Protect the Margin and Protect the Experience

Why Restaurant Cost Control Is a Hospitality Leadership Responsibility

By Jim Bierbauer

Vice President, Gold Moon Capital Group | 10M Member

After more than two decades in hospitality and leading multimillion-dollar restaurant operations, I know how much work goes into a successful service.

I also know that a full dining room does not always mean a restaurant is making money.

You can have a strong night, a hardworking team and guests leaving happy…..then review the financials and wonder why so little made it to the bottom line.

That is when restaurant leaders need to look more closely.

Are we scheduling for the business we expect, or simply copying last week’s schedule? Are portions consistent? Do we know what is already in the walk-in before placing another order? Are we measuring waste, reviewing overtime and understanding which menu items actually contribute to the business?

These may seem like everyday decisions, but together they determine whether a restaurant remains financially healthy.

Hospitality is about taking care of people. That includes guests and employees. The business must be profitable enough to continue investing in both.

The Pressure on Restaurants Is Real

Cost discipline is especially important in the current restaurant environment.

The National Restaurant Association reported that 33% of surveyed operators said their restaurants were not profitable during the first half of 2026. Although food-price inflation has recently shown signs of moderation, wholesale food prices in September 2026 remained 34% above their February 2020 level.

Some inflation relief does not eliminate the higher cost base restaurants now carry.

For me, the question is not simply, “Where can we cut?”

The better question is: Where can we operate more effectively without taking away from what our guests came to experience?

Understand Which Costs Can Be Managed

Restaurant leaders need to understand the difference between fixed, variable and mixed costs.

Fixed expenses generally remain stable over a defined period. Base rent, salaried management and fixed software subscriptions are common examples. Whether a restaurant serves 100 guests or 500 guests, those commitments generally remain.

Variable expenses change with business activity. Food and beverage consumption, hourly labor above minimum staffing and transaction-based fees generally rise or fall with sales volume.

Other costs are mixed. Utilities, for example, may include both a fixed charge and usage-based expenses.

Variable does not mean entirely controllable. Managers can influence ordering, preparation, portions, waste and scheduled hours. They cannot dictate commodity prices, insurance costs or local wage pressure.

The key is separating outside price changes from internal execution problems. Otherwise, management may attempt to solve the wrong problem.

Build the Schedule Around the Business

Labor is often where cost-control conversations become difficult.

A restaurant must manage payroll, but it also needs enough people to deliver the experience it promises.

Schedules should be built around expected demand by daypart and time interval. Reservations, historical covers, special events, seasonality and realistic walk-in assumptions should all be considered.

Two hundred covers spread across an evening require a different staffing plan from 200 covers arriving within 90 minutes.

Bring employees in when the workload requires them. Stagger start times, plan preparation around expected sales and review overtime before it becomes a surprise. Cross-training can also create flexibility, provided employees are properly prepared for the responsibilities they are given.

Every restaurant should also establish the minimum coverage needed to protect its service.

Guests should be welcomed promptly. Someone should be available to guide them through the menu.

Tables should receive attention throughout the meal, and a manager should be available when something goes wrong.

Cutting below that level may lower payroll temporarily, but it can also create slower service, remade dishes, complimentary items, exhausted employees and guests who do not return.

Restaurant leaders should review fully loaded labor costs, including wages, salaries, employer payroll taxes, benefits and applicable employer-paid insurance.

The basic calculation is:

Labor cost percentage = Fully loaded labor cost ÷ Total net sales × 100

Suppose a restaurant spends $30,000 on labor against $100,000 in net sales. Its labor percentage is 30%.

If sales fall to $85,000 while labor remains at $30,000, the ratio rises to approximately 35.3%, even though payroll dollars did not increase.

Before cutting hours, determine whether the real issue is scheduling, weak demand, workflow or execution.

Know Where the Food Is Going

Before discussing food-cost percentages, a restaurant needs reliable inventory information.

What was purchased during the week and what the kitchen actually used are not necessarily the same thing.

The standard calculation is:

Beginning inventory + Purchases − Ending inventory = Cost of goods sold

That calculation should include consistent adjustments for transfers, returns and credits.

Restaurant leaders should then compare actual usage with theoretical usage….what recipes and recorded sales suggest should have been consumed.

If theoretical food cost is 29% but actual food cost is 33% on $100,000 in net food sales, that four-point difference represents $4,000 in costs above the theoretical amount.

That does not automatically prove that $4,000 was wasted or lost. It is a signal to investigate.

