Restaurant owners are facing higher costs for goods, tariffs, and taxes, leading to pressure on profit margins. Daniel McCoy, a senior business consultant at the University of Georgia’s Small Business Development Center at Kennesaw State University, offers several strategies to address these challenges without compromising quality.
McCoy recounts how a restaurant owner noticed inventory levels dropping despite steady spending. “A simple cost analysis revealed cost for the inventory was up by 40 percent or more in several categories, however, he had not raised prices since after the pandemic. I helped him understand the principle of Cost of Goods and how it affects the bottom line. This is the first rule for increasing profit margins,” McCoy explained.
He also shared observations about new service fees being added by some restaurants. “Some restaurants that I have visited as a customer recently have come up with a ‘service fee,’ added after the cost of the food but before the bill total, so it becomes part of the total ticket pre-tip. I have questioned my server about it and have gotten everything from ‘It is instead of printing new menus all the time’ to ‘It is compensation for the hostess and back-of-house staff.’ Uh, no! They lost my business,” said McCoy.
To help restaurateurs manage costs effectively, McCoy suggests focusing on menu engineering—analyzing both profitability and popularity of menu items to make data-driven decisions. Reducing menu size can help minimize ingredient waste and streamline inventory management.
Inventory management is another key area. Implementing systems to track usage and reduce spoilage can prevent unnecessary losses. Staff training in portion control and storage techniques also contributes to minimizing waste.
Negotiating with multiple suppliers rather than relying on one vendor can lead to better pricing without sacrificing quality. McCoy warns against substituting lower-quality ingredients as customers notice such changes: “One of my favorite restaurants went through this with their chicken wings when costs had soared by 70 percent. The owner tried using a different vendor, but the quality of the wings was not the same, and people quit ordering them.”
Embracing technology—from point-of-sale analytics to AI-powered scheduling tools—can further enhance efficiency and reduce labor costs.
Labor remains one of the largest expenses for restaurants. McCoy recommends smarter scheduling using forecasting tools rather than simply cutting hours: “Your team can be your biggest asset in cost control — if they are empowered and educated.” Cross-training employees and offering incentives for reducing waste or upselling high-margin items are additional steps operators can take.
On pricing strategy, he advises careful adjustments such as psychological pricing or bundling items into value meals rather than straightforward price hikes.
“Just remember, controlling costs does not have to mean cutting corners — it can mean working smarter,” McCoy said. He emphasizes leveraging data, empowering teams, and adopting technology as ways to protect margins while maintaining guest expectations.
Daniel McCoy has worked at UGA’s SBDC since 2017 following careers in banking and retail management. He holds certifications in human resources (SHRM), grant writing, cybersecurity, and has received several awards including Business Consultant of the Year 2022 at UGA SBDC and Georgia State Star at America’s Small Business Development Conference in September 2023. For three years he has contributed articles to Restaurant Informer Magazine, affiliated with Georgia Restaurant Association.
