Prime cost gets all the attention. Food and labor are the numbers general managers name in their sleep, the numbers area directors argue about, the numbers that decide whether the unit is operating or bleeding. That focus is correct. Prime cost is where a restaurant either wins or loses.
But there is a second category of money that a restaurant loses in a completely different way. Not by variance. Not by discipline. By drift. Every fixed and semi-fixed cost line on a restaurant P&L is quietly moving up every year because the vendor is passing through their own inflation, the subscription auto-renews at a higher rate, the CAM reconciliation includes something new, or the insurance renewal absorbed a premium bump that nobody caught. None of this is malicious. All of it is expensive. And almost nobody audits it.
The fixed cost audit is boring, low-status work. It also consistently finds 5 to 15 percent savings on the lines being audited, which usually adds up to $30K to $120K per unit per year in a full-service restaurant. Over 16 years, this is the single most reliable non-prime margin play I have run, and the one operators are most likely to postpone forever.
Why fixed costs drift up
Three structural reasons that all compound:
- Nobody owns them. The general manager owns prime cost. The area director owns unit performance. The CFO owns the P&L in aggregate. But the actual vendor contract for pest control? It sits in someone's file cabinet from 2019 and nobody has looked at it since. Ownership is diffuse, which means attention is zero.
- The vendor knows. Every recurring vendor has a customer base that audits and a customer base that does not. The pricing you get quietly reflects which category you are in. A vendor whose customer has never called about pricing in three years is not going to volunteer a lower rate at renewal.
- Auto-renewals are the default. Software subscriptions, service contracts, equipment leases. Most of them auto-renew with a small annual increase built in. 4 percent per year compounds to 22 percent over five years. That is a 22 percent overcharge you did not agree to and nobody stopped.
Fixed costs do not stay fixed. They creep. And they creep on the assumption that nobody is watching. Once a year, be the one who watches.
The seven categories to audit
In descending order of typical savings opportunity, based on audits I have run across a 21-unit franchise portfolio and a $30M Bay Area group.
1. Waste hauling and grease services
Highest single-category opportunity in almost every audit I have run. Waste hauling contracts are legendary for silent price increases and for pickup schedules that no longer match actual waste volume. Common findings: 3 pickups per week that could be 2, dumpster sizes that are one tier too large, fuel surcharges that never got adjusted when fuel prices dropped, and secondary fees for services never used. Typical savings: 15 to 30 percent of the line.
2. Software subscriptions
Easiest money in the audit. Every restaurant I have audited has 3 to 7 active subscriptions that nobody uses, plus 2 or 3 that duplicate features of the POS or accounting system. Reservation platform legacy account. Training software from an old operator. Two different scheduling tools because someone tested one and forgot to cancel. Total waste per unit typically runs $2,000 to $8,000 per year. Cancellation takes ten minutes per subscription.
3. Insurance premiums
General liability, workers comp, liquor liability, property, cyber. Most restaurants renew with the same broker every year without shopping. Getting three real quotes from competing brokers typically produces 5 to 20 percent savings, especially on general liability and workers comp where classification errors are common. Bring a real loss run history, get real quotes, then take them back to your current broker to match.
4. Equipment leases
Coffee equipment, ice machines, POS hardware, dishwashers, hood cleaning contracts. Many of these were signed at unit opening and never revisited. Common findings: equipment being leased that is more than fully paid off, service plans overlapping with manufacturer warranties, and per-transaction fees on POS hardware that could be flat-fee. Typical savings: 10 to 25 percent of the line.
5. Pest control
The classic 20-year contract that nobody has renegotiated. Pest control is a competitive market and the pricing has dropped over time, but the contracts have not. Typical savings: 20 to 40 percent when you actually shop the contract.
6. Uniforms and linens
Rental contracts with silent price increases, exchange charges that grew, and item counts on the invoice that do not match what actually shows up. Audit the invoice against actual pieces for one month. Typical savings: 10 to 15 percent, plus recovered miscounts.
7. Telecom and internet
Business lines that were installed in 2015 and never revisited. Redundant lines. Dedicated data circuits at 10x the current market rate. Typical savings: 20 to 50 percent, though telecom is the most annoying category to actually renegotiate.
Fig. 1 · Where the savings live, by category. Ranges reflect audits across multi-unit portfolios.
How to actually run the audit
Two weeks of part-time attention from operations. Not a project. Not a consulting engagement. A structured half-day per week for two weeks, plus a follow-up in weeks 3 and 4 to close out negotiations.
Week 1, Day 1: Pull the recurring spend
Sit with the accounting team for two hours. Pull every vendor that hit the P&L two or more times in the last 12 months with a similar dollar amount. Sort by annual spend descending. Export to a spreadsheet. The top 20 lines usually cover 80 percent of the audit opportunity, so focus there.
