Labour costs are one of the most important costs of running a successful restaurant. How do we determine its effect on business?
An effective gauge is the labour cost percentage: divide the amount owed for payroll with the amount earned in sales. The goal of any restaurant should be to keep this percentage below twenty percent, as anything more than that is too costly.
Here are six tips to keep that number from approaching anything unreasonable.
Cross-training your staff is an essential tool in combating unhealthy labour costs. By preparing workers to handle other jobs that need filling as necessary, the restaurant is able to better focus on keeping the number of workers needed in a given day low. When the prep cooks are able to operate the grill and the hosts can act as back-up servers, you eliminate the need for a specialized, diverse staff. The beauty of cross-training is that it maintains the same level of production quality your restaurant is known for without bleeding money on unnecessary labour.
While cross-training your staff, it might be a good idea to also perform regular audits on their performance. By observing how each member of your staff operates during a given work-day, you can better assess their time management, as well as how to construct your schedule around certain parts of the day that are “down-times.”
Although restaurants normally operate on fixed wages, extra staff on busy nights should be shifted to hourly wage rates. As simple as it may sound, it will drastically improve the effect labour costs have on payroll when workers are only taking in a variable amount based on how much they’re actually needed on those intense work nights.
Along the same lines as monitoring staff performance for “down-times,” it’s also a good idea to regularly change the schedule as needed. Instead of relying on fixed work schedules, an adaptable schedule allows you to react accordingly to shifts in projected sales, as well as other important business concerns.
“Panic hiring” is the temptation to hire the best from a pool of applicants with, at best, limited quality. It might seem like a good idea when your crew is overworked and undermanned, but consider the long term effects before making a hasty decision.
For one thing, it won’t do anything to directly address the labour cost problem, as you’ll be spending more to keep new recruits under your employ. The logistics of training them is another problem. If your crew is already overworked, adding an extra employee with no training will do nothing to increase your efficiency.
Just as it might be tempting to hire extra employees when the situation seems desperate, care should also be given when scheduling too many people for one night. Only schedule as many people as necessary, don’t attempt to account for any unforeseen consequences as that’s ineffective managing and will only increase labour costs in the end. Ultimately, this one shouldn’t be a concern if you’ve been following our other tips as outlined.
How do you control labour costs in your restaurant? Leave a comment below.
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