A famous investor once said, “It takes money to make money.” This couldn’t be truer in the world of foodservices, where restaurant operators contend with slim profit margins ranging, on average, from three to nine percent. Consequently, seeking cost control measures is a strategic means to preserve as much of the bottom line as possible.
Yet, inflation, labor shortages, and fierce competition complexify cost abatement – saving money isn’t easy when the price of nearly everything has risen. Recent reports underscore this theme, with 90% of restaurant operators stating that inflation poses a significant challenge. In fact, 48% of restaurants reportedly reduced hours of operation because of higher costs. So, how can restaurants unlock cost savings without cutting business hours or risking deficiencies in the quality and quantity of their offerings?
The key lies in technologies like the Internet of Things (IoT) solutions, which allow restauranteurs to cut costs by streamlining processes, minimizing waste, automating tasks, and maximizing the use and availability of resources. IoT also enhances customer experiences, which leads to increased satisfaction, loyalty, and profitability. The following examples represent three of the biggest cost-saving opportunities with IoT.
Reduce Food Expenses
Over the past three years, restaurant food and beverage costs rose by nearly 22%, with inflation hitting a 40-year high in 2022, forcing many to hike prices. In fact, 87% of restaurants increased menu prices because of higher food costs, with over half changing menus items as another cost-control measure.
Since food costs at restaurants can represent an average of 28-35 percent of their sales annually, one key means of achieving cost savings is to reduce waste. Food waste accounts for a third of overall restaurant expenses per year, weighing an average of 50,000 pounds per location. IoT temperature monitoring emboldens back-of-house (BOH) operations - ensuring the shelf life of perishables can be maximized, and food spoilage and subsequent waste can be prevented via smart, strategically placed sensors that continuously monitor food storage conditions in areas like walk-in refrigerators, deep freezers, and hot-holding stations. Should temperatures deviate from preconfigured thresholds, staff are alerted in real-time so that they can take immediate corrective action – which is especially useful in situations where a refrigerator door might be kept open too long, during a power outage, or if a freezer door isn’t entirely shut. Given that an average restaurant operator’s food inventory is valued at $10,000 in refrigerators alone, and equipment failures can occur once every three years, temperature monitoring is critical to avoid expenses associated with food loss. If operating 1,000 stores, for example, IoT solutions could save up to $3.3M annually on waste costs.
Further, IoT temperature monitoring systems streamline and automate food safety and compliance protocols, contributing to cost savings by preventing contaminated food from being served and consumed. Foodborne illness outbreaks can cost between $4,000 and $2.1 million depending on the severity of the incident, legal costs, fines, and potentially unrecoverable brand and reputational damages.
Mitigate Utility Expenses
Utilities represent one of the largest costs in foodservice, given business-critical needs for energy-intensive equipment. According to studies, U.S. restaurants spend around $2.90 per square foot on electricity and $0.85 per square foot on natural gas annually, which breaks down to about 3% to 5% of their overall operating costs. A food service facility consumes approximately 56 kWh/square foot. In contrast, according to the U.S. Department of Energy, a retail mall uses 23 kWh/square foot, and a warehouse uses 9 kWh/square foot.
Utilities can be challenging to control in restaurants, but technologies that help lower average usage and respective charges allow them to be strategically optimized. Leveraging IoT for power and energy management does just this and can help cut energy usage by 20%, which can amount to thousands (even millions, in some cases) in savings annually. More specifically, energy-draining kitchen appliances like ovens, dishwashers, freezers, refrigerators, and ice machines can be monitored via IoT sensors to gauge power consumption at the equipment level – enabling foodservice operators to detect inefficiencies and target areas for improvement via energy-saving tactics like optimizing equipment usage schedules or making investments in energy-efficient appliances.
Devices like smart plugs and CT clamps allow operators to remotely monitor and manage power to connected devices – enabling automatic shut-off for non-essential appliances when they’re not in use or during hours when the restaurant is closed. Estimations suggest for every 1,000 kWh saved by turning things off or down, $100 will be cut on utility bills. Moreover, by illustrating consumption trends, such as disproportionate spikes in energy usage, the proactive identification of underperforming or defective equipment helps determine needs associated with servicing, maintenance, repairs, or replacement before failures occur. As a result, further cost savings can be achieved by ensuring peak operational efficiency and consistency, preventing unnecessary energy consumption, and extending the lifetime of appliances. These power optimization measures help operators save overhead and create more eco-friendly, sustainable processes.
