Fastest way for F&B businesses to double their margin

Food & beverage businesses often walk a financial tightrope — with a shaky 10% bottom line margin that’s under constant pressure. But it’s possible to double this figure and put your operation on a firmer footing by making key changes.  

The past 12 months have been tough on the F&B trade in the UK. Many high-profile restaurants were forced to seek rescue deals, while 922 shut their doors in 2019[1].

But it’s not because of crumbling demand. Restaurant numbers are up 16% on 2010. The chief problem is rising expenditure putting the squeeze on margins.

When your targeted profit is ultra-thin, the slightest mistake or miscalculation — anywhere across your F&B operation — can have devastating consequences. And it’s no wonder why this happens: Restaurants lack the right information to make accurate decisions quickly.

So how can F&B businesses transform a shaky 10% bottom line margin into a consistent 20%?

To begin the process, you need to focus on your Profit & Loss (P&L) and its two major expense accounts: Cost of goods sold (COGS) and Payroll. Let’s see how these are built and what can be changed.

How the new breed of POS can reduce costs to double your margin

Opportunities using iiko next generation POS:

Typical casual dining establishment Share of revenue spent – before POS   Share of revenue spent – after POS  Impact on margin
COGS 32% 25% +7% saving
Payroll 30% 28% +2% saving
Rent 10% 10%
Other 18% 17% +1% saving
Total 90% 80%  
Margin achieved 10% 20% +10% saving
Figures based on iiko global research, 2020

Saving around 7% on COGS

For a chain of casual dining restaurants, theoretical food and beverage costs can represent around 32% of total expenditure. But this can be reduced to 25%, as demonstrated by F&B businesses around the world using the new breed of point-of-sale system (POS) from iiko. Here’s how it’s done …

  • Tackling waste can save you around 4-6%: By implementing real-time controls, every ingredient can be tracked from arrival. You can check your inventory at any of your sites, moment by moment. Your POS will tell you what needs ordering —nothing more, nothing less. In fact, it’ll order for you automatically if you wish. Prep plans are created using artificial intelligence based sales forecasts. Portion sizes are regulated carefully too. Every human action is guided and measured — but in a way that makes life faster and easier for your staff. Put simply, the whole process allows no room for guesswork and human error.

  • Controlling supplier prices and playing with recipes can save you 1-2%: Even if your staff don’t remember how much they normally pay for supplies — your POS can act as your financial watchdog. There’s zero chance of prices being hiked by a supplier and then accepted without your approval. You’ll also get a sense of the cost of ingredients for each dish and how to make them more profitably with some adjustments, so your menu delivers stronger margins. 

Reducing payroll costs by around 2%

Employee expenditure may seem too difficult to address. But with a POS like iiko, you’ve got the right tools to lower your overall labour costs by 2-4% — without impacting quality or customer service. There are three areas to focus on right away:

  • Management time: Your managers can avoid spending hours trapped in the back office pouring over spreadsheets — and more time adding real value elsewhere. The system is optimised to save them time by automating and optimising virtually every aspect of staff management, from storing staff contracts to maintaining attendance records.

  • Smarter scheduling: Using accurate financial forecasts, your POS knows precisely those the days and hours when you’ll need more people on duty — so staff won’t be sitting idly during quiet moments or unable to serve enough customers at busy times. With a powerful schedule builder, you can also copy reoccurring shifts and set shift overlaps to provide the right levels of cover.

  • Staff incentives: It’s possible to increase employee productivity dramatically with incentives programmes within your POS — for front and back of house teams. For example, a waiter could receive a percentage of sales for a particular item, while a chef could receive a bonus for sales of a profitable new dish. Behind it all, you’re sharpening their performance with incentive programs to boost your bottom line. 

Cutting other costs by 1%

With the right POS, any expenditure across your business becomes visible — from the cost of non-food consumables, through to staff uniforms, in-store repairs and IT maintenance. There’s no room for unusual, one-off costs to slip under the radar.

With COGS, payroll and other costs under control through your POS, your margin can double.

With the right tech, your margin is safe

The beauty of a POS such as iiko is that it’s all-in-one. There’s no clunky integration between ill-fitting apps and legacy back-office programmes. Instead, iiko is designed to fit the F&B world effortlessly. It covers the nature of the business and all its nuances, so 100% of your costs can be brought under control.

Everything that moves and breathes across your F&B operation is recorded in near real-time. So you’re not waiting for your staff to complete the numbers, or an accountant to provide you with the figures. Instead, you get actionable, up-to-the-moment data that allows everyone to make the right decisions to protect your margin.

Farmer J’s story is a great example of how iiko is working well for a fast-paced, successful business serving 300 customers an hour.

Can we boost our bottom line even more?

The simple answer is Yes. You don’t need to stop at 20%. Once you’ve brought costs under control, then revenue can be increased by another 5-10% just by implementing loyalty systems, lunchtime optimisation and changes in service speed and quality.

With iiko, you’ve got all the tools on board. Just switch them on when you need them. 

Discover more
Find out why iiko is trusted by over 30,000 F&B businesses worldwide. Request a demo or find out more by contacting our UK and Europe team 020 3880 9977.

Sources: [1] ‘Thousands of restaurant jobs axed as high-profile chains endured torrid 2019’ – ITV News (4 January 2020)