Restaurant owners should view today’s inflationary environment as an opportunity to pause and take a closer look at their operating costs to identify areas to reduce spending.
When costs go up, restaurants have to look for creative ways to reduce their spend and maintain healthy profit margins. Squeezed by inflationary pressures on both food and labor costs, some restaurant managers are succumbing to sneaking hidden fees—ranging from fuel to kitchen-appreciation surcharges—into customer receipts.
But today’s savvy restaurant management teams aren’t risking hard-earned customer goodwill with nickel-and-dime fees. Instead, they’re adopting tools rooted in artificial intelligence to better control their operating costs, undertaking initiatives that will continue to pay benefits no matter how economic conditions unfold.
“Temporary” fees have a way of becoming permanent, and customers often view surcharges as a disingenuous way to raise prices. Instead of looking for the quick fix, sophisticated restaurant owners and management teams pay close attention to every operating cost. Costs that never got a second look in the past often provide opportunities for savings and improved margins. In many instances, the tools of artificial intelligence deliver significant savings.
Intelligent equipment maintenance
Take, for example, the repair and maintenance of kitchen equipment, a $28 billion annual expense industry-wide. Equipment downtime adds another $46 billion in annual lost revenue. According to ResQ’s 2022 State of Disrepair report, on-demand repairs of refrigeration and kitchen equipment top the list of full-service restaurants' annual spending on service.
For years, restaurants have been relying on the accumulated expertise of veteran repair technicians to find and solve equipment problems. If service personnel didn’t have much experience, the restaurant paid for the technicians’ “education” through inevitable costs when out-of-service equipment caused kitchen downtime.
Service Intelligence is a new AI-powered technology, however, that puts the accumulated expertise of technicians who specialize in commercial kitchens into the palm of even the most novice technician.
Data stored in the smartphone app walks a technician step-by-step through diagnosis and solution of all sorts of problems on both cold-line and hot-line appliances. With all that experience available to them, technicians are able to get to the root of the problem, order the parts they need, and get the kitchen equipment back into operation as soon as possible.
AI and data-driven maintenance pushes repair companies toward the ultimate cost-saving goal: providing true prescriptive maintenance. Prescriptive maintenance is a concept that collects and analyzes data about an equipment's condition to come up with specialized recommendations and corresponding outcomes to reduce operational risks. The purpose is to resolve issues before they become a problem while promising cost savings over routine or “time-based” preventive maintenance, because tasks are performed only when warranted. When companies have data across the lifetime of a machine, they will be able to fix problems before they even happen, causing no machine downtime and saving restaurants more money in the long-run.
The savings are subtle, but real: Kitchen equipment is better maintained and operates more efficiently. Problems that take equipment out of service can be resolved more quickly, reducing the hassles and costs of appliances that aren’t working. Service technicians spend less time on fixes and do it right the first time.
AI for inventory, menu plans
The possibilities of cost savings through the application of artificial intelligence extend throughout restaurant operations. AI-enabled software can be integrated, for instance, with the restaurant’s point-of-sale system. By analyzing historical inventory, purchasing data, and recent customer buying trends, the software makes recommendations that ensure just the right amount of ingredients are purchased. Elimination of wasted purchasing makes a substantial contribution to operating margins.
Other management teams use AI-driven tools to create menus designed to maximize profits. Software helps determine the precise cost of each menu item, then gathers data about the popularity of each dish. The resulting comparison allows restaurant owners and managers to recognize the stars of their menus—the items customers love, but don’t cost much to make—as well as dishes that are both costly and slow sellers.
With that data, menus can be redesigned to spotlight high-margin items—a move that can add 10 to 15 percent in profitability. Slow sellers can be eliminated, saving the costs associated with the inventories and labor necessary to produce them.
Staff recruitment that works
AI tools also help resolve the staffing issues that continue to bedevil restaurants. By one recent estimate, industry-wide turnover in restaurants runs as high as 75 percent a year. Every time a back-of-house employee resigns, the restaurant loses the employee’s skills, accumulated knowledge and contributions to the team’s culture. When front-of-the-house staff leaves, customer service declines as existing staff is stretched thinner and new staff members learn the ropes. Customer relationships suffer as well.
Recruitment tools based in AI aid in finding potential new hires through steps such as allowing candidates to submit resumes by text. AI-based tools evaluate candidates and identify those who are a good fit, reducing the amount of time hiring managers need to spend reviewing applications. Other software analyzes historic and recent trends to create cost-efficient staff scheduling that allows the restaurant to meet customer-service standards.
Better candidates will lead to better hires. Better hires, in turn, are more likely to become skilled and efficient long-term employees. Better scheduling reduces wasted payroll dollars and provides greater satisfaction for staff members. Cost-savings may be subtle at first, but streamlined HR operations will make a significant impact on cost savings over time.
Restaurant owners should view today’s inflationary environment as an opportunity to pause and take a closer look at their operating costs to identify areas to reduce spending. Restaurant management teams who find ways to use AI technology to tighten their costs rather than imposing new fees will be well-positioned to maintain the loyalty of existing customers and attract new diners.
Sidney Lara is currently the Service Principal at Aquant, a software company focused on bringing service intelligence to field service organizations through AI and data-powered platforms. Sidney is passionate about eliminating waste from business processes and focusing on the activities creating value for customers. Prior to joining Aquant, Sidney worked for RATIONAL USA as Vice President of Service.