Your Guide to Managing Restaurant Expenses in 2025

When you’re putting your all into running your restaurant, you naturally hope for good things in return. 

You hope your hard work pays off financially, of course, and you hope your staff is happy and that your new guests become loyal customers. Along with this comes the challenge of controlling restaurant expenses.

Between inflation reaching 9% only a couple of years ago and tight customer budgets, profit margins are constantly shrinking. You need to balance fixed costs and variable costs such as labor, marketing, and delivery.

All of these things can seem impossible to figure out and manage yourself. 

Here’s the good news: You can control your restaurant costs instead of letting them eat your profits. Discover how to decrease costs through best practices and strategic outsourcing.

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How much does it cost to run a restaurant per month?

How much it costs to keep your restaurant open depends on the cuisine you cook, your customers, where your restaurant is located, and your business model. 

To have any hope of controlling your expenses, you first have to understand them. Understanding begins with knowing your two different cost categories.

Expenses can add up. While some expenses constantly change, others remain constant. This is where variable and fixed costs come in.

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1. Fixed costs for restaurants: Understanding standard expenses

It’s in the name: fixed. These are the costs that don’t change—think of your lease, insurance, loan payments, and subscriptions.

One way to understand fixed costs is to imagine closing your restaurant for one day. What expenses would you still have to pay even without selling a single dish?

You can work at lowering fixed expenses. For example, you might shop around for cheaper insurance or find ways to lower monthly payments for music subscriptions and internet packages. Still, there isn’t much you can reduce unless you’re moving to a new location or removing a salaried position.

The good news is that with fixed expenses, you have stability. You know what your restaurant costs will be. The real cost-saving opportunity comes from diving into your variable expenses.

2. Variable costs: Finding your significant savings

Variable costs constantly change. Each order costs money to produce, and that includes the price of the ingredients, labor, and utilities to make it possible.

When restaurants don’t control their variable expenses and operating expenses, they can lose money quickly. For example, restaurants might sell a certain dish without even knowing they lose a dollar or two every time they make a sale. In that instance, the cost of making the dish is higher than the profit. But you’re not in the business of making food for free. 

Even if you think you’ve figured out your variable costs and restaurant operating costs, your situation can unexpectedly change overnight.

The mayor of Seattle, for instance, announced that restaurants will eliminate tip credits for owners and require them to pay workers a minimum of $20.76 an hour. One restaurant owner told The Seattle Times, “No restaurant has this margin, so they’ll be asked to seriously change what they’re doing, or they’re going to close their doors.”

That’s why it’s so important to control your variable costs and prepare for changes. Start by identifying the most important variables:

• Labor expenses: Your front-counter staff and back-of-house chefs and employees will be among your biggest expenses. If you can’t accurately predict rushes and slow periods, you’ll find yourself understaffed or overstaffed, both of which cost you. Also, it can be costly and difficult to find an employee who has high English proficiency to take orders at the front counter. A partner like Tarro can handle phone calls and food delivery, saving you money and eliminating the headache of managing a large team. 
• Food and beverage expenses: Your food and beverage costs can be one of your biggest expenses. If you experience an increase in food waste or your supplier hikes up prices, this can affect your bottom line. Consistently monitor your food cost of goods sold (COGS) and make sure you’re keeping an eye on costs from the moment you buy the supplies to the moment you serve food to your customers. 
• Marketing expenses: Promoting your restaurant can get expensive, especially if you aren’t seeing results. Plus, there’s a lot to juggle: you might choose to handle your social media management with an app like Hootsuite, use email marketing tools like Mailchimp, design ads with Canva, or take advantage of local search engine optimization (local SEO) with Google and Yelp profiles. You can also add SMS marketing and print marketing to reach your local community. You need a marketing strategy that brings in new business without it taking a big bite out of your margins. 
• Delivery expenses: Big apps like Uber and DoorDash take cuts up to 30% out of your sales price and make you compete for the bottom price by promoting deals and coupons from competitors on their apps. Instead, you can save money by choosing a delivery partner like Tarro. With Tarro, you’ll see improved profit margins and won’t have to worry about working through third-party delivery apps. 
• Day-to-day technology expenses: Make sure you’re getting the best deals for the tech you use, whether it’s your point-of-sale software (your POS system) and scheduling software or your payroll tax platform and other tech expenditures. This ensures you have the features and value you need.

