Cost reduction strategies:

Muglan is a private company having its branches in different suburbs of Sydney which includes the
main city branch, Burwood, and Rockdale branches. There are plenty of restaurants that offer Indian
and Nepalese cuisine like Muglan and considering so many competitors in the market, costing
strategies for improving the business is quite significant. From the research our group had on the
different components of the business, we can propose below outlined different cost-saving
measures.

Variable Cost-saving Strategies:

Variable cost is critical for profitability and success as these are incurred as required. So, controlling
them is quite easier as compared to fixed costs and leads to the financial health of the organisation.
Muglan variable costs include food costs, hourly wages, and utilities. Below are a few strategies to
save the variable cost.

1. React to Unfinished Plates: Serving size at Muglan is quite good at Muglan and we realised
that some customers couldn’t finish their food for the main course dishes. It is good practice
to watch out for the servers and bussers clear tables and if customers are leaving quarter-
full plates in the dish pit, then it is viable to reduce the portion size in a way that food
wastage will reduce while maintaining the sales volume. Saving money on food costs will not
only reduce expenses but will also increase the gross profit margin.

2. Shop Around: Muglan promotes the traditional values of Nepal and Indian cuisine and many
of its suppliers are based overseas or have family ties with the owners. It will be a good
strategy to consider other suppliers while not putting all the eggs in one basket. If the
management can build more relationships with the local vendors, they might be able to
source great deals which will reduce the cost consequently. Economies of scale could be
considered in this scenario as buying the non-perishable stock in bulk quantity will reduce
the cost largely.

3. Reduce Energy Usage: Electricity is the major indirect expense in any food business. The
traditional ambiance and lighting Muglan offer, lead to high electricity costs. We noticed that
a lot of kitchen equipment is old which uses more energy. Replacing them with energy
efficient will be costly initially but will save cost in the long run. Also, the shift manager can
ensure that the energy conservation checklist should be followed from time to time which
includes but is not limited to:
 Keep a schedule of regular maintenance of all electric equipment
 Shut off unused appliances as and when required.
 Check seals and gaskets often
 Setting up smart thermostats and replacing the conventional bulbs

Fixed Cost-Saving Strategies:

Fixed cost is fixed irrespective of the sales or operational level. These are uncontrollable costs but
contribute towards a great portion of the total operating expenses of the business. Various
strategies can be followed to reduce the fixed cost in the long run.
1. Reduce permanent Staff: We noticed that most of the staff at Muglan are working on
permanent contracts and not on a roaster basis and they are working quite of overtime on
the weekends because of the business demands. If management can promote more shift-
based staff as morning or evening staff, it will reduce the overtime hours and save on
penalty rates. Casual staff can also be hired to meet seasonal or festive sales requirements.
It will reduce the direct labour cost and hence make a huge impact on the profitability of the
business.

A significant part here is not using the same schedule or copying and pasting the staff
schedule week after week. All weeks are not the same so scheduling staff shouldn’t be the
same.