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Smart Methods to Track & Manage Labor Costs of Restaurant Business

26 Sep
Track Manage Labor Costs of Restaurant Business.

Smart Methods to Track & Manage Labor Costs of Restaurant Business

Only having a reliable staff to keep your restaurant operations running effectively isn’t a great thing — until you know how to keep track of them without wasting your much time. From archiving their personal information to mapping out perfectly designed schedules to making adjustments at the last minute is enough to frustrate managers on a weekly basis.

However, few things feel worse and one of them is paying your employees to stand around during a lull and the second situation is being short of waiters during a sudden rush of customers. Thus, it’s not an easy task to actually know how much labour your business needs until you pay keen attention towards the number of employees and track their cost effectiveness.

To run your restaurant successfully and intelligently, you don’t need to do a magic but doing a simple calculation of your labour cost percentage, automating your scheduling process, tracking it consistently, and organizing your payroll log can work wonders.

Tho, the ideal percentage of revenue is allocated to wages and salaries will differ as per your business type. So, it’s logical to prevent your labour costs from skyrocketing. For restaurants, generally, 35% is an accepted labour cost target.

Table service restaurants are more likely to find themselves in between 30 to 40 per cent range while fast food chains usually achieve labour cost as low as 25 per cent. The difference in labour cost percentage mainly depends on the menu and service style. Beverage and food costs for the restaurant industry mostly run between 28 to 35 per cent.

Here is the formula to keep your labour cost on track:

Total cost of labor / Revenue * 100 = Labor Cost Percentage (%)

If you are using a POS System that is fully integrated to an employee management system, then the percentage of labour cost can be calculated automatically by pulling data pulled directly from your existing database.

To help you manage the labour cost intelligently, we are listing down 6 smart ways to keep your labour costs under control.

Rethink Your Schedule Regularly

You may feel convenient and easier to set a schedule for your employees and they operate on it for months, but for better results, it’s a perfect idea to reevaluate your work schedule frequently to avoid overbooking your labors\employees. And schedule the duties as per the flow of traffic in your restaurant which will fluctuate from day to day, week to week, and month to month. Tho, a consistent schedule is usually appreciated by the staff members, but when it comes to business, it isn’t an optimal act.

In this way, you can also identify If in case your waiting staff outnumbers customers during different shifts, this is enough to understand that you are wasting money. Additionally, your staff might appreciate having more control and flexibility over their work schedule; it may also save you from the expenses associated with a high turnover rate.

Designate tasks for each payroll log

In this way, you can exactly figure out how your employees are spending their time on duty. For example, an apparently minor task like recording new inventory is a lengthier task than you realize.

With payroll log, while tracking the time your employees are spending to complete their task will help you in figuring out whether you need their support to complete that specific task or can be processed automatically. In this way, you will also know the need for hiring more people to work for better services or you should omit some employees as they aren’t of any use for your business.

Overall, once you start keeping track of employees performing specific tasks will help you determine whether they are spending work-time in the most productive way or not.

Calculate Your Employee Turnover Rate

A higher employee turnover rate can cost your business some real cash in the long run. If you continue hiring and firing of employees on regular basis, then it isn’t good for your brand image too and people will stop taking you seriously while they are searching for better opportunity.

However, the price of recruiting and training new workers will not only eat your time but can also easily eat the efficiency of your labour force over time. So, taking steps to keep employee satisfied is surely a smart way to become a better manager while keeping an eye on the bottom line.

Automate the Scheduling Process

The days are gone when managers were bound to schedule employee using time clocks and paper schedules. Now, managing employee schedules won’t ask you to spend hours and hours of a headache, as there is a much smarter way. With advancement in tech, software like HRMS can do shift planning to save you time while keeping you aware get greater insight into your labour costs in real-time, especially when integrated directly to the POS System.

Play to Your Employee’s Strengths

Once you start analyzing your labour costs, chances are that your employees’ individual weaknesses and strengths will be quite prominent. And this is the point where you can make most out of their positive aspects, which will be beneficial for business.

For example, one or your server is perfect for managing the busiest night of the week, whereas another server has a knack to entice customers to place an order for extra dishes. By identifying their distinctive talents, rewarding them for extra efficiency, and using them for business advantage, you will be able to handle and optimize your labour costs while making your employees feel valued and appreciated.

From individual strengths to paying keen attention towards scheduling, there’s a lot you can do to run a highly efficient restaurant business. If you keep the above suggestions in mind, they will help you managing staff while keeping labour costs down!

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