Sustain profitability and long-term growth by projecting and managing costs across locations

Managing restaurant operating costs for one location is challenging enough—managing multiple restaurant locations and concepts is a whole other game.

Scaling your business means:

  • More inventory
  • More labor
  • More vendors to manage
  • More costs to control

All that “more” inevitably adds up to a lot of financial complexity. Managing that complexity and controlling restaurant operating costs doesn’t have to be tricky.

Automated restaurant management tools can take the sting (and labor costs) out of tedious back-office work. Those same tools can help you and your team successfully monitor and adjust costs, ensuring you’re tracking toward single-location goals and larger business objectives.

This all starts with a solid understanding of your restaurant operating costs.

Continue reading to learn about cross-location operating costs, the systems that make it all easier to manage, and more.

Restaurant operating costs breakdown

Restaurant operating costs consist of controllable and uncontrollable costs.

Controllable costs are costs that restaurant owners can directly change, whereas uncontrollable costs are costs they cannot.

Here’s a restaurant operating costs breakdown.

Major controllable operating costs

Prime costs. These are your most important restaurant operating costs, accounting for roughly 60% of any operators’ costs. They include:

  • Cost of Goods Sold (COGS), which is the cost of the supplies and ingredients used to create dishes.
  • Labor, which includes all labor-related costs like wages, salaries, bonuses, overtime, payroll taxes, health care, and vacation days.

Plate or recipe costs. This is the cost to serve a menu item.

Utility costs. Water and electricity are your most common utilities. You cannot control the unit cost, but you can manage your usage.

Monthly marketing costs. Your monthly marketing spend will depend on the marketing medium and how frequently you market.

Major uncontrollable operating costs

Rent. Technically, you can negotiate your rent, but the decision to increase or decrease it still rests with the landlord.

Internet, cable, and phone costs. These are usually fixed monthly fees you can only change if you change your package.

Monthly software technology costs. Examples include your accounting solution or restaurant management software.

Managing operating costs across multiple locations—it’s not a walk in the park

It’s easy to get caught up in the financial complexity and time-consuming work that comes with multiple locations—complexities that are intensified by inefficient systems and manual process (e.g., Excel).

These hiccups make back office work even more tedious and resource-intensive.

For example, how long would it take you to calculate plate costs manually for one location? And how accurate do you think you could get?

You need to:

  • List all ingredients that go into a dish on your spreadsheet
  • Calculate the unit serving cost by converting the product price unit
  • Factor in yield and waste
  • Consider all the labor that goes into the dish
  • And then if it’s sold as takeout, price in your packaging and other to-go materials

You don’t have to calculate plate costs for every plate you end up washing—but it’s no one-off task either.

You need to do these calculations with each new invoice and product price change across every recipe if you want detailed tracking.

Unsurprisingly, many operators don’t even bother with these crucial calculations. Who can blame them!

The point is: There’s no shortage of challenges in managing restaurant operating costs across multiple locations. There’s also a lot on your plate—whether it’s having to do more resource-heavy work while being held back by inefficiencies or simply finding enough time to get the work done with so many things vying for your time.

Luckily, there are ways to simplify complexity and free up time, all while improving your cost management.

Stop getting cooked by your food costs 🔥

Get the recording for our webinar, Fixing 5 Common Food Cost Management Fails!

Controlling restaurant operating costs—it starts with the right software

Investing in the right restaurant management software simplifies your restaurant cost calculations, removes the manual input, and provides valuable insights for making more informed decisions.

For xtraCHEF by Toast, it all starts with invoice processing automation.

Automated invoice processing takes the heat out of cost management

Invoices contain all your product costs. Our invoice processing tools enable you to easily capture this data with a simple photo or scan.

xtreaCHEF's automated invoice processing enables you to get real-time line-item level updates.

We can automatically pull and route General Ledger data to your accounting software—while extracting line-item invoice details to xtraCHEF for precise food costing and more.

This ability to easily record and track product prices from invoice to invoice helps you spot cost trends at the ingredient level as well as keep vendors honest.

Each product price update automatically flows through to adjust recipe prices in xtraCHEF. If chicken prices rise by 15% from one week to the next, it will reflect in any recipes with that same chicken.

This information can spur you to shop around for new vendors and cheaper alternatives or to increase your menu prices to account for the cost increases.

Free up resources & alleviate labor costs with crucial automations

Automated invoice processing can free up literal labor hours for you and your team to put to use elsewhere. Keep managers on task, whether that’s working with the kitchen or greeting customers, rather than spending hours inputting invoice data into spreadsheets.

The same goes for any in-house bookkeepers or contract accountants.

Take hours off your bill by eliminating manual invoice processing and accounts payable for them. Or use that newfound time to work together on spotting cost trends across locations and constantly updating projections.

All of the cost trends, vendor negotiations, and more can add up to money saved. Every dollar saved can be another dollar to use attracting and retaining labor.

xtraCHEF’s invoice processing automation also helps you manage inventory and maintain lean levels. This way you never have too much stock sitting on the shelfs or rotting in the pantry.

That’s capital you can free up to reinvest in labor costs or into that next build out.

Set goals and track performance for single-locations and business-wide

There’s a saying tossed around by an accountant we work with describing some restaurants. It goes:

“You don’t own a business, you own a paycheck.”

The idea is that you’re not in total control without consistent insights. Restaurant operators need accurate, updated controllable cost details to spot trends and inform critical decisions—across the business and for individual restaurant performance.

Without the insights and the ability to make informed adjustments, you’re at the mercy of your costs and simply getting a paycheck from whatever is leftover.

Getting consistent control of costs is a two-fold benefit, as it opens up your business to you as well as enables you to start setting goals and tracking toward them.

xtraCHEF by Toast can provide the insights that you need to track profitability—again, across your entire business, individual locations, and even specific menu items. From there, it’s just a set of if/then statements to establish your goals.

For example, if you want to open a second location, then you need to hit a minimum of xx% profitability at your existing location for xx months to generate the required capital.

You’ll have to fill in the blanks based on all the costs associated with the second location, but we can help you monitor that profitability along the way.

Don’t get bogged down by the financial complexity of multiple locations

There’s no way to get around it: economic complexity increases as you open up more locations. This doesn’t mean you should accept the status quo.

Instead, invest in tools that ensure you don’t get bogged down by the financial complexity and resource-heavy and time-intensive processes that often accompany it.

Let xtraCHEF by Toast do the heavy lifting. Schedule your demo today!

Let xtraCHEF do your dirty work.

See how our platform sets restaurants of all sizes and service levels up for success by scheduling a demo with a Product Specialist.