A Guide to Restaurant Cost Management in Africa

Here’s what you need to know:

• Data shows that more restaurants fail because of poor financial management vs an inability to generate revenue.
• Food costs account for over 35% of costs, and the world's best restaurants keep this under 25%
• Leading restaurant managers and owners regularly monitor their expenses and financial performance.
  

Our team has worked with thousands of restaurants across the continent. Our data has revealed that more restaurants go out of business due to their inability to manage costs rather than generate revenue. Therefore, as a restaurant owner or manager in Africa, it is essential to have an effective cost-control system to ensure your business's profitability and sustainability.

Here are some cost control measures that can be applied to your restaurant:

Control your food cost

Food cost is the most significant expense for most restaurants, so it is essential to have tight control over it. Here are some tips:

• Proper inventory management: Regularly check and monitor stock levels to avoid waste and overstocking.
• Menu engineering: Analyse your menu and adjust prices and portion sizes to ensure profitability while satisfying customer demand.
• Purchase from local suppliers: Local suppliers offer fresh produce at affordable prices, reducing food costs.

Optimise labour cost

Labour cost is the second-largest expense for most restaurants. To manage labour costs:

• Use scheduling software: Proper scheduling can help avoid overstaffing or understaffing, which can affect labour costs.
• Cross-train employees: Cross-trained employees can perform multiple roles, reducing the need to hire more staff.
• Hire seasonal workers: Hire seasonal staff instead of full-time employees during peak seasons to avoid extra labour costs.

Reduce overhead costs

Overhead costs include rent, utilities, and other non-food expenses. Here are some ways to control these costs:

• Energy-efficient equipment: Energy-efficient equipment can help save on utility bills.
• Lease negotiation: Negotiate your lease with the landlord to ensure affordable rent.
• Digitise your operations: Adopt digital technologies like online ordering, reservation systems, and digital menus to reduce paper usage and costs.

Monitor and analyse financial performance

Regular monitoring of financial performance is critical to making informed business decisions. Here are some ways to analyse financial performance:

• Review your income statement: The income statement provides insight into your restaurant's profitability.
• Analyse your break-even point: Analysing your break-even point can help you understand the minimum sales volume required to cover your costs.
• Conduct regular budget reviews: Review your budget regularly to ensure expenses align with projections.
  

For example, you can apply these cost control measures in several ways as an African restaurant manager. Purchasing fresh produce from local farmers can reduce food costs, while energy-efficient equipment can help save on utility bills. Additionally, cross-training employees can reduce labour costs, and digitising your operations can help you reduce paper usage and costs.

In conclusion, controlling restaurant costs is essential for the profitability and sustainability of your business. By implementing these cost control measures and adapting them to your African context, you can ensure the long-term success of your restaurant.

If you're a finance manager in the hospitality industry and would like to speak, my email is adnan@caantin.com. You can also try Caantin out for free.