HVAC monitoring is another way restaurant operators can save on costs. Smart, retrofittable thermostats enable restaurant operators to remotely program and intelligently manage HVAC systems with real-time and historical data insights. This ensures temperature settings are consistent with operational standards while supporting energy efficiency and sustainability goals. Smart thermostats also enable restaurant operators to customize heating and cooling schedules based on business hours, seasonal changes, or occupancy trends, which not only reduces energy costs but promotes occupant comfort.
Reduce the Cost of Labor
Maximizing the availability of resources, including staff, is critical for successful restaurant operations and customer satisfaction. Yet, restaurants are grappling with staffing issues, with 45% of operators reportedly needing more employees to meet customer demand and 27% of operators stating their most difficult challenge is recruiting and retaining employees, according to the National Restaurant Association’s 2024 State of the Industry Report. To overcome this challenge, operators can look to technologies that automate and enhance routine, monotonous tasks. Without automation, the time that should and could be used to focus on customers is spent on tedious, time-consuming processes, where restaurant managers may spend more than 16 hours per week (or two full days) on said tasks. Since time is money, the right IoT solutions can help save by assisting staff and management in gaining back precious time by decreasing the manual labor needed for BOH operations, such as the above temperature monitoring and logging example.
In fact, 69% of restaurant operators reported technology integration in restaurants will augment rather than replace human labor – and 47% say that in 2024, the use of technology and automation to help with the current labor shortage will become more common within their segment. Hiring struggles are certainly pressing, yet retaining employees is equally challenging for restauranters - with the quit rate in foodservice, which is the number of quits during the entire month as a percentage of employment, at approximately 4.5 percent as of March 2024. Research indicates that replacing a single employee could cost as much as $6,000, so prioritizing retention by ensuring staff satisfaction should be top-of-mind. One way to achieve this is by making their jobs more enjoyable with technologies that automate mundane tasks, enabling them to focus on more interesting, higher-value initiatives. For example, with an IoT-powered connected restroom solution, restaurant operators can benefit from cost savings while promoting positive customer and employee experiences.
What’s more, by automatically collecting, transmitting, and centralizing temperature data into intelligent systems continuously and reliably, IoT-powered temperature sensors automate monitoring and logging activities performed by staff who must document temperatures, often via spreadsheets and paper logs – taking them away from customers. By automating this process, staff can focus on more valuable priorities, like serving customers and helping restaurant operators to ensure maximum productivity and profitability.
Connected hygiene product dispensers deliver powerful automation that benefits employees by identifying the best periods and frequency for cleaning and restocking bathroom supplies based on actual usage data. By gauging consumption rates of hygienic products, smart restrooms have the capability to infer the usage - which then informs how frequently restrooms need to be cleaned – which is useful in the event restrooms weren’t used or were used sparingly since the last cleaning session. Without this usage data, staff would be required to clean restrooms regularly on a scheduled frequency throughout the day, which leads to unnecessary cleanings and wastes time for staff that could be focusing on more value-adding priorities – all without jeopardizing cleanliness.
This results in massive time savings, since employees are only required to service bathrooms based on this usage data. Real-time alerts ensure that dispensers are only refilled as needed rather than during routine cleanings, which often results in waste from partially used rolls or soap getting thrown away in the process. The data allows for maximum efficiency, hygiene, and overall productivity, which goes a long way towards retaining crucial talent – especially given that 47% of restaurant workers cite sanitation as critical for their satisfaction in the workplace. Further, issues that require immediate attention, like full waste bins or dumpsters, can be solved using IoT sensors, which trigger notifications to staff accordingly, empowering employees with proactive, intelligent automation and optimizing waste pickup scheduling.
Unlock Powerful Cost Savings in Foodservice with MachineQ
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Coming up Next: Part 2 - How Foodservice Operators Can Get Started with IoT
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