track inventory closely, use portion control, and repurpose ingredients when possible. Food market hub can help you in this aspect as well. It has double PAR level inventory monitoring. You can set 2 levels, which means that one level of PAR is for first warning and the second level is more like a critical warning. Whenever your ingredient level drops below the second level, you can order ingredients. This ensures that you don’t over-order ingredients and end up wasting them. 

7. Insurance and Permits

You can’t skip insurance and permits, but you can find ways to lower costs. Compare different insurance providers to get the best rates. Some policies bundle coverage, which can save money. Also, check if you qualify for any discounts or subsidies on permits.

How Food Market Hub Helps You Control Food Costs

Calculating food costs manually takes time and often leads to errors. Food Market Hub automates this process, giving you real-time data on what you’re spending. You can see which suppliers offer the best prices and track price changes over time.

The software also helps you forecast demand, so you order just what you need. This reduces waste and keeps your spending in check. When you have full visibility over your expenses, you make better decisions that protect your profits.

Frequently Asked Questions

1.How do I calculate food cost percentage?
Divide the cost of ingredients by the revenue generated from selling the dish, then multiply by 100. Keeping this percentage between 28% and 35% helps maintain profitability.

2.What is the biggest expense in a restaurant?
Food costs are usually the highest, followed by labor and rent. Controlling these three areas is key to staying profitable.

3.How can I reduce food waste?
Track inventory, train staff on portion control, and use software to predict demand accurately. Repurposing ingredients in different dishes also helps.

4.Is supplier management software worth it?
Yes. Tools like Food Market Hub save time, reduce errors, and help you negotiate better prices with suppliers.

5.How often should I review my expenses?
Check your costs weekly to catch problems early. A monthly deep dive helps you spot trends and adjust your budget.

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Managing restaurant expenses doesn’t have to be overwhelming. By focusing on the biggest costs—like food, labor, and waste—you can make small changes that add up to big savings. Tools like Food Market Hub take the guesswork out of food costing, so you spend less time worrying and more time growing your business.

Start tracking your costs today, and you’ll see the difference in your profits tomorrow.

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