Conquering Food and Labor Costs for Hawaii Sandwich Shops and Fast Casual Restaurants
In the fast-paced and ever fluctuating food and beverage (F&B) industry, understanding your margins isn’t a luxury – it's a necessity. For EARL sandwich shops on Oahu, meticulously tracking food and labor costs is part of the key to our profitability and long-term success. This quick guide delves into essential food business principles all Hawaii sandwich shops, fast casual restaurants, and restaurants in general need to know and master to survive and thrive. Especially in a high-cost location such as Hawaii, where around 90% of our food is imported. Whether you’re in the Hawaii F&B industry or just curious about what it takes to run a top sandwich shop in Honolulu, read on to see how EARL makes money moves and continues to grow after a decade in the Oahu food scene.
The Power of Prime Cost
Prime cost serves as the foundation for a thriving food establishment and is something all Hawaii F&B pros should know. It directly impacts your ability to generate profit after accounting for all other operational expenses. Put simply, it’s your food costs + labor costs, which are broken down below:
Food Cost: This encompasses all ingredients used to create, for example, a top Oahu sandwich shop like EARL’s delicious subs, salads, and sides. It includes the cost of meat, cheese, vegetables, bread, condiments, and any other culinary components that make up a restaurant’s offerings.
Labor Cost: This represents the wages and salaries paid to staff involved in food preparation and service (direct labor) as well as those paid to behind-the-scenes employees or contractors in areas such as accounting or admin (indirect labor).
Optimizing food and labor cost management directly affects your prime cost, improving your bottom line.
Under 60% Prime Cost Challenge: Impossible or not?
The industry standard for both food and labor costs respectively is 30%, making an ideal prime cost below 60%. Some might scoff at the idea of achieving a prime cost ratio under 60% in today's market. While it's undoubtedly a challenging feat, it's not an impossible one. EARL’s an example of this, and other Hawaii sandwich shops and fast casual restaurants can be too by learning and mastering the principles below.
Step 1: Embrace Continuous Food and Labor Cost Evaluation
The cornerstone of cost optimization lies in meticulous monitoring. Regularly evaluate your current food and labor costs to understand where you can adjust purchasing and staffing decisions and price your menu items accordingly. Consider implementing a dedicated food costing software like Margin Edge – a powerful tool praised we at EARL love for its user-friendliness and accurate, real-time data analysis.
Step 2: Learn the Art of Price Negotiation and Rebates
Building strong relationships with your vendors and manufacturers is crucial. Negotiate pricing for bulk purchases and explore rebate programs that reward consistent loyalty. By becoming a valued customer, you unlock opportunities for cost reductions that can be a game-changer for your prime cost and bottom line.
Step 3: Efficiency is Key in the Restaurant Industry
Always strive to improve operational efficiency. Analyze your procedures to identify areas for streamlining. Consider investing in better equipment that minimizes waste and expedites food preparation without compromising quality. Additionally, explore employee scheduling strategies that ensure optimal staffing levels throughout the day.
Beyond the Basics: More Food Cost Management Strategies
Portion Control: Implement and reinforce standardized portion sizes for each menu item. Utilize measuring tools and train staff to ensure consistency. This minimizes waste and ensures consistent quality.
Menu Engineering: Analyze your menu's profitability. Identify high-margin items and strategically promote them. Conversely, consider revising or potentially removing low-margin items that disproportionately impact your prime cost.
Embrace Technology: Explore digital solutions like inventory management software. These tools help you anticipate ingredient needs, prevent overstocking, and minimize spoilage.
Waste Reduction: Implement effective waste reduction strategies. Conduct regular inventory checks to identify expiring ingredients and utilize them creatively in specials or side dishes. Explore composting programs for organic waste.
Bonus Tips to Save Costs and Limit Waste
Track the Competition
Stay informed about industry trends and your competitors' pricing strategies. Conduct some competitor analysis to understand others’ menu offerings and pricing structures. This knowledge allows you to strategically position your sandwich shop or restaurant in the market, maintaining competitiveness without sacrificing profitability.
Power Up with Partnerships
Consider collaborating with local farms and purveyors to source high-quality ingredients at competitive prices. Building local partnerships often leads to better deals, fresher produce, and generates more interest from conscious customers, further enhancing your menu's appeal and profitability.
Communicate, Educate, Involve Your Team
Effective communication with your staff is essential. Educate your employees on the importance of food cost management. Encourage them to identify areas for waste reduction and promote responsible ingredient usage. Empower them to take ownership of the process and create a culture of mindfulness around operational efficiency and food waste.
Cost Management Is a Continuous Journey
Food cost management is an ongoing process, not a one-time fix. By implementing and mastering the strategies outlined above over time, Hawaii restaurants can become better equipped to navigate the complexities of the F&B industry as EARL has learned to do throughout the years. Continuous monitoring, strategic partnerships, and a commitment to operational efficiency are the keys to unlocking long-term success. Embrace the prime cost challenge, refine your approach, and watch your restaurant thrive!
There’s a billion other tips we couldn’t fit in this quick rundown, so if you need more advice or have questions just ask EARL’s owner Justin on our Instagram. Now that you have a better appreciation for all the costly ins and outs that go into running one of the best sandwich shops in Hawaii, show us some love! Get $5 OFF when you sign up for our loyalty program and use in-store or on your next online order.