Restaurant owners are facing increased costs due to rising prices of goods, tariffs, and taxes. Daniel McCoy, Senior Business Consultant at the University of Georgia’s Small Business Development Center at Kennesaw State University, has provided guidance on how restaurants can manage these challenges without compromising quality.
McCoy recounted working with a restaurant owner who noticed that inventory was shrinking despite spending remaining constant. A cost analysis revealed that the price of inventory had increased by 40 percent or more in several categories since the pandemic, but menu prices had not been adjusted accordingly. McCoy explained to the owner the importance of understanding Cost of Goods and its impact on profit margins.
He also noted a trend among some restaurants introducing service fees instead of updating menu prices. According to McCoy, “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.”
McCoy emphasized that operators do not need to sacrifice quality or add hidden fees to maintain profitability. He outlined several strategies for controlling costs:
Menu engineering involves analyzing which dishes are most profitable and popular. By highlighting high-margin items and removing low-margin ones, restaurants can streamline their offerings and reduce unnecessary ingredient purchases.
Inventory management systems can help track usage and minimize waste. McCoy recommended using software for real-time tracking, applying FIFO (First In, First Out) storage principles, and training staff in portion control.
Negotiating with suppliers is another key strategy. McCoy shared an example where a restaurant switched chicken wing vendors due to soaring costs but found customers noticed a drop in quality; when wholesale prices fell again, they returned to their original supplier.
Technology adoption—from AI-assisted scheduling to kitchen display systems—can improve efficiency across operations.
Labor management should focus on smarter scheduling rather than cutting hours outright. Using forecasting tools helps align staffing with demand while tracking labor costs as a percentage of sales ensures better control.
Pricing strategies such as psychological pricing ($14.95 instead of $15), value meal bundles, and premium add-ons can help increase perceived value without deterring customers.
McCoy concluded: “Just remember, controlling costs does not have to mean cutting corners — it can mean working smarter. By leveraging data, empowering your team, and embracing technology, you can protect your margins while continuing to deliver the quality your guests expect.”
Daniel McCoy has served as a business consultant at UGA SBDC since 2017 following careers in banking and retail management. He holds multiple certifications including SHRM-CP and cybersecurity credentials from North Star. Recognized for his consulting excellence with several awards—including Business Consultant of the Year 2022—he has contributed articles for Restaurant Informer Magazine over three years.