Week 1, Day 3: Match to contracts
For each top line, find the contract, the renewal date, the price schedule, and the notice period for cancellation. If there is no contract, note it. Anything without a contract is an evergreen subscription and probably the easiest saving.
Week 2, Day 1: Get real competing quotes
For each line, contact at least two competing vendors and get a real quote for your specific usage. Not a rate card. Not a general marketing quote. Your actual monthly volumes and specific service needs. This is where most audits fail. Without a real competing quote you have no leverage.
Week 2, Day 3: Renegotiate with the incumbent
For each line where the competing quote is materially lower, contact the current vendor's account manager, not their general customer service. Say: "We received this quote. We would prefer to stay with you. Can you match it?" Nine times out of ten they can. Get the new rate in writing with a term.
Weeks 3 and 4: Switch or cancel
For lines where the incumbent will not match, switch. For subscriptions nobody uses, cancel. Track every change in a spreadsheet with the annualized savings. Present it to finance as a completed project.
A real audit example
A 5-unit group I ran a fixed cost audit on inside 12 months of a broader turnaround. Total audited annual fixed and semi-fixed spend across the five units: roughly $1.62M. Time invested: 3 weeks of my time, plus about 40 hours of accounting support. Findings:
Category Annual Before Annual After Saved %
Waste hauling $ 82,400 $ 61,800 $ 20,600 25%
Software subscriptions $ 41,200 $ 28,500 $ 12,700 31%
Insurance (GL + WC) $158,900 $138,200 $ 20,700 13%
Equipment leases $ 96,300 $ 79,700 $ 16,600 17%
Pest control $ 24,000 $ 15,600 $ 8,400 35%
Uniforms and linens $ 51,200 $ 44,800 $ 6,400 13%
Telecom and internet $ 38,600 $ 24,900 $ 13,700 36%
--------- --------- ---------
Top 7 categories $492,600 $393,500 $ 99,100 20%
Structural savings, year 1 $ 99,100
Recurring, year 2+ $ 99,100
Roughly ~$500K over 5 years, no operating change required.
That $99K per year did not come from operating discipline. It came from asking the vendors what the current market rate is. Nobody in that group had asked in more than four years.
The rules that keep the audit clean
Ops runs it, not finance
Finance can produce the spend data. Ops knows what the line is producing. When I have watched finance-led audits go badly, they cancel things that operations needed, or leave things in place that operations does not use, because finance does not have the operating context. The audit should be operations-led with finance in support.
Get real quotes, not rate cards
A rate card is what the vendor publishes. A real quote is what they will actually charge you, given your volume and specifics. The gap between the two is often 20 percent. Never negotiate with a rate card. It has no leverage.
Contact the account manager, not customer service
Every recurring vendor has an account manager whose job is to retain your account. That person has pricing authority customer service does not. Skip customer service. Ask directly for the account manager. If the vendor does not have one, that is often a sign the account is small enough that switching is easier than negotiating.
Get the new rate in writing with a term
A verbal price match lasts until the next auto-renewal. A written amendment with a 12 or 24 month term locks the rate. Every time you accept a price match, ask for a term. It is standard practice and vendors almost always agree.
Cancel unused software first
The easiest money in the audit. Before you touch any negotiation, walk through the subscription list and cancel anything nobody has logged into for 90 days. Total time: two hours. Total annualized savings: usually $3,000 to $10,000 per unit.
What I got wrong on my first audit
I audited everything
The first audit I ran, I tried to audit every recurring line, top to bottom. Took a full month. The bottom half of the list saved almost nothing. Now I stop at the top 20 lines by spend, which is where 80 percent of the savings live, and revisit the tail on year 2 if there is any opportunity left.
I tried to switch vendors instead of renegotiating
For the first three categories in my first audit, I switched vendors without giving the incumbent a chance to match. Six months later, two of the three switches produced service problems that ate the savings. Now I always try to renegotiate first. The incumbent knows my operation. Switching has friction that a spreadsheet does not capture.
I did not track the savings
The first audit produced roughly $60K in annualized savings that I never tracked to the P&L. Six months later some of them had crept back because nobody was watching the new rates for compliance. Now I hand accounting a tracking sheet with the negotiated rates and check quarterly that the invoices match.
The point
Prime cost is where the biggest money lives, and it is where the best operators put their attention. But there is a category of margin that is not about operations at all. It is about pricing discipline on the vendor side, and the vendors will only apply that discipline if you make them.
An annual fixed cost audit takes two weeks of part-time attention and consistently finds 5 to 15 percent savings on the audited lines. In a five-unit group that is $50K to $150K per year of structural, recurring, no-effort-to-maintain margin. It compounds. It stays. And it stops the drift that would have quietly cost you another 4 percent every year.
Put it on the calendar the same month every year. Ops leads. Finance supports. Top 20 lines. Real quotes. Written amendments. Two weeks. Then back to prime cost, where the real work lives.