How to Reduce Restaurant Labour Costs and Increase Margins

UK restaurants, pubs, and hotels face growing pressure from rising labour and ingredient costs, which threatens profit margins across the hospitality sector. Manual kitchen management creates inefficiencies, hidden costs, and missed opportunities for growth. This article outlines the main cost challenges for hospitality businesses and explains how automated kitchen management helps control them. Jelly, a platform designed for growing hospitality businesses, provides real-time insights and more efficient operations so you can manage costs and protect profit margins.

The Problem: Why Restaurant Profit Margins are Shrinking in the UK

The Silent Killer: Hidden Labour Costs and Administrative Burden

The hospitality industry is facing a labour cost challenge that extends far beyond basic wages. Primary hidden labour costs in UK restaurants include time spent on administrative compliance, technology inefficiencies (manual or outdated systems), and the high cost of employee turnover (£3,000–£5,000 per position). These costs accumulate gradually and erode profitability without always appearing clearly in standard cost reports.

Hidden labour costs often arise from:

1. Administrative tasks such as rota changes, compliance checks, and payroll adjustments
2. Manual data entry into spreadsheets or disconnected systems
3. Recruitment, onboarding, and training caused by high staff turnover
4. Time spent correcting errors that occur in manual processes

Labour costs now average 31.2% of revenue for UK restaurants in 2025, above the ideal target of 25–30%, primarily due to staff shortages, wage inflation, and turnover rates approaching 38%. This gap from industry benchmarks makes it harder for many establishments to maintain profitability while still meeting service and staffing expectations.

The administrative burden has also increased after recent regulatory changes. Recent changes to UK labour law and business rates in April 2025 have directly increased costs for restaurants, disproportionately affecting part-time and entry-wage labour, contributing to a “third of annual profits wiped out by rising labour costs” for some operators. Increases in wage rates, National Insurance, and tax changes have intensified pressure on hospitality operators to reduce overhead while still relying on flexible contracts such as zero-hour and part-time roles.

The cumulative effect is significant. Owners and managers spend more time on paperwork, compliance, and manual processes, and less time on activities that generate revenue. What should be a manageable 25–30% labour cost ratio can quickly become an unsustainable burden that threatens long-term viability.

The Ingredient Cost Crisis: Unpredictable Prices and Waste

Ingredient costs create another major challenge for margin protection. Ingredient and kitchen inefficiencies such as portion inconsistency, food waste, and untracked supplier price increases can cause cost of goods sold (COGS) percentage to rise unnoticed, eroding gross margins. Volatile prices make budgeting difficult, especially when operators rely on manual tracking and delayed reporting.

Rising overheads compound this pressure. Rising supplier costs, energy, business rates, and especially card payment fees (1.5–3.5% per transaction) are notable hidden costs steadily eroding profit margins in UK hospitality, including restaurants and pubs. Even venues with apparently strong gross margins can struggle once these extra costs are included.

The impact on net profit can be sharp. Despite high gross margins (78–80%) on drinks, actual net profit for pubs can fall to just 10–15% after fixed costs and fees; for many, even a 2.5% transaction fee can wipe out more than 20% of net profit per sale. With margins this thin, poor control of ingredient costs can push an otherwise busy and well-regarded venue into loss.

Manual tracking systems often delay the moment operators notice a problem. By the time a chef or owner realises that ingredient costs have climbed, weeks or months of margin erosion may already have occurred. Without timely information, it is harder to negotiate with suppliers, adjust menus, or update portions in a planned and strategic way.

The Cost of Inefficiency: Manual Processes and Delayed Insights

Operational inefficiency in traditional restaurant management also damages profitability. Admin tasks and manual managerial work are key time sinks for head chefs and managers, making labour cost control increasingly challenging without digital support.

The time needed for manual processes is considerable. Dish costing alone requires tracking dozens of SKUs from multiple suppliers, fluctuating prices, and batch recipes. On average, it takes 28 minutes of work in a spreadsheet to cost a single menu item. Head chefs rarely have this time available while running a busy kitchen.

This workload creates a cycle where growth increases pressure on management. As a restaurant becomes busier, owners and finance managers often spend 10–20 hours a week on manual data entry, price checking, inventory management, and invoice reconciliation. This leaves less time for strategy, staff development, and guest experience.

Outdated payment and billing systems create cumulative hidden costs that impact viability, especially as customers shift away from cash. When systems for POS, purchasing, stock, and accounting operate separately, data sits in silos and a full financial picture is difficult to assemble without extensive manual work.

Delayed reporting makes this problem worse. Many operators rely on monthly accountant reports to review performance. By the time these reports arrive, the window to react to supplier price changes or low-margin dishes has often closed. This reactive approach leaves businesses responding to issues after the damage is done rather than guiding decisions in real time.

The Solution Category: Embracing Automated Kitchen Management to Cut Costs

Modern hospitality cost pressures call for a shift from reactive to proactive management. Automated kitchen management provides a practical way to move beyond manual processes and gain the data visibility needed to operate efficiently.

