A Perfect Storm of Costs
Running a restaurant in India has become a high-wire act of balancing expenses. The primary culprits are food and beverage costs, which can consume 30-35% of a restaurant's revenue. Recent months have seen sharp increases in the prices of essentials like
cooking oil, vegetables, proteins, and even staples like onions and ginger. But the pressure doesn't stop there. Labour costs, accounting for another 25-30% of revenue, are on the rise due to minimum wage adjustments and a competitive hiring market. Add to this the burden of high rents in metro cities (10-15% of revenue), volatile commercial LPG prices, and new operational costs like UPI transaction fees, and the profit margins for many establishments have become dangerously thin.
The Menu Gets a Makeover
Instead of simply raising all prices, many restaurants are turning to a strategy called 'menu engineering'. This involves a deep analysis of each dish to understand its popularity and profitability. Dishes are categorised as 'Stars' (popular and profitable), 'Plowhorses' (popular but less profitable), 'Puzzles' (profitable but not popular), and 'Dogs' (neither popular nor profitable). The goal is to subtly guide customers toward the Stars. This can be done through strategic placement on the menu, using more descriptive language, or bundling them into combos. Unprofitable 'Dog' items are often removed, leading to a smaller, more efficient, and more profitable menu. Streamlining menus not only cuts down on ingredient waste but also simplifies kitchen operations.
Smaller Portions and Smarter Choices
Another subtle strategy is the use of 'shrinkflation,' where portion sizes are slightly reduced to avoid a noticeable price increase. This might involve a minor reduction in the amount of a main ingredient or a smaller side dish. While some owners are wary of alienating customers, it's often seen as a less jarring alternative to a direct price hike. A more transparent approach gaining traction is offering tiered pricing. This gives customers more control by providing options like half-portions, full-portions, and family packs at different price points. It caters to both budget-conscious diners and those willing to pay more for a larger meal, allowing restaurants to serve a wider audience without sacrificing their margins.
Technology as a Cost-Cutter
Technology is no longer a luxury but a crucial tool for survival. QR code menus, for instance, reduce printing costs and can even increase the average order value. Behind the scenes, inventory management software helps track ingredients precisely, minimising food waste and optimising procurement. Restaurants are also increasingly adopting their own direct ordering systems to bypass the steep commissions of 15-30% charged by third-party delivery aggregators. By encouraging customers to order directly, restaurants can retain a significantly larger portion of their revenue. In the kitchen, some establishments are even shifting away from a total reliance on costly LPG by adopting induction plates and other energy-efficient equipment for tasks like slow cooking.
Sourcing and Supplier Negotiations
Beyond the menu, restaurateurs are looking at their supply chains for savings. This involves actively negotiating with vendors for better rates, sometimes by simply getting a competing quote. Some are also exploring farm-to-table models, which involve sourcing ingredients locally and seasonally. This not only helps mitigate the impact of unpredictable supply chains and transportation costs but also appeals to a growing consumer preference for fresh, sustainable food. While it can require more planning, focusing on seasonal produce often means better prices and higher quality ingredients, turning a cost-saving measure into a feature that enhances the dining experience.
