How to Control Food and Labour Costs in a Restaurant

How to Control Food and Labour Costs in a Restaurant

Running a busy restaurant doesn't always mean running a profitable restaurant.

Sales can be strong, tables can be full, and the kitchen can be moving all night — but if food and labour costs aren't under control, very little of that revenue may actually make it to the bottom line.

Two of the biggest expenses in almost every restaurant are food and labour. Together, they make up what is commonly called prime cost, one of the most important numbers restaurant operators should be watching.

Start With Accurate Numbers

Before you can control costs, you need to know what they actually are.

Good restaurant bookkeeping should give you a clear picture of sales, purchases, payroll, food cost, labour cost and operating expenses.

The problem is that many operators don't see these numbers until weeks after the month has ended.

By then, the opportunity to correct the problem has already passed.

Regular financial reporting allows restaurant owners to identify changes earlier and ask better questions.

Why did food cost increase this month? Did labour rise faster than sales? Are supplier prices changing? Is overtime increasing? Are menu items still producing the margins you expect?

Those questions are much easier to answer when your bookkeeping is current and organized.

Understand Your Food Cost

Food cost isn't simply about negotiating lower supplier prices.

Portion control, waste, inventory, menu pricing, purchasing habits and recipe costs can all have a major impact.

A restaurant may have great sales but still struggle with food cost because portions have slowly increased, recipes haven't been updated after supplier price changes, or inventory isn't being properly tracked.

Operators should regularly compare purchasing, inventory and sales data instead of relying only on what was spent with suppliers.

Watch Labour Alongside Sales

Labour should never be looked at in isolation.

A higher labour dollar amount isn't necessarily a problem if sales increased significantly at the same time.

What matters is the relationship between the two.

Restaurant operators should monitor labour as a percentage of sales and look for patterns by day, week and month.

Scheduling based on realistic sales forecasts can also help reduce unnecessary labour without compromising service.

The goal isn't simply to cut hours. It's to put the right number of people in the right place at the right time.

Know Your Prime Cost

Food and labour costs are closely connected, which is why looking at prime cost can provide a better picture of overall restaurant performance.

One month might have slightly higher food cost but lower labour. Another could be the opposite.

Looking at the combined number helps operators understand whether the core economics of the restaurant are moving in the right direction.

Turn Your Numbers Into Decisions

Financial reports shouldn't just tell you what happened.

They should help you decide what to do next.

At Prime Cost Partners, we combine bookkeeping with hospitality-focused profit control to help restaurant and hospitality operators better understand the numbers behind their businesses.

That means looking beyond whether the books balance and helping identify what food, labour and operating costs are telling you about the business.

Because better bookkeeping isn't just about recording the past.

It's about making better decisions for what happens next.