You don’t have a restaurant without your employees, which is why it’s important to pay them on time, pay them fairly (and well, if you can), and keep them happy with as consistent a shift schedule as possible. But the cost of labor is constantly rising, and it can be hard to keep up while staying within your restaurant’s operating cost.
If you’re not keeping an eye on your restaurant staff scheduling practices, things can get out of hand quickly.
When you think of food cost, buying a little too much food isn't usually an issue. As long as it’s not spoiled, wasted, or stolen, you can use that food at a later point. But if you bring in too many employees and the shift is slower than you expected, you can’t tell those employees the hours they worked don’t count.
This makes it vital to have controls in place to manage your restaurant's labor costs. Here are three changes you can make in your restaurant to control your labor costs and maximize your profitability this year, while keeping your staff’s needs in mind.
1. Schedule Less
There’s a myth in the restaurant and hospitality industry that bringing in more staff gives your guests better service.
You want to give your guests a great dining experience with incomparable customer service. To plan for this, you may think to bring in more servers or additional cooks for faster ticket times. But when you have too many people working and not enough work to be done, employees may wind up getting bored or distracted and ultimately giving less than great customer service. Their tips will suffer, too, says Rewards Network.
There’s a fine balance to strike here: Scheduling too few staff members leaves your employees vulnerable to getting slammed with too many customers and eventually burning out. Too many and you’re stuck paying employees to stand around.
In my eyes, your restaurant's guests get the best experience when you’re staffed to a level where you think you might be able to use one more person on the floor, where there’s enough of a sense of urgency to keep everyone moving, and where staff only have time to stay focused on the guests. The end result is happy customers, higher sales, more tips per server, and lower labor costs.
Now, I'm not saying to overwork your employees and under-schedule your loyal staff – you should feel like maybe one more worker would make things easier, not three. If your scheduling has been off a few times in the past month and you’ve been left scrambling, it’s time to think about sales forecasting – more on that below. If your staff is chronically overworked, they won’t be sticking around very long.
The bottom line here is you should ignore the impulse to dish out extra shifts to staff when you have a feeling they won’t be needed.
2. Track Labor Cost Daily and Watch Your Weekly Average
Track your labor cost every day.
This sounds tedious, but you have the tools you need as long as you have a restaurant point-of-sale (POS) system. All you need to do is run a daily report in your POS system each day to see how much you’re paying your employees who worked that day and divide that number by the day's gross sales. This will give you your labor cost.
Then, as each day goes by, add the labor costs together and the sales together and divide. This will give you your restaurant's running labor cost.
The hard part about this process is understanding that your labor target is different each day. For example, let’s say you’re aiming for a total 30% labor cost for all hourly employees, before taxes, benefits, insurance, and not including salaried management. You use that percentage goal to adjust your schedule to be on budget. What you’ll find is that your labor cost — based on how you scheduled — may be at 33% on Monday after a busy weekend due to the extra prep that needs to be done at the beginning of the week, and since Monday is your slowest sales day.
Take a look at weekly averages as your guiding light. If you’re hitting 30% over the course of a full week, balancing slow days and line-out-the-door days, you’re on target.
3. Schedule Based on a Sales Forecast
Don’t just rely on your gut feeling when it comes to restaurant scheduling. It’s extremely common for restaurants to schedule "like they always do," even when their sales are lower than expected or when they’re coming out of a high season. The truth is this practice can rob you of your profits faster than anything else in your business.
Changing this habit starts with one step: By the 20th of the current month, make your best guess of what your Monday-Sunday gross sales will be next month. This enables you to adjust your schedules to take care of the needs of your guests and your business without losing money.
Having a labor cost target to shoot for helps immensely. You can simply multiply your forecasted sales by your labor cost percentage target to know how much money you can spend on labor next week. Subtract salaried management and, like magic, you know what you can spend on hourly employees to stay on budget. Now, adjust your schedule to match. This allows you to go into the week on budget instead of bringing people in and praying you’re busy enough to pay for them.
It also helps to check your weather forecast every day. No one likes getting a shift cancelled, but if it’s going to be a thunderstorm-filled Saturday, you’ll likely need half the staff you’d planned for. Make cuts as needed, and make it up to your cancelled staff the following week to keep things fair.
The Bottom Line
When you prevent having excess staff members working a slow shift, schedule based on a budget, and track your restaurant's payroll on a daily basis, you are putting your restaurant's management team in a strong position. You’ll not only control your labor costs and make the business more profitable but also gain the benefit of happier customers and a management team who controls the business, not the other way around.