HOW TO REDUCE RESTAURANT LABOR COSTS
LET’S TAKE THE FIRST STEP – IT’S IN THE SCHEDULING
Question: What’s the largest, hardest, and typically the most uncontrolled expense in your restaurant?
If Labor Cost wasn’t your answer then either grab a pen and get ready to take notes, or call a broker and sell your restaurant.
While restaurant food cost is volatile because food prices rise and fall with the seasons and the natural disasters, restaurant labor costs only go up. No state in the Nation has announced (or will ever announce) a labor wage, tax or benefit-cost reduction.
Each year we post the various state minimum wage increases and then sit back and wait for the calls, and each year they come pouring in.
You can hear the anger and desperation in the restaurant operators’ voice – “You’re kidding?!” “Do they know we don’t make any money?!” “I hope they like paying $15.00 bucks for a hamburger!” “How the hell are we supposed to compete against the chains, there’s no way I can offer any benefits!” “I’m going back to being a bartender, this is ridiculous!”
Listen up folks, effective labor management is not optional. The operative word here is effective.
Plunking a bunch of names into an excel schedule is about as effective as watching the Captain of a sinking cruise ship rearranging deck chairs as it goes down.
Writing an effective labor schedule takes more effort than using your team member availability and tenure.
You need to take into account Server and Bartender ROI (Return on Investment), BOH production ability, individual wage rates, guest count trending, and seasonality (just to name a few).
MAKING A LABOR SCHEDULE THAT WORKS
Now don’t lose hope. In this article we’re going to focus on two things:
#1) What is the bare minimum amount of information you need to possess in order to write a schedule?
#2) How do you know if your schedule is effective?
Let’s start with some basic rules:
It drives me absolutely nuts when I ask a client how much they spend on labor and they say, “25%,” and it’s usually followed by, “I think.”
You don’t take percentages to the bank so stop thinking this way.
You need to get a handle on how much you spend on cost of labor in dollars EACH DAY, for each person and summarized by each Job Code and the total number of hours worked.
Example: On Monday you have 6 line cooks using 27 hours of total labor. Let’s say the average wage is $12.00. You’ve spent $ 324.00. You can get this information from your POS system (also known as your $30,000 paperweight).
Know the score.
It’s simply not enough for you to know your total revenue per week.
You need to forecast your revenue weekly and manage it daily.
If you’re an over-achieving restaurant owner, you’ll break it down to Food vs. Beverage Sales as well as Lunch and Dinner Sales.
This creates the target for you to shoot for when you’re building your schedule.
Example: Total Sales for Monday are $3,600 – Food Sales are 70% or $2,520. You’ve spent $324.00 on your line cooks. That’s 13%. (Yes, I know I said you don’t take percentages to the bank, however, you need to use them as a guide AFTER you know the dollars you’ve spent.
Please note that scheduling does not take into account Payroll Taxes.
Also, numbers don’t lie, people do so take the emotion out of the equation.
A great first step in writing a schedule is to build a template.
Work the schedule template over until the numbers make sense, then plug the team members into the template. You’ll find that you make far fewer adjustments that affect your profitability during that time period.
Once you have written your schedule, and you can see that your theoretical labor dollars and percent will be on track to hit forecast, it is important to then not just consider it done and walk away until next week.
Throughout the week you need to monitor Scheduled vs. Actual and/or Actual vs. Forecasted to see where hourly employees are either punching in early or staying too late that has not been authorized by management.
It is very important to avoid any overtime for your employees.
With time off requests and shift change requests, potential OT needs to be monitored when you are replacing one person with another.
Overtime can be costly and detrimental to your overall Labor expense.
A great way to maximize productivity is to get people cross-trained so that you can have employees that can perform more than one Job function when needed.
Analyze how much time it takes your staff to perform certain activities. Are they spending more time than they should be on a task?
Recognizing these trends and adjusting accordingly is key to increasing staff productivity… set reviews so they know where their performance is at and you can focus on getting the most out of your labor dollars!
Effective labor schedules can be a driving factor in how much time you have for other revenue producing activities within your restaurant.
Setting a budget is necessary to determine your targeted labor cost, and accumulating data and monitoring trends are keys to keep that budget on point. Check out a few snapshots of our labor scheduler below.