Food Service: Shrinking Margins, Expanding Costs, and How to Fix It
On average, a food service business earns a profit of 5-6%1. For a business with $2 million in earnings, this translates into a meager $100,000 to $200,000 in profit.
Maintenance spend in food service on average is around 1-3%2 of sales which translates into a $20,000 to $60,000 cost to our sample store. Emergency maintenance expenses, high levels of yearly maintenance, and equipment replacements can also impact your profit significantly.
Critical decisions about maintenance and repair can be overwhelming tasks for a food service operator to tackle alone, including:
- repairing or replacing older equipment
- renewing contractor agreements
- selecting manufacturers that provide the best value for the money spent
Knowing when it’s time to stop repairing the cooler that keeps breaking down or if a contractor is overcharging you for a quick fix are big money savers for your business. In contrast, mistakes and oversights can cost your business thousands.
Manually monitoring these aspects of your business can be difficult when the responsibility of running the actual day-to-day business is your main concern. You don’t have time to manually monitor everything happening in your store. You may not realize that the contractor hired to fix the cooler didn’t replace the leaked refrigerant. You may not notice that a certain manufacturer is the best-performing freezer across the enterprise. These mistakes leak money out of the bottom line each year.
Businesses often see maintenance and repair as a fixed cost instead of a controlled cost. Maintenance spend can be controlled with better knowledge of site equipment and consistent monitoring. Tracking maintenance metrics is the best way to make informed decisions while allowing an owner/operator more time to track daily business needs.
A computerized maintenance management system (CMMS) helps you take control of your enterprise and optimize your operations to maximize profits. Intelligent tracking of equipment function, location maintenance and contractor management helps you anticipate problems to avoid downtime and costly emergency maintenance.
Our maintenance solutions can potentially reduce your current site maintenance costs by 9-22%, which translates into a $13,200 return to our example store with $2 million in earnings, boosting profit by 11%.
But that’s just one store location. You can translate these cost reductions across an enterprise and potentially save hundreds of thousands of dollars. Money saved in maintenance and repair goes directly to your bottom line and can be used to better benefit your business.
1Locsin, A. The Average Profit Margin for a Restaurant Baker Tilly International. 2014. Restaurant Benchmarks: How Does Your Restaurant Compare to the Industry Standard?
2Elkins, M. How to Make a Budget for Repair and Maintenance for a Restaurant.