It’s little wonder that running a restaurant is considered a stressful career. Managing frequent deadlines, numerous staff, and demanding customers all day long are challenging but necessary parts of working in the restaurant industry. But when you also consider that profit margins are very narrow in the restaurant business, you’ll begin to appreciate why carefully tracking every dollar spent and earned is an essential part of owning or managing your own restaurant. In this 8-minute read, we’ll cover the basics of inventory management and the systems you need to save more time, money and your sanity in the restaurant industry.

What is Restaurant Inventory Management?

If you’re new to the restaurant business, you might also be new to restaurant inventory management. Or, if you’re already running a successful bar or restaurant but want to save or make more money, then it might be time to review your approach to inventory management.

Your restaurant or kitchen inventory is all the food and beverage items or ingredients you order and keep stored to stock your bar and kitchen. Restaurant inventory management describes your system, procedures and coordination for smoothly and efficiently overseeing your inventory: ordering, counting, food and beverage costing, recipe costing, reporting, catering, and event management to name a few.

In the simplest of terms, after ensuring that your menu, staff and dining atmosphere are all what you customers want and expect, managing your inventory effectively is the next most essential ingredient to staying afloat in this competitive industry.

Implementing an inventory management system will help you not only keep track of your inventory needs, but control your recipe costs and waste in a more effective way — the key to achieving healthy profit margins in your restaurant business.

Just as you work hard to ensure your staff follow the right steps to prepare and serve quality food and customer service, you also need to make sure you and your staff follow best practices for optimal food inventory use so that your overall profit margin is protected.

The good news is that restaurant inventory management is something you can learn and perfect easily with knowledge, experience and the right tools. Chefs learn the basics of how to manage their kitchen inventory in culinary school, but anyone can implement an inventory management system and streamline their operations with a willingness to learn and today’s digital restaurant software products.

Why Controlling your Bar and Food Inventory is Important to your Bottom Line

In a nutshell, managing your restaurant inventory will help you make more money — and who doesn’t want to do that?

How you manage your bar or restaurant inventory can make or break your restaurant business. As a restaurant owner, you have a huge list of items to manage on a daily basis, leaving room for small but costly errors in your business processes that undermine your productivity and cut into your profits, including wasted inventory and incorrect pricing. Inventory management solutions help optimize your kitchen inventory processes, streamline operations in your restaurant or across your multi-unit chain, and save more time and money.

An inventory management system means you have a standardized recipe management system that controls for preparation, usage and yield for every dish to minimize waste. Likewise, it means creating a reliable procedure for tracking and counting your food and bar inventory as it is purchased and used, or even while it’s stored week to week.

It’s also important to recognize that small things can add up to a lot of lost profit each month, which can make or break your ability to stay open and be successful. Taking steps to manage the inventory in your restaurant could be the key to putting thousands of dollars back into your budget or bank account each year.

For example, tracking your inventory usage might reveal that your kitchen staff have been using clarified butter to spread on toast and sandwich bread instead of regular butter or margarine, a small error that adds up to $28 a week. That’s $1,500 a year you didn’t need to spend.

Or, consider that the industry gold standard for restaurants is to operate at a food cost percentage between 25% and 35% to achieve a reasonable profit. And let’s say your restaurant currently runs with costs at 30%. Implementing some basic inventory management techniques, like analyzing your purchases, usage and sales, might reveal that your optimal food cost percentage should actually be 28.5%.

Small difference right? Just 1.5%. But if your restaurant has $2 million in sales, that’s an extra $30,000 a year profit that you are losing.

The key message is that implementing a restaurant inventory management system is essential to your business bottom line: managing your inventory means you can keep a quick and close eye on how your costs, usages, and profits balance out so you can be more successful.

Common Bar and Food Inventory Issues

Need more convincing that you should be using a system to manage your bar and food inventory?

There are a few common signs that your bar, restaurant, lounge, catering business or food truck needs better inventory management.

Wasted food items are the easiest signal of an inventory management problem. If your garbage cans are filling up with unused ingredients from recipe prep, or with uneaten food from customer plates, this is a sign you need better inventory management. Without a portion control program, it’s hard to prevent over-usage and over-portioning of your inventory, costly mistakes that drain away your profits.

For example, some owners will load plates with large portions of fries to give perceived value for the customer. But if those fries are not being eaten, you are allowing your profit to be tossed into the garbage.

It’s better to offer free refills on fries, and reduce the portion from 14 ounces to 8 on a regular meal. Most customers will not order a refill, but if they do then you can rest assured that by increasing the profit on every customer that did not order a refill, you saved money. At 20 customers a day, saving 40 cents per order on fries, can add up to almost $3,000 per year in recouped profit.

Similarly, running out of key ingredients to make your most popular dishes during a rush is a hint you need a better way to stay ahead of the game. An inventory management system makes sure you are ordering inventory before you run out, or conversely, not ordering too much so that inventory goes to waste.

Another way you can spot inventory control trouble is if you’re guesstimating your menu prices. Inventory management helps you find your ideal recipe and menu costs, perfectly balancing your profit with selling prices that keep your customers happy.

Spending a lot of time ordering your inventory? While purchasing and working with suppliers is a key part of running a restaurant, it can be streamlined to cut down on time, errors and costs. Food inventory management tools like how much to order based on sales and custom templates for your commonly ordered items are just a few examples of how much easier and effective this task can be.

Lastly, if you find you are buying ingredients from your suppliers at premium costs, you likely need a better management system to track price changes and help request bids from multiple suppliers at the same time to ensure that you’re not overpaying for inventory. This way you can identify and stop supplier price creep, where an item goes up only a dollar or two each order but ultimately becomes a significant detriment to your bottom line over time

Restaurant Inventory Management Tools

There are many tips, tricks and tools that can help your inventory management system run as smoothly and consistently as possible.

Any process or procedure you can put in place that saves your staff time on inventory management tasks will also cut down on hassle and costly errors. Common food and bar inventory tools and systems include:

• Labels: You should be labelling all of your inventory, marking them with the date they were purchased, and noting the location where they should be stored. Detailed labels help your team find things in a hurry, use the oldest items first, and avoid the mistake of ordering items already in stock that are just reshelved in the wrong spot.
• Portion control: Make sure your kitchen is well stocked with the right equipment and tools for accurate measuring for every recipe on your menu. Scales, measuring cups, portion cups, scoops and spoons — it doesn’t have to be fancy, it just has to be handy and accurate to make it easy for your staff to comply with your portion control standards.
• Recipes: Make sure your recipes are stored in an easy-to-access location, in print or online, and that they include exact measurements and expected yields. You can go one step further and include pictures of finished dishes to help guide your staff in plating each order perfectly.
• Count sheets: Remember to do your inventory count regularly, as part of your daily, weekly or monthly kitchen inventory management, and try to be consistent. Our recommendation is to do at least a weekly key-item inventory count to stay on top of your major items. This way when a problem appears, you can react quickly.
• Software: You certainly can implement a restaurant inventory management system with paper count sheets and Excel spreadsheets, but there is a better, easier way. Today’s digital landscape means all-in-one software products designed just for restaurant inventory control. Professional restaurant software will make the biggest difference in your profits and performance.