Automated kitchen management platforms address cost control from several angles at once. Instead of treating labour, purchasing, stock, and menu performance as separate tasks, these systems connect data across back-of-house operations. This reduces duplicated effort, minimises errors, and gives operators a clearer view of how daily decisions affect profit.

Labour automation solutions can generate at least a 1% labour cost reduction per site, 7–10% improvement in staff scheduling and deployment, and more efficient service during high-traffic periods. Over time, these gains compound and support a more resilient business model.

The main benefits of automated kitchen management focus on three areas:

1. Real-time visibility into costs and margins at dish, menu, and site level
2. Streamlined administrative workflows that reduce manual tasks for managers
3. Data-driven insights that support proactive decisions rather than reactive fixes

Timely insights remove the lag between cost changes and awareness. Instead of learning about price increases weeks after they harm margins, operators receive alerts and reports as changes occur. This allows quicker negotiations with suppliers or menu updates, which can be the difference between a profitable month and a loss.

See how Jelly can automate your kitchen management. Book a chat.

Jelly: The Automated Platform for Growing Hospitality Businesses

Growing UK restaurants, pubs, and boutique hotels need clear cost control as they scale. Jelly offers an automated kitchen management platform designed to support this growth. The system is built for quick onboarding and aims to deliver useful insights within the first week. It works well for operations with annual revenues of £500,000 or more, especially those preparing to open additional sites.

Jelly focuses on the key challenges facing hospitality operators by automating time-consuming back-of-house tasks such as invoice management, inventory tracking, and real-time dish and menu profitability analysis. The platform replaces manual processes with structured workflows that provide visibility and clear, actionable data.

Key features that influence operational efficiency and profitability include:

1. Automated invoice scanning: captures every line item from supplier invoices via photo or email, digitising data for real-time insights without manual entry.
2. Live dish costing: reduces the 28-minute manual costing process to about 3 minutes by letting chefs build recipes with pre-populated ingredients from scanned invoices, with costs updating automatically as prices change.
3. Price alert system: flags ingredient price changes immediately, so chefs and managers can negotiate better rates or claim credits with suppliers.
4. Flash report: provides daily, weekly, or monthly views of gross profit margins, integrating with POS systems for financial visibility without waiting for month-end reports.
5. Accounting integration: integrates with popular accounting platforms to simplify bookkeeping and reduce duplicate work.
6. Menu engineering (sales mix): connects with POS systems such as ePOSnow to show which dishes are most popular and profitable, supporting data-led menu decisions.

Jelly’s design prioritises clarity and ease of use, so even less tech-confident team members can work with the platform with minimal training.

See how Jelly can automate your kitchen management. Book a chat.

How Jelly Enhances Operational Efficiency and Profitability

Streamlining Operations: Automating Admin to Save Time

Jelly’s automated invoice scanning and processing features reduce the administrative workload that often burdens hospitality teams. Instead of spending 10–20 hours each week on manual data entry, price checking, and invoice reconciliation, teams can focus more time on service and revenue-generating activities. Across a month, Jelly can save operators 10–20 hours of admin work.

The platform’s integration with accounting software further simplifies bookkeeping and helps reduce errors or missed payments that could strain supplier relationships. Automation allows finance managers and owners to focus on planning, budgeting, and growth rather than repetitive tasks.

Managers identify the real pain points in the manual time required to adjust for compliance, payroll, and fluctuating schedules, further increasing hidden administrative labour costs. Jelly supports this area by providing current cost data that can feed into forecasting, budgeting, and workforce planning.

The time savings extend beyond data entry. With routine tasks handled by the system, management can allocate more time to staff training, service improvements, marketing, and other initiatives that have a direct impact on sales and guest satisfaction.

Optimising Inventory & Negotiations: Protecting Margins from Ingredient Costs

Jelly’s Price Alert feature helps operators manage supplier relationships more effectively. Instead of discovering price changes long after they occur, teams receive real-time notifications of cost shifts. This enables prompt negotiations, credit claims, or supplier comparisons, which can reduce purchasing costs each month.

Live dish costing keeps menu profitability visible as ingredient prices move. Operators can see when a dish’s margin drops and then act quickly. Options include adjusting portions, switching suppliers, or changing menu prices. Many venues see gross margins increase by about 2 percentage points within the first three months of using Jelly.

Amber, a Mediterranean restaurant in East London, illustrates this effect. Chef-owner Murat Kilic reports consistent savings of £3,000–£4,000 per month through better buying decisions, faster responses to price changes, and tighter menu control. “Jelly keeps my business alive,” says Murat Kilic, highlighting the platform’s role in maintaining profitability.

The automated recipe management system also supports menu engineering. By combining cost data with sales performance, operators can identify dishes that deliver strong margins and guest appeal and adjust the menu mix to favour those items.

Empowering Strategic Decisions: Real-Time Insights for Better Margins

Jelly’s Flash Report and Sales Mix tools give owners and finance managers immediate visibility of financial performance. Instead of waiting for monthly accounts, operators can track gross profit margins daily and spot trends early.

