The Middle East and North Africa (MENA) region’s restaurant and coffee shop sector faces various hurdles, including global inflation, which directly impacts operating costs, raw material prices, and consumer purchasing power. Inflation affects all types of restaurants, from fine dining establishments to food trucks. No business is immune to the consequences of inflation.
For instance, the International Monetary Fund (IMF) forecasts the MENA region will experience inflation rates of 11% in 2025. As a result, some restaurant owners have resorted to cutting costs or sacrificing service quality, which can harm the restaurant’s reputation and customer experience. Doing so ultimately leads to losing customers in the long run.
In this article, we will explore practical strategies for combating inflation in restaurants and coffee shops. We’ll explore the use of modern tools that can help improve financial performance amidst these economic challenges, without compromising quality or customer experience.
First: Restaurant financial monitoring and follow-up
With inflationary pressures and rising costs, it’s crucial to create a clear restaurant budget, including a detailed analysis of various expenses. Restaurant owners must identify sources of high expenditures, including ingredient costs, employee salaries, utility bills, rent, and other operating expenses.
We recommend restaurateurs conduct monthly financial reviews to assess the performance of their venues. By comparing actual expenses against the budget, they can take proactive measures to address any issues before they escalate. Continuous monitoring is far more effective than dealing with unexpected financial surprises.
Second: Using menu engineering to address inflation and enhance profitability
In a restaurant, the dishes offered can vary in both popularity and profitability. You can analyze this through menu engineering. The main objective is to highlight dishes with high profit margins while eliminating those that do not sell well. By promoting these profitable items and positioning them strategically on the menu, restaurants can attract more customers and boost sales.
For dishes with low profit margins, consider removing them from the menu or improving their recipes to minimize ingredient costs. Alternatively, you could incorporate those ingredients into more profitable dishes, which would lead to operational efficiencies and reduced expenses.
Further reading: Menu Engineering 101: How to Maximize Profit from Every Dish
Third: Optimize inventory and reduce waste
Ineffective inventory management is a major contributor to profit-and-loss (P&L) in restaurants. Waste can manifest as over-purchasing or spoiled or expired products, which diminishes profit margins and negatively impacts the overall budget.
To combat this, restaurants need a modern inventory management system that connects purchasing with actual consumption. One effective option is Foodics’ Inventory Management System, which allows for real-time tracking of inventory levels and helps determine necessary quantities, improving decision-making.
Using restaurant inventory management software also offers automatic alerts when key ingredient levels are low. This feature enables restaurants to maintain operational efficiency and reduce costs without compromising the quality of service.
Fourth: Streamlining staff schedules amid inflationary pressures
Managing staff schedules, from the kitchen to the dining room can improve operational efficiency in a restaurant. Inflation heavily impacts labor costs. Any mismanagement of work schedules can jeopardize profit margins.
While restaurants often hire extra staff to handle rush hours, failing to account for quieter periods can create a financial burden, leading to inefficiencies.
By analyzing point-of-sale (POS) reports and data, including Foodics POS, restaurants can accurately identify peak days and hours. This allows for adjustments in work schedules based on actual demand and attendance. Using the reports, you can align your employee numbers with your restaurant’s needs for each season or day of the week.
Labor cost reports can help restaurant owners compare income generated per shift against expenses, ensuring better decisions and staffing.
Further reading: Top 8 Strategies for Providing Excellent Customer Service
Fifth: Renegotiate with suppliers and consolidate orders
Inflation creates an unstable economic environment, leading to rapid increases in the prices of raw materials. This necessitates the constant improvement of supply chains to maintain profit margins. One important step for restaurant owners is to renegotiate deals with suppliers for better terms instead of sticking with their current offers, which may become prohibitively expensive amidst rising inflation. Negotiations can cover aspects such as prices, payment schedules, delivery fees, order quantities, and the brands of certain products.
In some instances, switching to local suppliers can be beneficial, as they often provide faster response times and lower shipping costs. This change can result in improved material quality and reduced overall expenses.
Here are some tips for negotiating better deals:
- Bulk ordering: This strategy can significantly reduce the total unit cost.
- Market comparison study: Conducting a comparison of quotes and supply terms from various suppliers helps identify the best options that deliver value for money.
- Supplier diversification: To prevent supply chain disruptions, it’s advisable not to rely on a single supplier. Negotiating with two or three suppliers can ensure a continuous supply and help secure the best prices.
Sixth: Diversify income sources
Success in the restaurant industry is no longer solely dependent on in-store sales. Diversifying income sources has become essential for ensuring financial stability and growth, especially in light of inflation and evolving economic challenges.
Restaurants can boost their revenue by implementing innovative strategies. For instance, they can introduce additional services, such as delivery options, allowing customers to place orders via the restaurant’s mobile app or website.
Additionally, restaurants can create products under their brand name, like signature sauces or frozen meals.
Another effective strategy is to offer meal plans as a subscription service, providing customers with specific meals throughout the week at competitive prices. This approach not only enhances customer loyalty but also increases cash flow.
It’s worth noting that Foodics offers an integrated restaurant solution for managing sales and expenses across all channels. Whether through delivery services, app orders, or self-service kiosks, you can monitor all your sales via a unified dashboard. This allows restaurant owners to track financial performance in real-time, compare data from different channels, ultimately saving time and effort while improving decision-making.
Seventh: Embrace automation to lower operating costs
With inflation pressuring prices, automation offers a smart and effective solution for restaurants looking to relieve operational burdens without sacrificing service quality.
For instance, self-ordering kiosks in fast-food restaurants allow customers to place their own orders and make payments without staff assistance. This not only eases the workload for employees but also reduces the number of staff needed, minimizes waiting times, and decreases order errors.
Digital menus also make it easy to update offers and adjust prices. They can also provide insights into the best-selling and least-ordered dishes, allowing you to optimize your menu and pricing strategy.
While the initial investment in automation technologies may seem high, the return on investment becomes evident in a short time. From decreased labor costs to reduced waste to higher customer satisfaction, and ultimately increased profits.
Further reading: Top 5 Tasks You Should Automate in Your Restaurant Today
Eighth: Retain customers, boost loyalty, and improve experiences
Facing economic challenges, some restaurant owners might cut costs and compromise quality. But this can hurt the customer experience, leading to lost customers and declining sales.
A better approach is to enhance the customer experience without increasing financial burdens.
This can be done through strategies such as:
- Loyalty programs: Implement restaurant loyalty programs that reward repeat customers with offers and discounts, helping to strengthen their connection to your brand.
- Mobile app notifications: Use push notifications in your restaurant’s mobile app to market targeted promotions based on customers’ purchasing behavior.
- Personalized offers: Provide personalized offers tailored to each customer’s interests and preferences.
Using a customer relationship management (CRM) system for your restaurant, such as the one offered by Foodics, can help you understand customer behavior and purchasing patterns. Additionally, the Foodics loyalty program encourages customers to collect points and build a balance for future visits.
To conclude
The restaurant sector is significantly impacted by economic challenges and inflation across the Middle East and globally, directly affecting operating costs and profitability. However, with effective tools and strategies, restaurants can overcome these hurdles and even secure sustainable profits.
By embracing advanced solutions such as modern POS systems, inventory management software, and specialized accounting software tailored for the restaurant industry, businesses can make informed, data-driven decisions. This proactive approach enables them to optimize performance and adapt swiftly to evolving market demands.
Request a demo now and discover the path to greater profitability!
