Restaurants after-shocks – Part 1: How to beat food inflation

Just when business-as-usual feels a step closer, restaurants and bars are being hit by surging prices for ingredients. However, Next-Gen restaurant tech can help you to protect your margins against food and beverage inflation. 

Are you seeing a trend in price increases for everyday ingredients? 

It’s happening at a global level and on a grand scale. The Financial Times reports that prices for bulk contracts of coffee, milk, sugar, wheat, oats and orange juice have jumped 28% on average from 2019 levels. This relates to trading on US futures markets, where companies lock in supplies or hedge their exposure to commodities costs.

High global demand is also filtering down to businesses and consumers in the UK. For example, there’s been a year-on-year increase of 1.7% in ‘breakfast items’, according to Ulster Bank figures reported on BusinessLive. Tomatoes have jumped by 15.1%, pork sausages have risen by 5.1% and coffee is up 0.3%.

“Whether it’s soaring shipping costs, packaging supply issues, commodity price hikes, shortages of drivers and seasonal workers, increased labour and safety costs, or new Brexit-related red tape, inflationary pressures have been mounting,” comments Adam Leyland in The Grocer. He notes that wheat, corn and soy have hit prices not seen since the last global food price crisis of 2012.

The inflation dilemma

These price hikes present a big dilemma for restaurants. Can you absorb extra costs when margins are uncomfortably thin and profits have already been hammered by lockdowns — or should you pass on the costs to customers at a time when consumer confidence is only just returning?

Fortunately, there is an alternative. Next-Gen restaurant tech can help you to optimise your operation and save as much as 15% of food costs.

These five actions can make the difference:

Action #1: Understand the real cost of every dish and optimise your menu based on margins

Anyone can pack their premises by launching cut-price promotions. But the overriding mission for a sustainable business is all about the bottom line. It’s essential to know which dishes are your top earners and which should be replaced because the margin just isn’t enough.

With the right restaurant tech, you can see this granular detail as food prices change. You can switch ingredients where necessary, fine tune your menu and alter pricing to make your business more profitable. You can also encourage your table staff to steer diners towards the dishes and upsell options with the greatest margin.

Action #2: Become an inventory management expert and avoid waste

When up to 40% of your cost base may be tied up in stock, food and beverage, it’s essential to get real-time visibility and control of inventory. Food waste alone costs the UK restaurant sector £682 million each year, according to estimates.

Unless restaurants take control of their inventory, they can end up with blind ordering, costly guessing or careless bulk buying. However, Next-Gen tech can let you manage your stock in real-time — from delivery to sale, including write-offs and wastage. With intuitive tools on tablets and mobile devices, staff can complete regular stock checks in moments and record events as they happen, giving you real-time visibility.

Action #3: Use accurate sales forecasts to determine your orders

It’s easy to over-order if you’re concerned about running out of key ingredients. But artificial intelligence can be harnessed to predict your sales accurately for the next month or period ahead.

Next-Gen tech can think ahead for you. It will look at your stock and tell you how much to increase or reduce your orders, based on your previous sales patterns and any additional seasonal factors or events you allow for. In fact, it’s possible to automatically predict what you’ll need tomorrow with 95% or more accuracy. You’ll have less money locked up in stock too, helping with cash-flow.

Action #4: Optimise kitchen production and portioning

Using accurate sales forecasts, Next-Gen tech can create automatic prep plans so your teams know what to get ready every day — and the minimum of food is wasted.

A kitchen display system can be part of your unified Next-Gen tech and it provides your team with batch management tools within the same code base. This means that ingredients from multiple suppliers —turned into batches of dishes — can be tracked easily from weighing and prep, through to servings and sales: real-time.  

Portion sizes can be monitored and controlled, while wastage is recorded accurately, including any returned dishes and bottle breakages. This means you can control wastage and cost-of-sale in real-time across each of your locations.

Action #5: Consolidate orders and suppliers to achieve best price

With precise visibility of your stock requirements and accurate sales forecasts, you can avoid ad-hoc ordering. Instead, you’ll have accurate data to negotiate regular orders and bigger quantities, securing competitive prices from suppliers.

Next-Gen tech will allow executives to see if one restaurant is paying more than its counterparts — and intervene if this isn’t picked up by managers at the venue. You can combine orders and consolidate suppliers across your group. Once deals are secured, your restaurant tech can also place orders automatically as soon as it recognises your inventory is getting low.

Keeping quality high and costs low

These five measures can help restaurants to recoup as much as 15% of food costs and so offset the significant rises in the price of ingredients.

These steps are part of a wider digital transformation that’s possible with Next-Gen restaurant tech. Discover more about how much you could save across your business, using our Next-Gen Tech Savings Calculator.