Once you know your costs, you can compare your numbers with those of other restaurants to get an idea if you’re on the right track.

Comparing costs with the industry standard

Do you know your cost percentages? If not, the first order of business is to find out so you can compare them with similar restaurants and get a better picture of how your restaurant is doing. Here are some ways you can do that:

• Posting in a local restaurant community Facebook group
• Visiting a local chamber of commerce and connecting with other restaurant owners
• Studying the National Restaurant Association’s yearly State of the Restaurant Industry reports for a general understanding
• Joining a community of owners running similar restaurants

If the average variable food cost is around 30%, or if you know through networking what similar restaurant owners pay, you can measure your costs and find improvements. For example, if your food cost is 40% and it’s not matching the average, then you know there’s room for improvement.

Here’s what the formula per menu item looks like:

Food cost percentage = (Cost to make the item / Selling price) * 100

For example:

Let’s say a dish sells for $20 and the food cost is $8. You would work out the percentage as follows:

(8 / 20) * 100 = 40%

In this particular case, your food cost of goods sold (COGS) would be too high at $8. To improve your bottom line, you can make changes to lower costs or increase menu prices.

You can use this equation when considering all your expenses, including utility costs or hourly wages. When you’re comparing your restaurant against similar businesses, these percentages can offer a valuable perspective.

According to the accounting software Sage, restaurants can expect costs such as:

• Lease or mortgage payment: This can run between $2,000 to $12,000 per month.
• Labor: In addition to restaurant monthly expenses for line cooks and other employees, restaurant owners can expect to pay $28,000 to $55,000 per year for a manager’s salary and between $1,300 and $1,800 per week for a head chef.
• Food: These costs vary based on ingredients, restaurant style, and standards.
• Utility bills: These average about $2,500 per month.
• Insurance: According to the Horton Group, a business insurance company, restaurants can expect to pay an average of $180 per month for a business owner’s policy.  

These are all critical costs to consider. Plus, there are marketing expenses, which include email marketing, managing social media platforms, and text message marketing. 

Anything that streamlines these processes can decrease restaurant expenses while maintaining a high-quality customer experience. And improvement starts with technology. 

Using technology to manage restaurant expenses

Today, you have an advantage. While you can prevent food waste to help lower expenses, you also have the full power of technology in your hands. 

According to the National Restaurant Association, 21% of restaurants surveyed in 2023 planned to invest more in tech. Restaurant operations technology helps you serve your customer base faster and with improved quality. Tech also helps you run a successful restaurant while keeping costs affordable and preventing your employees from getting burned out trying to juggle too many responsibilities. 

Below are three ways you can use tech to decrease restaurant costs today:

1. Implementing marketing automation

As a restaurant owner, you want to provide a great customer experience, not spend time trying to hunt down customers. 

But there are so many marketing options on the table. While there are customer relationship management platforms (CRM) with marketing features and digital marketing platforms that can help with success, it can be hard to manage them all on your own. 

Add in sustaining a social media presence with daily social media posts, managing local influencers, and maintaining your restaurant website, and social media marketing starts feeling impossible. It’s easy to get overwhelmed, but marketing shouldn’t be something you have to think about every day. 

Your focus should be running your restaurant. 

One way to lighten the load for marketing and make it more effective is to pick a strategy and marketing campaign, such as SMS messaging and print marketing, and find a partner to implement it. 

When you trust a marketing partner that can use tech to spread the word and boost your online presence, you can rest easy knowing you’re reaching your target audience on auto-pilot.

For example, you can automate marketing efforts with a partner like Tarro.

Tarro uses the latest SMS (text) messaging features to reach customers wherever they are. These customers get your promotions, special offers, and more, reminding them to visit your restaurant and leave positive online reviews. Plus, Tarro creates your printed materials, such as brochures and flyers, increasing your marketing channels. In the first year, restaurants get SMS for free—a $8,500 value.

Find a partner that can automate the marketing process through:

• Discoverability: Your marketing partner should have a process to increase reach so you can win new customers.
• Action: Your partner should motivate customers to make a purchase.
• Return: Your partner should have a strategy to encourage customers to return.

2. Optimizing delivery costs

You can maximize your delivery revenue while retaining more profit. The shift starts with choosing an automated delivery service partner.

A partner like Tarro answers a call and sets up the entire delivery process. From taking the order to scheduling the driver, Tarro handles the entire customer experience. You pay less to process those orders when you don’t have to manage drivers or use third-party apps, and you can better control the customer experience using a professional customer service partner.

