Labor, the silent killer
Need help managing your labor costs?
Labor goal setting is crucial to the success of a restaurant. Labor must be managed daily. Easy Restaurant101 tools will help you set and maintain achievable goals weekly. We can help you set sales goals that you have to achieve to make your labor cost percentage. There are only 3 ways to achieve the best labor costs possible in the industry.
One: Manage the schedule by historical sales and cover count data (We explain a solution under the labor page)
Two: React to slumping sales by cutting and staggering
Three: Menu production for back of the house by using ready to use products (Products that will reduce labor not reduce quality)
When you schedule unnecessary labor you are also affecting two other areas: higher payroll taxes and higher workers compensation insurance.
Managing Labor Costs
Next to food and alcohol costs, labor is the second biggest expense in your restaurant and could be the most deadly if not managed. A little work up front will save you thousands of dollars in the long run.
Scheduling Know How
Here are some important questions you need to ask yourself…
- What is my areas average compensation for the positions I need to fill in the restaurant?
- Based on the square footage, number of seats and concept how many front of house, back of house and management personnel do I need to cover the hours of operation?
- How many workable hours are in a week?
- What are my peak times?
- Is it ok to schedule everyone for doubles?
- Will I be working shifts if so will I take a salary?
- Am I required to pay for insurance?
- What is my budget based on my sales or cover count?
- Should I run a straight percentage across the board or adjust according to my historical sales numbers?
- Should I pay weekly, bi weekly or twice a month?
- Is there a benefit to not having my servers key in their all their tips?
- Is keeping my servers credit card tips a good idea and if so why?
- How much is it costing me in taxes for my staff?
- Is it good practice to write out a schedule a month in advance?
- Servers are inexpensive so is it ok to have several on the clock in case I get busy?
- Is it OK to pay flat rate pay instead of overtime?
- Is my menu too big and is my kitchen set up properly to accommodate it?
- Do I have all of my staff’s availability?
- Should I have a request off book on site? Do I honor all requests?
- Do I know my staff’s strengths and what position they are best suited?
- Is my time clock adequate in managing my labor?
- Should I pay my staff cash under the table?
- What day should I start my schedule?
- I have a High School nearby is it a good idea to hire from it?
- Should I just put everyone on salary to get the most hours from them?
Once you have the answers to these questions you can better understand how to schedule going forward.
The Most commonly used method.
One popular way of figuring out your labor is to base it on your general sales. This is a great way to get it within reason but take into consideration some very important factors. By using this method you leave money on the table. For instance what happens within those sales dollars may have an impact on whether you over or under staff. Discounts and increase cover averages will take that number in both directions and could have you jumping from one foot to the other when it comes time to schedule based on a percentage.
Keep in mind if you use the general sales number what falls beneath that number is unknown such as… Did you sell an extra drinks and desserts to your customers raising the sales percentage where you may not have required additional staff? Or… could you have potentially under scheduled based on discounts voids, promotions? So figuring out how many labor dollars needed per customer count is extremely helpful in being most accurate.
How it works: Labor verses sales dollar forecast. You basically take you average daily sales and divide it by your desired labor cost percentage to see if you fall in line with your projected sales dollars. This method will get you on track but just know with any schedule or method you have to manage it. That means by the minute, hour etc… This means you have to constantly watch your labor dollars and react to sales volume. Again, It doesn’t matter what method you use it’s a must. Most people will do just enough not to get fired and they are in no hurry to get everything done in a jiff just to jump off your clock when you are paying them. You’re probably saying to yourself… “They need to earn money and if I cut their hours they will leave!” Well, they will leave to go work for your competition the instant you close the doors for not being able to pay them due to your excessive labor costs!
Labor Cost by Cover
One way to get a better view of what your actual spend on labor should be is to find out what your labor cost per cover is. It helps to know what your skeleton crew consists of to run a successful service. Successful meaning… Great ticket times, table touches, food arriving within spec times to guest, time to interact and up sell the quest etc…
How it works: Take the labor dollars from that shift a divide them by you cover count and this will give you a cost per guest. With this information you can then look at your average guest count and have a close forecast of what you need to schedule for
|Example A||Example B|
|Sales for the day $1700||Sales $2493|
|Labor $425||Labor $425|
|Check Average was $10 (170 covers)||Sell an extra drink and app to 1/3rd of the guests…Drink $6, appetizer $8 raising check average to $14.66|
|Labor$/Cover=$ 2.50 p/c||Based on 25% of sales labor cost would have looked more like $623.25|
|Say you do 170 covers a night your budget= $2975 p/w||$2494 times 7 days in the week $4364.50p/w in labor.|
|There is no exact science to scheduling, with unpredictable spending habits and fluctuating volume it’s not easy. But getting as close as possible is important to maintain a great profit.||There are flash points in volume where you have to add additional staff. It’s up to you to determine those flash points. And where to spend your labor dollars.
If your bartender could not handle an additional 56 beers or the kitchen could not absorb an additional 56 orders of mozzarella sticks throughout a shift I would question if I had the right people in place or if coaching is in order.
Tips to lower labor
- Stagger both FOH and BOH staff throughout the day.
- Do not allow staff to clock in 15 minutes early.
- Enforce breaks and have them clocked out.
- Start your work week on a Thursday to avoid needing to pay over time during high volume days.
- Reduce the size of the menu. Labor intensive menus are costly.
- Use ready to use products where applicable. Reduces BOH labor and increase productivity.
- Have both FOH and BOH staff scheduled for call in shifts.
- Be proactive instead of reactive.
- Know your labor percentages and Cost per cover.
- Properly train and cross train your staff for every function of the restaurant.
- Have standard operating procedures mapped out for efficiency and consistency.
- Have a good scheduling tool in place.
- Have a proper POS system that will provide you with great analytics and clock in accountability.
- Have an up selling system in place.
- Make sure staff that has multiple job codes are clocking in under the correct one.
- Create a team work environment to get things done faster.
- Have the clean as you go theory in force.
- Make sure your bar and kitchen equipment is the correct to produce your menu items.
- Have the proper tools in place for production of prepped items.
- Have all side work and closing procedures mapped out with time lines to completion.
- Know your high volume times and have early our procedures in place for both FOH/BOH