Labor Costs is one of the major bleeders for a Restaurant Business because it is fixed and Restaurant owners have to face this monthly, however there are ways to manage and reduce such costs.
Every restaurateur has to understand that Labor Costs is more than just the hourly and monthly wage given to his staff. It includes :
- Health Benefits
- Payroll Tax
- Overtime Pay
- Vacation and Sick Pay
Through proper management and with the right strategy, a restaurateur can have financial freedom, have a business that works for him, and have a team that serves their purpose and align with his business philosophy.
Ways to Reduce and Manage Labor Costs :
- Proper Scheduling – Also known as Pod Staffing. This is the process of identifying the maximum capability 1 group of staff can service. It gives you the opportunity to scale the numbers of staff to employ at a certain day or certain period in a day. This helps you save labor costs because you won’t be obliged to pay unnecessary staff present.
Take this as an example, a normal lunch time for your restaurant serves 60 customers and you’ve employed 10 staff for that day and time not knowing that it only takes 5 staff to serve that number of customers. This leads you to pay staff that we’re not even needed on that day and time.
Pod Staffing can be done if you’re tracking the number of customers coming in and the number of staff you’ve employed the same time, from here you can see the pattern and develop a proper schedule that would also help your staff to increase efficiency with their roles. Tracking may be time-consuming but it is imperative for you as a restaurateur to take care of this matter.
- Pay a little bit more – Now this may seem off to you as I’ve mentioned that this article is about reducing labor costs. But paying your staff the average or a little bit more than the average will do wonders for your restaurant business.
It will give them a sense that they’re being valued and their hard work is really paying off. This gives you the opportunity to retain good staff and avoid turn over. Decreasing the number of turn over means reducing costs for hiring and training new staff.
If your staff feels like they’re being taken care of, they will properly invest with their job and your restaurant business. They’ll be more productive, provide better service and this ends up as your gain because there’s a high chance of having an increase with the customers and your profit as well. A good culture is what it takes to gain your staff’s trust and loyalty.
- Reduce work-related stress – It is your responsibility as a restaurant business owner to keep the environment stress-free for your customers, this goes for your staff as well. You have to provide a workplace that is fun for them, and make it like they’re not doing their job just for the sake of doing it. An environment that will make them fulfill their roles because they feel satisfaction and happiness while doing it.
Give positive reinforcement to your staff, inspire them to hit quotas and make more upsells by offering incentives to them. Make sure that it’ll be a friendly competition among them and this will end up benefiting you and your restaurant. Give them the impression that they’re doing their job because it adds to their satisfaction and not because they have to do it. This will decrease the number of turn over thus decrease in labor costs as well.
- Cross Training – A well trained staff is like having a well oiled machine that will run for you and your restaurant. Now, imagine if this machine can also do the tasks the other machines can do and how this will help you running your restaurant business.
Cross Training may look like an added expense and labor costs but this is just as vital as basic training because it’s an opportunity to train existing staff to gain additional skills which will benefit your restaurant business. This will allow them to take on multiple tasks and fulfill multiple roles if needed. For example, you’ve trained your hosts to wait tables, this means that there should be a need for an additional waiter, you just have to talk to your host and do the job. This saves you effort, time, and resources looking for someone who will fill in the needed position.
Your staff should be trained about the whole process of the restaurant, so that they have enough knowledge to step up, fill up a different position, and multi-task whenever needed. Being trained in other things also gives them a sense of growth professionally and personally. This will result in having a better work culture, gaining their loyalty, increase in productivity and decrease in labor costs.
- Publish a Rulebook – This handbook can make or break your relationship with your staff. This should serve as your bridge to them, this is where they would refer should there be confusions with their workload, schedule, and other factors that affect their employment with your restaurant.
A Policy Handbook sets the right expectations right off the bat. This list of guidelines provides your staff the way you want and expect them to act and work inside your establishment. You have to be clear what’s expected from them so they can do their job properly and efficiently.
For example, it is written in the rulebook that staff are only allowed to access the food that’s prepared for them, now they’re informed that they can’t touch food that’s not included in their crew meals. Should there be an offense made from this rule, you’ll know that you have to warn them because it is already stated to the rulebook. This allows you to manage your staff, resources better and reducing the labor costs.
- Hire Properly – Investing in the hiring process can make you reduce your labor costs because it saves you from incompetent staff. Keep in mind that letting the wrong person do a job that’s not fit for his quality and competency will end up as your loss.
Even if you end up giving them more training (since they’re not properly versed with the job) or end up firing them, this will both cost your restaurant business more than just having a proper screening. This will cost you not just the salary you’ve given them, but the amount of time and effort you wasted on them with their training. You’ll also end up needing a new staff to cover for their position (either fired on still in training) thus doubling up your labor costs.
You may also opt to hire some part time help. Seasonal workers demand lower hourly rates and you’re not required to offer them incentives and benefits. Especially during peak season, having a staff that could help your permanent staff with general tasks would be a huge save for your labor costs and helps to increase the productivity of your permanent staff.
- Check for Equipment – Good tools and equipment empowers your staff to do and perform their roles better. With the help of correct automation and technology, it increases the restaurant’s productivity and your staff would be able to focus and work smoothly.
Take it from the technology of Biometrics. There’s a huge loss for restaurateurs because of the clock in-out system. Some of the staff do their clock in for their friends thus compromising the system. This would also appear that they’re on time leading you to pay them more than what they’ve worked for. Biometrics would prevent this from happening because this is a technology where the specific thumbprint of a staff is needed. This would help you monitor their attendance, and paying and/or deducting the hours they just worked for. And you just save yourself from hiring additional staff to do this task for you thus reducing another labor costs.
Ask your staff what are the possible equipment that would help them with their job and at the same time, do your own research as well. This way you can invest for your restaurant and it also helps you with your labor costs significantly. This is true of your takeaway food delivery app, too.
You can take care and add value to your staff by not hurting your profit and adding expenses. Learn to recognize their brilliance doing their job, build a good working relationship, and give them a proper culture to work with where they can grow professionally.
Labor Costs should be treated as an investment for your restaurant business. This is the way you invest and repay your staff from doing their job and serving your restaurant. But as much as they are important to you, it is also your role as an owner to manage your expenses and run your business. That’s why it is important to know the proper ways of managing it.