Support Login. Get your restaurant set up for success with Upserve! Share Tweet 5. Pin 2. As we stated earlier, some expenses are fixed and others can change. By viewing your labor costs as a percentage of overall costs, you can analyze your spending to see where to focus your cost-saving efforts. First, find your total labor costs as outlined above. Next, add up all your expenses. Be sure to include rent, utilities, marketing, software subscriptions, food costs, uniforms, and all other expenses.
Lastly, you will divide your labor by your total expenses. You can use this formula for other variable costs too, such as electricity and restaurant equipment.
That way, you can find a healthy percentage for each expense. If your labor costs are too high, you will want to reign them in before they cripple your restaurant. And even if your costs are at a healthy level, reducing them can help you boost advertising spend or invest in new equipment. Your employees perform different tasks that match their job title, and as such, they earn different hourly wages. By breaking down employees into similar groups, you can see how much each group costs you.
For example, you will know on average what your kitchen staff cost per 8-hour shift vs. Once it comes time to cut costs, you can see which groups cost you the most. While no one likes letting workers go, this process will help you determine which cuts will be most effective. A normal restaurant likely has a few servers and a host out front and a small meal preparation team in the back of the house.
A manager will oversee operations, handle customer service issues, and be the go-to person for all other issues. By cross-training your team, you can reduce the number of employees on a shift without losing productivity. Even paying this person a few dollars more per hour during these situations will cost less than scheduling a manager for an entire shift.
Likewise, you can train hosts to serve food. Callouts and no-shows can impact your operating costs. Rather, you want to incentivize workers to show up and reward positive behavior.
You may hesitate to add a new server since it will mean an increase in labor cost. You have the same 4 cooks and 5 servers:. Another restaurant industry metric to track is prime cost, or the cost of labor and food combined.
To calculate prime cost percentage, divide your prime cost for a given time period by your total sales for the same period. Food prices, shipping costs, taxes, and other factors beyond your control are constantly changing. A top-of-the-line dishwashing machine may take away the need for an extra dishwasher. A commercial food processor could cut down on prep time, eliminating the need to bring on a new prep cook.
An efficient POS system could let servers spend more time delivering orders and less time at the register, requiring one less person on shift. Great equipment comes with a higher price tag, but could save you significant operating costs in the long run.
Changing up your line to turn out food faster can increase sales either by maximizing turnover or enhancing take-out and delivery and decrease your labor cost percentage. If overtime becomes consistent among multiple employees, you could be out thousands of dollars. This will help mitigate overtime offenders and control costs while refining company culture. Understanding the story behind your labor cost is especially important as restaurant owners around the country address the repercussions of a rising minimum wage.
Restaurants all over the country, in different states, counties, and cities are experiencing new mandates and regulations raising the minimum wage. For example, beginning in , the city of Seattle increased the minimum wage differently for different companies. For restaurant companies with locations in 10 states and 23 cities, keeping track of anywhere between 10 to 23 different minimum wages in each location for reporting purposes is a monumental task. However, some restaurant operations software now offers tools to stay compliant with multiple minimum wage laws.
Instead of spreadsheets or documents for each location, a minimum wage adjustment report can pull information for each employee underneath a selected job type to monitor the pay each employee should receive versus how much they earned.
This allows restaurant owners to see the amount of money needed to pay a worker if they did not reach the minimum wage required. Technology tools like a minimum wage adjustment report can help restaurant owners adapt to the pressure of increasing wages. Facing rising labor costs without decreasing the level of quality or service in your restaurant requires finding ways to be more efficient in labor. Restaurant scheduling software tools like reusable templates, or a free employee app, can proactively help a manager create and communicate a streamlined staff schedule.
Scheduling software can help a manager cut down on errors, spot potential overtime issues, or even regulate the windows that employees can clock in or clock out.
Your restaurant scheduling should also account for reporting and metrics about labor categories, day parts, and seasonality. With new sales forecasting tools, facilitated by POS system integration, you can track trends to avoid being over or understaffed.
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