Running a restaurant efficiently is a challenging task, made even more complex by the potential for escalating labor costs. As a restaurateur, labor, alongside food and beverages, represents one of your most significant expenses. Furthermore, increases in minimum wage often lead to rising labor costs, adding another layer of difficulty to managing a profitable restaurant.
So, what’s the answer for keeping your labor costs manageable? Shedding staff, perhaps? What about lowering wages or increasing your menu prices?
There’s a good reason we’ve mentioned those methods first – they’re superficially attractive and may well lower your costs in the short term, but can really backfire in the longer term. Leaving your staff disgruntled about their pay or unable to provide an adequate quality of service is a poor recipe for managing your labor expenditure in the long run.
So, here are some much more sustainable strategies for streamlining your restaurant’s labor costs.
Work out your exact labor costs
Some simple math will help give you a sense of just how much your restaurant is spending on labor right now. Then, you’ll be able to monitor it over time, and implement cost controls if there’s a worrying upward trend.
Remember that your restaurant’s labor costs aren’t just its employee salaries and wages. Any bonuses, restaurant payroll taxes, vacation and sick days, overtime and healthcare must also be accounted for.
Add up your numbers for all of these categories, to arrive at your restaurant’s total labor costs. Then, calculate it as a percentage. You can work out your labor cost as a percentage of total sales, for example, by dividing labor cost by revenue.
Let’s imagine, then, that your total revenues are about $900,000 a year, and your labor costs $300,000. $300,000 divided by $900,000 x 100 would equate to 33.3 per cent – a little higher than the 20 per cent to 30 per cent bracket that most restaurants target for their labor cost percentage.
Analyze where any overspending may be occurring
Figuring out labor costs as a percentage of your restaurant’s sales is an important start, but it is just a start. It doesn’t tell you what you need to do to start reducing that percentage.
So, you’ll need further analysis to determine exactly what is pushing up your labor costs – and therefore, where you can improve. You may start to do that by dividing your staff into groups, so that you can see which positions are costing you the most.
You might realize from this that you’re spending a lot more money on bartenders than servers, for example. That might prompt you to try using two servers in place of one bartender. Experimenting like this with the combinations of employees you schedule during each shift may quickly reveal ways of lowering your labor costs without compromising on quality of service.
Regularly evaluate your schedules
Restaurants often waste money by overbooking employees. So, keep an eye on your shifts to identify where you might be using more staff than the actual level of business at the time requires.
If you’re currently using one or two more servers than you need during slower periods like the middle of the afternoon, moving those same staff to busier hours or letting them go could save you a lot of money.
Help your employees to be more efficient
The more productive your staff are, the more you will get out of each dollar spent on them. So, make sure your cooks, hosts, servers and cleaners are all sufficiently well-trained to be able to do their job well, with the minimum of fuss. That includes briefing them on changes to your restaurant’s policies and menus, to reduce day-to-day slowdowns or interruptions.
Also ensure the equipment you use in your restaurant is quick and intuitive to use, and that even the layout of your restaurant lends itself to efficient working. These things will all have a knock-on influence on your labor costs.
Hand responsibility for your accounting to trusted experts
Why spend time on your bookkeeping that you could be spending on your core business, implementing measures like the above to lower your labor costs? That’s why specialized restaurant accounting services like those of Prix Fixe Accounting exist.
We can take the burden of your restaurant’s bookkeeping off your hands. Our work will help you to boost your business’s efficiency and get more out of its precious labor. So, don’t hesitate to get in touch with us if you’d appreciate the help.