4 Ways to Reduce Labor Costs Long Term

May 25, 2017 Tiffany Regaudie

 

When the Monday happy hour rush is kaputz and you’re left with four bored servers Windexing windows, cleaning menus, and rolling napkins, chances are good that your scheduling tactics weren’t exactly on point. This is a simple, common error that can negatively affect labor costs in some big ways.

 

If you’ve scheduled an excess amount of servers, your labor costs are already extraneous. Many of us take the short-term approach to fix this problem: a server or kitchen staff member is cut early so you can save on labor. 

 

If this error continues to happen,  it can have a long-term impact on labor costs. With less tips, less tables, and less to do, your service staff might just start looking for a workplace with a higher table turnover and a lower staff-to-table ratio. You may then be stuck with the higher costs of losing – and subsequently hiring and training – a new staff member. 

 

All restaurants have slow nights, but the mighty task that management must address combines an HR strategy with analysis and technology. In this article, we’ll look at a few ways to cut down on long-term labor costs. 

 

 

1. Schedule Staff Based on Forecasts and Variable Analyses

Your ability to schedule effectively is directly proportionate to your ability to analyze labor data and schedule accordingly. In the article, “Boost Productivity to Control Labor Costs”, Dr. David Pavesic, Graduate Program Director of the Cecil B. Day School of Hospitality at Georgia State University, suggests that we remember we’re purchasing labor, not just putting a name on a calendar. This means that every time you schedule a staff member, you’re buying the work they’re doing. You wouldn’t buy a car without doing some research first. The same goes for your staffing, which is why it’s a best practice to analyze past labor costs by daily and hourly trends (not just weekly). 

 

But the labor cost metric alone isn’t enough. Labor must be analyzed in conjunction with forecasting and analysis to be effective. By accessing average sales data from your POS and projecting that data forward over time, you can create a reasonable forecast basis. Then, using forecasting techniques like Sales per Man Hour (SMPH), you can calculate how much revenue is generated by employees in an hour, and therefore schedule to match your hourly revenue. We described this in greater detail in another blog post here

 

It’s important, however, to read data with a critical eye. It’s crucial for restaurant managers to evaluate the extraneous variables that might affect sales trends. Perhaps there was a major sporting event on the same day last year that drove sales through the roof, while today is just another meandering Monday. Or maybe your patio was packed last year, but today typhoon rain is blowing your patio umbrellas away. 

 

For instances when you just can’t be sure, placing service staff on call is a great way to navigate cost variables that can only be determined day of.

 

 

2. Invest in Self-Ordering Kiosks

 

Welcome to the future, where machines make your gluten-free eggs benny with double paprika and a latte! While we may not be there quite yet, the self-ordering kiosk is saving restaurants on labor costs. By allowing management to supplement counter staff with technology, customers input their orders into intuitive kiosks that deliver their order straight to the kitchen. Lines move faster, which means more sales, less errors, and, of course, less labor costs. 

 

Also, kiosks can’t cough! They are impervious to human afflictions like the flu, don’t need vacations, and never have social obligations like prom or weddings. With self-serve terminals, managers can spend less time rejigging schedules, sick days, recurring wages, and overtime – and more time on making money. 

 

 

3. Minimize Overtime

Jean has worked 40 hours, but Alex has worked 15. To whom do you give the extra shift? It’s obvious that Alex would be the preferred candidate, but if you don’t know Jean is heading into overtime, you might pass the shift to her – which would put you in the red.

 

Since serving hours are fluid, clock-out times are rarely predetermined. So keeping track of employees’ hours is an activity that should be monitored on the daily. Your reporting system should allow you to craft an hours worked report that includes a breakdown of hours worked by each staff member, the number of shifts they worked, and pay accrued for those hours, all while accounting for different roles (bartending vs. serving vs. managing.) By reviewing your hours worked report daily, you keep a pulse on the changing beat of hours worked and avoid small but costly mistakes.

 

 

4. Cross-train Employees

A host who can run food, clean tables, manage the wait list, and, with some sort of unique brand of customer service magic, lull hangry customers into a placid state should not be undervalued. But at the same time, if she’s the only one who knows how to manage the hosting app, she’ll have to be scheduled at all times, even slow nights. 

 

Cross-training makes sure another employee can pick up the slack. Normally, we think of cross-training as advantageous in situations where your restaurant gets slammed or an employee calls in sick, but really, cross-training reduces your reliance on specific individuals. This saves you labor costs because you’re not dependent on one person to do one job. For example, if your customer turnover is manageable Sunday through Wednesday, you might train all wait staff on how to use the host management app and perform hosting duties like taking and confirming reservations. This way they can manage the host stand and tables in tandem on low-volume evenings, and you can reserve hosting staff for busy nights.

 

 

When it comes to labor costs, management should take the long view. By using self service kiosks, cross-training staff, and keeping your nose to the numbers, you’ll be better able to manage busy nights, slow nights, and staffing needs without getting into the weeds or kissing your precious pennies goodbye.

 

 

 

About the Author

Tiffany Regaudie

Tiffany is the Content Marketing Manager at TouchBistro, where she shares knowledge with restaurateurs on how to run their business. She's passionate about traveling the world and getting to know communities through great food.

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