Between lighting, HVAC, water heating, and powering kitchen equipment, electricity costs can add up quickly for restaurants. Furthermore, since many restaurants already run on thin margins, it serves them well to find ways to reduce spending in this cost category.
Luckily, restaurants can boost their bottom line and uncover savings on electricity costs by conducting an energy audit.
While our most successful cost reduction categories for restaurant clients are waste and recycling and uniform and linen, in this article, we will take a look at average restaurant energy costs, the difference between energy billing audits and energy consumption audits, and why an energy audit can bring savings to restaurants.
According to data from the U.S. Energy Information Administration (EIA), restaurants in America spend an average of $2.90 per square foot on electricity and $0.19 per square foot on natural gas annually.
Based on these numbers, the estimated annual energy costs for a mid-sized, 3,000 square foot restaurant might be around $9,270. Though the average electric bill will vary depending on the size of the restaurant, its consumption practices, and the ratio of electricity to natural gas, these numbers give us a good estimate to work from.
Typically, these figures equate to restaurants spending roughly 3%–5% of their annual operating costs on energy. Furthermore, depending on the climate and location of a restaurant, 69%–81% of their energy usage comes from cooking, water heating, refrigeration, and lighting.
Two different types of restaurant energy audits exist—energy billing audits and consumption-based energy audits.
Due to the thin margins that restaurants operate on, they’re likely looking for solutions that help them reduce costs without needing to invest more capital. For this reason, the information below will mostly focus on the benefits and details of an energy billing audit.
Energy billing audits don’t require capital expenditure, whereas the solutions recommended during consumption-based energy audits typically involve extra investment by the restaurant.
To find savings within their energy invoices and contracts, restaurants can work through a detailed energy billing audit led by an experienced team of auditors.
At P3 Cost Analysts, our experts focus on this type of energy audit. During an audit, we will take a close look at a restaurant’s invoices to uncover a variety of different errors and overcharges that typically go unnoticed by the average customer. Our expertise also allows us to analyze and understand your energy tariffs in order to find other opportunities for savings.
The goal with any energy billing audit is to find you financial savings without any additional investment. There won’t be any recommendations of technologies or products you should install in order to reduce energy consumption.
In our experience, we find the best energy savings for restaurants in deregulated energy markets. In those markets, we can look at energy supply agreements for almost any size restaurant or group. If the restaurant is large enough, and monthly energy expenses are high enough ($5,000/month), we can often help restaurant clients in regulated markets as well.
The main reason why restaurants don’t have as much savings in regulated markets is due to the lack of tariff options available for restaurants. Whereas manufacturers, hospitals, and other types of high volume electric users often have many different tariff options our auditors can analyze.
That being said, in many regulated states there are riders and other fees that restaurants can opt-out of that can generate savings. So, if the expenses are high enough for restaurant clients, it still warrants an energy billing audit.
Our most successful categories for cost savings for restaurant groups are waste and recycling and uniform and linen. We average 30-40% savings for restaurant groups in those categories.
In deregulated energy markets where you get to choose from a variety of different energy suppliers, we negotiate the best energy rates possible for your restaurant. Since we have access to nationwide pricing data and benchmarks, we can compare your costs with the costs of other restaurants that are similar to yours.
If we notice that your pricing isn’t fair and acceptable in comparison to industry averages, we can approach the energy supplier on your behalf to negotiate better rates.
There are many different types of overcharges and errors that can be found in your invoices by working through an energy billing audit. In most cases, the customer isn’t aware of these errors and overcharges and pays for them without thinking twice about it.
Luckily, we know what to look for and understand what the utility companies are liable for in regards to errors and overcharges. Once we have our findings, we can figure out where refunds are applicable and deliver the savings to you.
While the tariff options in regulated markets are often limited for restaurants, if the size of the restaurant is large enough, and expenses are high enough (approximately $5,000/month), it can still warrant an analysis.
For restaurants to truly optimize their spending on energy, they need to function under the proper tariffs. Energy tariffs are extremely complex and most, if not all restaurants won’t know how to check if they are qualified for the right tariffs. With their expertise, your team of auditors will be able to look at your tariffs documents, figure out which tariffs you should function under, and make any adjustments that are required.
A consumption-based energy audit is the other type of audit and it serves as a way for restaurants to better understand their energy usage and possibly install energy-efficient technologies. This type of audit is offered by many companies and their product or technology recommendations to reduce energy waste come in all shapes and sizes.
Though reducing energy consumption is overall a good thing, a majority of the energy-efficient technology recommendations will involve additional investment from the restaurant. If a restaurant is seeking savings without using more capital, working through an energy billing audit with a professional team is the best choice.
The engagement phase consists of us explaining our shared savings agreement during a 20-minute meeting. We also ask you to provide us with the essential materials we need to begin the audit such as invoices, contracts, and authorization documents.
During the onboarding phase, we work with you to gain access to 12–36 months’ worth of invoices, depending on the statute of limitations in your state. In some cases where we have access to your online energy vendor logins, only a single invoice may be necessary.
During the audit, our team will start dissecting invoices and provide you with weekly or bi-weekly updates on overcharges and errors found. We deliver these savings as we go instead of waiting until the end of the audit. Finding our initial areas of savings typically takes 4–6 weeks, and implementing these savings can take another 4–6 weeks, depending on which part of the billing cycle we are in.
After the initial audit, we move into the ongoing auditing phase where we manage invoices every month and make sure errors don’t continue to appear and that the savings are intact.
Restaurants are major consumers of energy for a variety of reasons. These include having to power a lot of kitchen equipment, heat and cool large spaces, maintain appropriate lighting, and heat a vast amount of water.
For restaurants seeking savings that can be found within their energy invoices, conducting an energy billing audit is a must. By working with a team of energy auditing experts, you can uncover a variety of different errors, overcharges, or other opportunities for saving that you wouldn’t be able to find on your own. Furthermore, an energy billing audit will ensure that you are qualified for and functioning under the correct energy tariffs.
Restaurants are also able to conduct a consumption-based energy audit. This can help them better understand their energy usage and figure out what types of technology they could implement in order to reduce energy waste. But, since many of these recommended solutions require additional investment from your restaurant, they might not be a good fit for your current financial needs.
If you’re interested in conducting an energy billing audit for your restaurant, our team at P3 Cost Analysts is ready and able to help. To schedule your free expense audit, contact us today!