Understand Average Monthly Restaurant Utilities Costs to Help Reduce Overhead

Restaurant utility costs can vary drastically from one operation to another. Nonetheless, these costs must still be factored into any total expense calculations and break-even analysis.

Unlike restaurant prime costs — the combination of cost of goods sold (COGS) and labor costs — your utilities costs are less flexible and controllable. That’s not to say there aren’t ways to optimize utility costs and carve out lower average usage and charges.

In this article, you’ll learn the importance of managing restaurant utility costs, common factors that impact costs, how to manage utility costs, and why it’s so critical for restaurateurs to take control of all restaurant costs.

Significance of managing restaurant utility costs

Managing utility costs is crucial for restaurant owners as it directly impacts the operational expenses and profitability of the business. Understanding the significance of utility cost management ensures efficient resource utilization and financial sustainability. 

Here are some reasons why managing utility costs should be a priority.

1. Cost control: Effective management of utility costs helps control expenses and maximize profitability. By reducing waste and optimizing energy usage, restaurant owners can lower utility bills and improve the bottom line.

2. Environmental impact: Energy consumption in restaurants contributes to carbon emissions and environmental degradation. Implementing sustainable practices and reducing energy usage can help mitigate the environmental impact of the business.

3. Operational efficiency: Monitoring and managing utility costs promote operational efficiency by identifying areas of high energy consumption. This allows for targeted improvements and optimization of restaurant processes.

Factors affecting restaurant utility costs

Utility costs for restaurants can vary based on several factors. Understanding these factors can help owners estimate expenses accurately and implement cost-saving strategies. 

Here are some key considerations.

1. Equipment quantity: The total pieces of equipment used in your kitchen, bar, and front-of-house can have a drastic impact on restaurant utility costs. This goes for gas, electric, and water utility costs. How many freezers are you running? Does every cooking station have multiple lowboy coolers? Is your dishwasher constantly running all day? 

2. Equipment efficiency: The energy efficiency of kitchen equipment, such as ovens, refrigerators, and dishwashers, affects utility costs. Replacing or maintaining outdated and inefficient equipment can lead to significant energy savings.

3. Lighting solutions: The type of lighting used in the restaurant, such as LED or fluorescent lights, influences energy consumption. Switching to energy-efficient lighting options can reduce electricity expenses.

4. Heating, Ventilation, and Air Conditioning (HVAC): Proper maintenance and regular servicing of HVAC systems are essential to ensure optimal performance and energy efficiency. Inefficient HVAC systems can significantly increase utility costs.

5. Water usage: Restaurants utilize significant amounts of water for cooking, cleaning, and sanitation. Implementing water-saving measures, such as low-flow faucets and efficient dishwashing systems, can help reduce water expenses.

Efficient utilities cost management for restaurant operations

Managing restaurant utility costs is an ongoing process that requires attention to detail and a commitment to sustainable practices. 

By prioritizing cost control, operational efficiency, and environmental sustainability, restaurant owners can effectively manage their utility expenses. Understanding the factors impacting utility costs, implementing energy-saving strategies, and regularly monitoring consumption levels are key to optimizing resource usage and maintaining financial sustainability. 

Adopting these practices can help restaurant operators reduce costs, boost profitability, and contribute to a greener future.

Taking control of all restaurant costs

The greatest takeaway from this article is the importance of ongoing, consistent restaurant cost breakdowns — for restaurant utilities costs and beyond.

This cost analysis doesn’t exist in a vacuum. As a restaurant operator, you’ve bought the ticket. Now it’s time to take the ride. The first best action you can take is to assess your current costing process and the systems you can employ for conducting a cost breakdown — especially for more controllable variable costs like food and labor.

While something is better than nothing, and manual calculations are something, your ability to accurately, consistently break down costs at scale is dependent on proper technology.

At the end of the day, profitability is the name of this game — not sales or revenue. A laser-focus on profitability requires a laser-focus on your costs — and a laser-focus on costs requires actionable, pinpoint accurate restaurant cost breakdowns.

Combining Toast and xtraCHEF can help all types of restaurants access reports on daily sales, costs, and how they’re impacting profitability.

Toast Payroll and Team Management, as well as Scheduling, powered by Sling, work together to uncover valuable labor trends so you can make better decisions.

xtraCHEF by Toast empowers you to drill into line-item level detail for every ingredient on each of your supplier invoices.

Together, these tools can automate and simplify the process of creating restaurant cost breakdowns.