3. Streamlining labor management

Finally, you can use technology to minimize one of the most expensive parts of running a restaurant: labor. 

Labor costs don’t need to be so high when you can shift some of your restaurant responsibilities, especially when it comes to taking phone orders.

Think of your restaurant today. 

It’s hard to hire front-desk staff with the experience, high English proficiency, and stamina to juggle the responsibilities of the front desk, the phone calls, and the communication with the kitchen. It’s also why new employees often burn out and leave after a few weeks. You can’t blame them, either.

Let’s flip the narrative.

Someone calls your restaurant. A professionally trained representative picks up the call. The customer service professional knows your menu so well that they can walk the caller through it and even customize ingredients and dishes at the customer’s request.

The orders you receive from Tarro have a 99.5% accuracy rate. Once you receive the order, your kitchen makes the food for the customer to pick up. If the customer requests delivery, a driver is promptly dispatched to pick up the order and take it to your customer.

Now, your restaurant looks different. When you partner with Tarro:

• Customer service improves: Your front-of-house employees can focus on the customers in front of them.
• Order accuracy increases: You avoid food-waste costs by preventing order mistakes.
• High employee turnover decreases: Without the pressure of answering phone calls and multitasking too many roles, your team is much happier and likelier to stay longer.
• No more front-of-house worries: When a team member calls out sick, or an employee leaves the business, you don’t have to stress out about how to service phone and delivery orders. 
• Revenue increases: With a partner like Tarro that can answer multiple calls at once in three seconds or less, your restaurant can process more orders, and you can make more money.
• Less staff is needed: Since technology and outsourcing can handle marketing, delivery, and phone orders, you don’t need as many people working at your restaurant. 
• Hiring gets easier: You don’t need a marketing expert on your staff, a perfect English-speaking multitasker up front, or several drivers. Instead of spending time recruiting and looking for employees, you can instead focus on providing great food at a profit margin you’re happy with.

These benefits show how using tech and outsourcing decreases restaurant expenses and improves revenue, which leads to increased profit margins.

Case study: From desperation to growth

When expenses creep up and you’re struggling to survive, it’s hard to see the light at the end of the tunnel. Mr. Chen’s original dream of starting a new restaurant decades ago slowly eroded when the reality of common restaurant challenges set in throughout the years.

Labor cost him too much, particularly with turnover and unreliable talent. Every time he hired someone, they would eventually become unpredictable and stop showing up. He felt it the most during peak hours. Mr. Chen also had trouble receiving front-of-the-counter orders, especially since he didn’t have someone with high English proficiency to take them.

Mr. Chen became frustrated with the restaurant’s inefficiencies, not to mention the financial and physical costs of running it. He recalls, “[I didn’t] want to run my restaurant anymore. I would have sold it for whatever price I could get.”

Fortunately, Mr. Chen didn’t give up on his dream of running a restaurant. He chose an outsourcing partner, Tarro, to handle all phone orders, delivery, and marketing.

This changed everything. 

With Tarro, Mr. Chen was able to make more food orders while saving on labor, delivery, and marketing costs. Partnering with Tarro was a better deal than going it alone or relying on different apps and food service solutions—and Mr. Chen made more money.

Mr. Chen grew his restaurant business by 33% with Tarro. With better restaurant profit margins and an increase in revenue, he now enjoys a thriving restaurant. And because Tarro can take orders in English and Spanish, Mr. Chen can provide a user-friendly experience to his diverse target customers. 

Now that he and his wife no longer need to be at the restaurant 24/7, they can take another day off each week. It’s an entirely different experience, and Mr. Chen enjoys running his restaurant again.

Choosing an outsourcing partner to reduce expenses

Tarro is made for restaurateurs by a team that has experienced restaurants firsthand. This team grew up working in their families’ restaurants, and they understand the challenges you face. It’s why so many restaurant owners love partnering with Tarro.

As a partner, Tarro can lower total labor costs by outsourcing front-of-house phone orders, handling delivery, and leading marketing. It’s practical and cost-effective, too. The only time you pay is when Tarro processes an order.

You can decrease expenses, increase revenue, and improve profit margins without the headaches.

Book a meeting today to learn how to use Tarro and technology to lower restaurant expenses and increase your payday—all while building customer loyalty.