Three ways to cut costs
Abdul Kader Saadi, managing director of Glee Hospitality Solutions, defines the three main categories for expenses and how to cut costs at your restaurant
Food
The food supply bill varies, depending on each F&B concept. It could reach 20 percent of the total purchase bill in a dessert-oriented outlet or 27 percent in a café, but might exceed 30 percent in a fine dining concept. We need to make suppliers understand the current market situation and try to negotiate better prices. However, this will not be an easy task, since purchasing volumes would also drop. The best solution would be to reconsolidate and reduce the number of suppliers in order to give large orders to fewer suppliers and renegotiate on prices. A reasonable management strategy would balance product selection. It will also push towards reviewing the recipes and the ingredients to try to reduce the cost of every dish and increase its yield without compromising on quality and minimize waste. In challenging times, restaurant managers should also resist the temptation to increase prices; on the contrary, they should look at introducing more deals and offers.
Training staff and offering bonus and compensation packages are a must, even in difficult market conditions
Labor
Unfortunately, in a tough market, business owners often let staff go, with plans to maintain the same service and quality, but using minimum resources available. This should be the last resort for any business as the ‘hiring again’ process in this market is both difficult and expensive. Rehiring costs tend to rise when involving visas and work permit fees relating to the employment of foreigners, which can amount to at least USD 2000 per person. The time spent on recruiting is even more expensive. Hiring is a particular challenge in countries such as the UAE, where the concept of part-time work does not exist and employees have to be taken on full time. Training staff and offering bonus and compensation packages are a must, even in difficult market conditions. Adding 1 - 2 percent to salaries won’t affect a company’s budget, but makes a huge difference for them, providing motivation and improving their engagement.
Rent
Rents in the region are a major expense. Relieving the pressure will depend on how willing landlords are to adjust to market conditions and their readiness to grant rent revision or reduction for a certain period. While an agreement along these lines would provide business owners with valuable breathing space, rent is often non-negotiable, leading, unfortunately, to the closure of some businesses. Landlords would do well to consider that the cost of replacing operators and down time is more expensive than reviewing the rent for a current client. In challenging market conditions, restaurant owners might want to decide whether a standalone or a mall outlet is their best option. While malls have a higher lease ticket, they tend to guarantee higher footfall, especially in the hot GCC countries. However, the situation may differ in countries such as Lebanon, where shoppers are less affected by the weather.