Possible causes include:

• Inconsistent portions

• Spoilage or preparation waste

• Receiving errors

• Outdated recipe costs

• Inaccurate inventory counts

• Unrecorded employee meals, comps or other consumption

• Remakes and returned dishes

The goal is to find the cause, not immediately assign blame.

Restaurants should maintain recipes with exact quantities, current ingredient costs and realistic yields. Deliveries should be checked for quantity, quality, condition and invoice price. High-cost proteins should be weighed, and waste should be documented by item, quantity, reason and value.

A lower purchase price does not always produce a lower plate cost. A less expensive product with a poor usable yield may ultimately cost more per portion.

The invoice price is only one part of the decision.

Look Beyond Food-Cost Percentage

Menu decisions should not be made from food-cost percentages alone.

Consider a hypothetical $60 entrée containing $24 in ingredients. It has a 40% food cost and leaves $36 before labor and other expenses.

A $30 entrée containing $9 in ingredients has a 30% food cost but leaves only $21 before other expenses.

The lower percentage does not automatically produce the stronger financial result.

Leaders must also consider dollar contribution, sales volume, preparation time, popularity and the role each item plays in the overall guest experience.

Give the Bar the Same Attention

Beverage operations require the same discipline as the kitchen.

Cocktails should have documented recipes and measured pours. Cost calculations should include mixers, syrups, garnishes and other ingredients—not only the liquor.

High-value bottles should be counted regularly. Usage should be reconciled against recorded sales, voids, comps, transfers and breakage.

Wine-by-the-glass programs should be based on actual pour specifications and preservation capabilities. A bottle with an attractive theoretical margin can become a weak performer if a significant portion is discarded.

Draft beer performance can be affected by line condition, temperature, foam and usable yield. Cocktail margins can be weakened by inconsistent builds or over-pouring.

When the numbers do not align, check the counts, recipes and records before assuming that an employee has done something wrong. Be fair with the team while remaining clear about expectations.

Give Managers a Routine They Can Follow

Across food, beverage and labor, restaurant leaders should regularly review prime cost.

Prime cost percentage = Cost of goods sold + Fully loaded labor cost ÷ Total net sales × 100

Industry benchmarks can provide useful context, but they should not automatically become targets for every restaurant. Each operation has its own menu, market, service model and financial commitments.

At $12 million in annual net sales, improving a cost ratio by one percentage point represents $120,000 annually, assuming sales and other costs remain unchanged.

That improvement can come from better preparation, more accurate scheduling, reduced spoilage, consistent portions or stronger receiving controls. It does not have to come from weakening the product or guest experience.

Managers also need a routine they can follow:

Daily: Compare forecast sales with actual sales and scheduled hours with actual hours. Review overtime, waste, comps and service failures.

Weekly: Review inventory, actual versus theoretical usage, supplier price changes and prime cost using consistent procedures and reporting periods.

Monthly: Review reconciled financial statements, update the cash forecast and compare results with the budget.

Costs should be reviewed alongside ticket times, remakes, guest complaints, employee turnover and repeat visits when reliable information is available.

If labor percentage improves but service becomes slower and complaints increase, leadership needs to understand what happened before declaring it a win.

Profit and Cash Flow Are Not the Same

A restaurant can appear profitable and still experience a cash shortage.

The profit-and-loss statement and cash-flow forecast answer different questions. Inventory purchases, supplier payment timing, loan payments, taxes, payroll and planned equipment spending can all affect available cash differently from reported profit.

Maintain a rolling cash forecast alongside the income statement. Restaurant leaders should know when payroll, supplier invoices, taxes, debt payments and major capital expenditures are coming due.

Technology can help identify changes earlier, but it depends on accurate recipes, counts, sales records and schedules.

Reports are valuable, but managers still need to be present on the floor. A report can tell you that something changed. Being present helps you understand why.

Cost Control Is Leadership

People deserve to understand what is being asked of them and why it matters.

Explain why portions matter. Show managers how scheduling decisions affect the business and the guest experience. Give employees the training and tools to succeed, then follow through with coaching and accountability.

That is part of taking care of the team.

So is managing the business well enough to support their jobs, maintain the property and continue delivering a product everyone can be proud to serve.

For me, a well-run restaurant is one where the numbers make sense, the team understands what is expected and guests feel looked after.

We owe it to the people who work with us and the guests who choose us to pay attention to both the finances and the floor.

They depend on each other every day.

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