Integration with POS systems provides a combined view of sales, dish performance, and cost. This helps identify which menu items drive profit, which dishes underperform, and where to focus effort. Decisions on pricing, promotions, and menu changes can then be based on clear evidence rather than guesswork.

Ruth Seggie, owner of The Howard Arms, has seen this shift in practice: “Our accountant said we’d be lucky to hit 60% gross profit. After using Jelly, we reached 80%! Now I sleep better knowing my costs are under control and can react instantly, not weeks later.” This reflects the value of real-time control over margins and performance.

Better transparency also improves collaboration in the team. When chefs, managers, and owners all have access to the same up-to-date data, it becomes easier to discuss cost targets, agree actions, and work together on profitability improvements.

Jelly vs. The Manual Grind: A Comparison of Efficiency and Profitability

This comparison shows how traditional manual methods struggle to keep up with today’s fast-moving hospitality environment. Many owners underestimate the cumulative impact of small operational inefficiencies and manual processes across back-office operations. Over time, these inefficiencies add up and can create a clear competitive disadvantage.

Manual systems also lack integration. Data sits in separate spreadsheets, accounting tools, and POS systems, which limits the ability to see how everything connects. Jelly’s integrated approach brings these data sources together and provides insights that are easier to act on.

See how Jelly can automate your kitchen management. Book a chat.

Frequently Asked Questions About Reducing Costs and Increasing Margins

How does Jelly help reduce administrative labour costs in restaurants?

Jelly helps reduce administrative labour costs by automating tasks such as invoice processing, inventory management, and real-time dish costing. This automation typically saves operators 10–20 hours of manual work per month and allows teams to focus on higher-value operational tasks. Automated invoice scanning removes the need for manual data entry, while integration with accounting software streamlines bookkeeping. The simplified dish costing process turns a 28-minute spreadsheet task into an approximately 3-minute workflow, freeing up valuable time for chefs and managers.

What are the main causes of eroding profit margins in UK restaurants and pubs today?

Eroding profit margins in UK hospitality usually result from several overlapping factors. Rising labour costs form a major part of the challenge, with restaurants now averaging 31.2% of revenue on labour compared to an ideal 25–30% range. Staff shortages, wage inflation, and turnover rates near 38% all contribute to this increase. Ingredient price volatility and supplier price changes often go unspotted until monthly reports arrive, which allows margin erosion to build. Hidden costs, including administrative compliance, technology inefficiencies, and employee turnover costs of £3,000–£5,000 per position, add further pressure. Regulatory changes in business rates and labour law have also increased operating costs, while outdated payment systems and card transaction fees of 1.5–3.5% per transaction can squeeze cash flow for venues already working with tight margins.

How quickly can I expect to see results in increasing my profit margins with Jelly?

Jelly users typically see initial insights within the first week, once supplier invoices have been processed through the system and price alerts and spending data start to appear. Most operators see their gross margins rise by about 2 percentage points within the first three months and reduce food costs by around 3% in the same period. Amber restaurant in East London, for example, reports savings of £3,000–£4,000 per month through better buying decisions and quicker responses to price changes, which demonstrates the impact on profitability.

Can automated kitchen management systems integrate with my existing POS and accounting software?

Yes. Platforms like Jelly are designed to integrate with existing restaurant technologies. Jelly connects with popular POS systems such as ePOSnow to provide real-time sales data for menu engineering and profitability analysis. It also integrates with accounting software to streamline bookkeeping workflows and maintain data accuracy. These integrations build on existing tools and create a more connected back-office workflow without requiring operators to replace their current systems.

What makes automated solutions more effective than traditional cost management methods for growing restaurant businesses?

Automated solutions offer advantages in speed, accuracy, and scalability compared with traditional manual methods. Automated invoice scanning and dish costing remove many hours of manual work and provide real-time insights for proactive decision-making. Accuracy improves because the system reduces the risk of human error in data entry and calculations, so cost tracking and margin analysis match actual performance more closely. For growing businesses, automation also scales more effectively across multiple sites without a proportional increase in administrative workload, which helps operators maintain control of profitability as they expand.

Conclusion: Secure Your Restaurant’s Future by Controlling Costs and Boosting Profits

The UK hospitality market now demands accurate, timely cost control that manual methods alone rarely provide. With labour costs above industry benchmarks, ingredient price volatility, and rising regulatory and operational pressures, restaurants, pubs, and hotels benefit from more structured and automated approaches.

Industry analysis shows that small inefficiencies and unmonitored costs can become serious threats for operators with thin margins. Manual processes, delayed insights, and reactive cost management can all combine to weaken competitiveness as market conditions tighten.

Automated kitchen management with Jelly offers a practical way to turn cost control into an advantage. By reducing administrative workload, providing real-time financial visibility, and supporting proactive decisions, the platform helps growing hospitality businesses protect and improve their margins.

Operators using Jelly report margin improvements, more effective supplier negotiations, and significant monthly savings, alongside gaining back hours each week for planning and development. These outcomes show how automation supports hospitality teams that want clear, data-backed control over their costs.

Take control of your costs and maximise your profitability. See how Jelly can automate your kitchen management. Book a chat.