Between lighting, HVAC, water heating, and powering kitchen equipment, electricity costs can add up quickly for restaurants. Electricity use often fluctuates due to factors like seasonal heating and cooling needs, making it important for restaurants to monitor and manage their energy consumption. On average, a restaurant can spend anywhere from $2,000 to $6,000 per month on energy costs (Fact: 1). Furthermore, since many restaurants already run on thin margins, it serves them well to find ways to reduce spending in this cost category. This article is intended for restaurant owners and managers seeking to understand and reduce their monthly electricity bills by exploring average costs, key factors, and actionable strategies.
Luckily, restaurants can boost their bottom line and uncover savings on electricity costs by conducting an energy audit. Focusing on energy efficiency—such as upgrading to energy-efficient appliances and systems—is a key strategy for reducing costs and improving overall profitability.
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. Monitoring and managing your utility bill is essential for controlling operational expenses.
Introduction to Restaurant Energy
Energy consumption is a major operational expense for the average restaurant, with electricity alone costing around $2.90 per square foot annually. When you factor in natural gas and water heating, energy costs can account for 3-6% of a restaurant’s total expenses. Managing these costs is crucial for maintaining profitability, especially in an industry where margins are often tight. By understanding how energy is used throughout the restaurant—from lighting and appliances to heating and water systems—owners can identify opportunities to reduce energy consumption and lower utility costs. Investing in energy-efficient solutions, such as LED lighting and Energy Star-rated equipment, not only helps save on monthly bills but also delivers significant long-term savings. These upgrades can make a noticeable difference in both operational costs and environmental impact, helping restaurants run more efficiently and sustainably.
Average Restaurant Electricity Costs
According to the U.S. Energy Information Administration, restaurants in America spend an average of $2.90 per square foot on electricity annually (Fact: 1). For a mid-sized, 3,000 square foot restaurant, this equates to an estimated annual energy cost of around $9,270 (Fact: 3), or approximately $772.50 per month. However, depending on size and location, a restaurant can spend anywhere from $2,000 to $6,000 per month on energy costs (Fact: 2).
According to data from the U.S. Energy Information Administration (EIA), restaurants in America spend on average:
Average annual electricity cost: $2.90 per square foot
Average annual natural gas cost: $0.19 per square foot
Restaurants can benchmark their electric bills by calculating their total annual electricity expenses and dividing by the building’s square footage to determine their Energy Use Intensity (EUI), which helps assess energy efficiency.
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, many restaurants choose to operate in smaller spaces to help reduce utility costs and improve energy efficiency. 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. It’s important to consider energy costs alongside other major restaurant expenses, such as food costs and labor costs, to effectively manage overall profitability.
In summary, while the average restaurant electricity bill per month can vary widely, most restaurants can expect to pay between $2,000 and $6,000 per month, depending on size, location, and energy usage patterns (Fact: 1). Calculating your own average using the $2.90 per square foot annual figure (Fact: 2) can provide a more tailored estimate.
Factors Affecting Energy Consumption
A restaurant’s energy consumption is influenced by several key factors. The size of the restaurant plays a major role—larger spaces typically require more energy for heating, cooling, and lighting. The type and age of equipment used, from ovens to refrigeration units, also impact overall energy costs, as older or less efficient models tend to use more energy. Menu offerings can affect energy use as well; for example, a menu heavy on grilled or baked items may require more energy-intensive cooking equipment. Location is another important factor, as restaurants in warmer climates may spend more on air conditioning, while those in colder areas may see higher heating costs. By understanding how these factors contribute to energy consumption, restaurant owners can better target areas for improvement and implement strategies to reduce energy use and lower costs.
Types of Restaurant Energy Audits
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. Both types of audits use data analysis to interpret energy consumption patterns and identify cost-saving opportunities.
Energy billing audits don’t require capital expenditure, whereas the solutions recommended during consumption-based energy audits typically involve extra investment by the restaurant.
Restaurant Energy Billing Audit
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. A thorough review of the restaurant’s utility bill can reveal hidden charges and opportunities for cost reduction.
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.
Benefits of a Restaurant Energy Audit
Negotiating Better Energy Rates
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.
Correcting Overcharges and Billing Errors
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.
Qualifying for the Proper Energy Tariffs
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.
Restaurant Consumption-Based Audit
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. Upgrading to energy-efficient appliances and systems, including lighting and other equipment, can lead to significant long-term savings and improved performance. 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.
Making a simple switch from incandescent bulbs and traditional bulbs to LED bulbs is an easy and cost-effective way for restaurants to use less energy and lower their utility costs. Optimizing hot water systems, such as adjusting water heater temperatures, can also contribute to significant energy savings.
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.
Restaurant Energy Use Patterns
Restaurants operate with unique energy use patterns that can significantly impact their bottom line. The largest contributors to energy consumption are typically cooking equipment, refrigeration, and HVAC systems. These systems often run for long hours, especially during peak service times, leading to higher energy costs. Energy use can also vary depending on the type of restaurant, hours of operation, and even the layout of the kitchen and dining areas. By analyzing energy consumption data, restaurants can pinpoint where energy waste is occurring—such as equipment left running unnecessarily or inefficient HVAC operation—and identify opportunities for cost savings. Understanding these patterns allows restaurant operators to make informed decisions about where to focus their energy management efforts for the greatest impact.
Our Energy Billing Audit Process
Step 1: Engagement
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.
Step 2: Onboarding
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.
Step 3: Initial Audit
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.
Step 4: Ongoing Auditing
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.
Implementation and Monitoring
Taking action to reduce energy waste starts with a thorough understanding of current energy consumption. Conducting an energy audit is a practical first step, as it helps restaurants identify inefficiencies and areas for improvement. Once opportunities are identified, implementing energy-efficient solutions—such as upgrading to LED lighting, installing programmable thermostats, or replacing outdated equipment—can lead to substantial cost savings. Ongoing monitoring is equally important; investing in an energy management system allows restaurants to track energy use in real time, quickly detect spikes or unusual patterns, and optimize operations for maximum efficiency. Regularly reviewing energy data and maintaining equipment ensures that savings are sustained over time, making energy management an effective way to control costs and reduce environmental impact.
Reduce Your Restaurant Energy Bill Today
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. Managing energy use during peak hours—when the restaurant is busiest—can help control costs and prevent spikes in energy consumption. Restaurants also need to 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!
Conclusion
For restaurants, reducing energy consumption is not just about lowering utility bills—it’s about boosting profitability and building a more sustainable business. By understanding energy use patterns, investing in energy-efficient equipment, and implementing an energy management system, restaurants can achieve significant energy savings and cost reductions. Regular maintenance of equipment, upgrading to efficient lighting, and conducting periodic energy audits are all effective ways to keep energy use in check. These steps not only help reduce the restaurant’s environmental footprint but also contribute to long-term savings and a stronger bottom line. With a proactive approach to energy management, restaurants can create a more efficient, cost-effective, and competitive operation.
