— By Mani Kulasooriya —
How e-commerce can help restaurants fight rising costs and challenges.
Restaurant operators are often running an uphill marathon. From hiring and schedules to inventory management and food ordering, back-end operations can present neverending challenges. To make matters worse, according to the National Restaurant Association’s “2024 State of the Restaurant Industry” report, 97% of operators now cite rising food and labor costs as pressing issues.
Fortunately, foodservice has entered a new leg of the race. E-commerce is emerging as a secret weapon to streamline operations and reduce costs like never before. For businesses like Coupa Café, a fast-casual coffee and bakery chain in the heart of Silicon Valley, the shift to a more digital buying experience translated into bottom-line impact when it needed it most.
The Heat is On: Rising Operating and Labor Costs
Restaurants might feed the masses, but their profits are being eaten up by operating fees and labor expenses. In fact, per the NRA, food inventory and labor costs account for ~33 cents of every dollar in sales.
Today’s economic environment is hitting restaurants harder than other foodservice businesses. Compared to grocery stores’ 1.7% inflation rate, restaurants are facing a 5.3% rise, according to the Consumer Price Index in December 2023. This means the restaurant kitchen is paying a premium for ingredients (and rent, equipment, machinery) that the at-home cook isn’t. Plus, with the cost of dining out up 5.1%, 68% of consumers are eating out less (Vericast). This has a major impact on restaurant revenue as the number of total transactions at U.S. restaurants is down by 13.9% (MarketWatch).
If inflated operating costs weren’t already hard to swallow, labor and wages have become an even bigger issue. On average, labor costs account for ~30% of a restaurant’s revenue (NRA). Wages continue to increase by 4.3% year-over-year — and in places like California, minimum wage is now up to $20/hour. Retention remains a costly issue with the average restaurant losing $150,000 yearly just in staff turnover (Notch).
Lastly, day-to-day inefficiencies are wasting expensive time on the clock. Restaurant operators spend 40+ hours a week on food order management alone. Without a solution to optimize their time and effort, operators are stuck in a cycle of climbing costs with little to no reward.
Case-in-Point: Coupa Café’s Big-Time Problem
Coupa Café is one story out of thousands where operations required unsustainable time, effort and costs.
For a cafe just a stone’s throw away from Stanford University, Coupa had 15 people ordering supplies the same way your grandfather would have. In fact, staff was spending at least 2 hours a day per location managing orders. With nine locations, each order was taking hours — if not days — of employee time.
To complicate the problem, the minimum wage for fast food workers recently rose to $20 per hour in Coupa’s home state of California. This meant immense pressure to make every hour of work count. Relying on multiple staff members to manage ordering, receiving, coding, expense tracking and accounting was no longer financially feasible. Coupa was going to need a better way to manage food ordering and payments that didn’t rely on manual labor, Excel sheets and countless hours.
With an understanding that every hour spent on manual tasks directly impacted the restaurant’s bottom line, Coupa turned to e-commerce to streamline operations and digitize order management.
E-Commerce: A Lifeline for Operators in the Race
For restaurants like Coupa Café, e-commerce is emerging as a solution to reduce costs, save time and boost efficiencies. By leveraging a foodservice e-commerce platform, operators can easily shop and purchase from their contracted distributors in one place. E-commerce is changing the restaurant management game in three main ways:
1. Digitizing Order Management
E-commerce technology offers operators a user-friendly platform to explore contracted distributor catalogs while also providing an all-in-one order and pay system for restaurants with multiple locations.
Every staff member involved in the ordering process can have access to the platform straight from their smartphones. Employees can add items to the company cart throughout the week or even place small orders for next day’s service. Before placing an order, a chef can easily review it to ensure nothing is forgotten, and kitchen staff can easily see all orders in real-time. This shifts a messy, paper-heavy process to a simple digital ecosystem that brings transparency and balance throughout the entire ordering process.
When Coupa Café switched to an e-commerce platform, it implemented a price tracking system which monitors their spend on individual products and alerts them in real time of any price changes. This allowed operators to manage their budget and make informed purchasing decisions for their specific location.
2. Streamlining Payment Processing
The average restaurant orders from four to eight suppliers, often daily. Following a trail of paper invoices, checks, faxed follow-ups and rebates for every single supplier makes it hard to spot deals — and even harder to stay on top of incoming and outgoing costs.
Going digital eliminates the hassle associated with a messy paper trail. Upon delivery, distributors generate and issue a digital invoice and send it to the staff member responsible for handling order payments. This not only keeps everything organized for the restaurant manager or bookkeeper, but also speeds up the overall payment process. Lastly, the kitchen staff no longer has to handle physical checks or invoices, reducing the risk of errors and the potential for lost documents.
3. Reducing Labor Costs
By digitizing the food ordering and payment process, restaurants can reduce the time spent on mundane tasks by over 70 hours a week. In fact, Coupa Café cut its ordering time in half. Communication and shopping with distributors became quick and easy, ultimately allowing it to save thousands of dollars annually. Operators can reduce labor requirements by 50% to 70% by having order and pay processes in one cohesive location.
Approaching the Finish Line
E-commerce has become a competitive differentiator for restaurant operators at organizations like Coupa Café that face high labor and operating costs. By digitizing ordering and payment processes, restaurants can improve overall operational efficiency while saving their workers’ time and their businesses’ money.
In this inflationary environment, restaurant operators should embrace e-commerce to offset heightened operational costs and challenges. By leveraging the powerful combination of tech and human touch, e-commerce can bring restaurant operators to the finish line.
— Mani Kulasooriya is CEO of Cut+Dry, a foodservice e-commerce platform with the largest food product database in the world. A serial entrepreneur, Kulasooriya co-founded CAKE, a restaurant POS startup, which was acquired by Sysco. While at Sysco, he helped create a brand-new technology organization, Sysco Labs.