[New Research] Food Costs Eat Up 35% of Revenue on Average for Multi-Unit Restaurants

It is well understood that food costs are one of the largest operating expenses for multi-unit restaurants. Running on already thin margins, the rising cost of food has placed additional strain on multi-unit operators worldwide, as it has become increasingly expensive for restaurants to produce the same menu items. Following the pandemic, global food prices rose at an alarming rate - up nearly 40% year-over-year, according to the United Nations' food price index. 

But just how much do food costs cut into revenue and impact the bottom line? New research now gives operators a clear benchmark–food costs are 35% of revenue on average for multi-unit restaurants, according to the 2023 Restaurant Operations Report. Food costs may be even higher for brands with 20 or fewer locations, with the expectation that food costs will come down as the number of stores increases.

In the report, 74% of operators indicated that reducing food costs is a strategic priority for their organization in the next year and a half. Saving small percentages on food costs can have a tremendous financial impact, especially on multi-location chains. Controlling food costs is essential and at the heart of profitability for all restaurants. 

Operators acknowledged that strategies for reducing food costs in the next 12-18 months are mainly focused around inventory-related processes. Inventory is often an area full of sneaky profit leaks for many multi-unit restaurants, and in today’s uncertain economy, neglecting food costs can be detrimental to a restaurant’s bottom line. 

To make headway against growth and expansion goals, with 96% of operators planning on unit expansion, operators should keep a close eye on their actual food costs, and consider implementing different ways to reduce them, such as tracking food waste, purchasing in bulk, reviewing prices with vendors, evaluating menu offerings, and properly portioning during food prep.

Download your free copy of the 2023 Restaurant Operations Report to dig into the full survey results. A deeper dive into the findings will also be shared in a live webinar with EnsembleIQ on Wednesday, October 25th at 11 AM ET. Register now to secure your spot, and join us live to ask questions, gain additional insight, and explore additional findings during this interactive session. 

By downloading the report and attending the webinar, you'll have access to a wealth of information that can help better position your operation for success in 2024 and beyond.