How to Manage Labor Costs for Your Restaurant

July 12, 2016 / Reading: 3 minutes



Whether you are a new restaurant getting your feet off the ground or one that has been around for awhile, but just haven’t been able to get your overhead costs under control (without sacrificing quality), labor costs can be an elusive subject.

The first thing you must know before managing your labor costs is, of course, what your labor costs are exactly.

Ideal Labor Cost Percentage

To calculate the percentage of the labor costs of your restaurant, simply divide your total sales from your payroll. What number did you come up with? Was it over 20%? The industry standard is right about there, but it should preferably be below twenty. The reason why is because once labor costs and overhead costs eat into so much of your profits, you are left with little-to-no room to invest into growing your business or acquiring better ingredients.

Just how do you lower your labor costs without hurting worker morale?

Doing more with less



Rather than cutting pay, and before you consider laying anyone off, think about how you can increase worker productivity. This can be done a few different ways, but the key is not to overtly place the restaurant’s burden on their shoulders. Some employees respond well to more responsibility, while others may crumble under the pressure. The key is to play into every individual’s personality and strengths.

Increasing productivity improves your overall operation by building employee skills and confidence. Take time to provide your staff with sufficient training and adequate communication.

Micro-managing Productivity

Broadening education is valuable to both the representative and the business, since the employees will have a more extensive scope of abilities and have the capacity to help in numerous ways. This permits you to hire less specialists while having the capacity to accomplish the same work and administration benchmarks.

Another good approach to enhance efficiency is to perform customary reviews. Take an ideal opportunity to watch and survey your staff’s metrics. On the off chance that you find that an expansive part of your staff’s work days incorporating unnecessarily long breaks or downtime, it may be worth it to modify your timetable. Directing eye to eye audits with every individual from the staff will help with your musings and concerns.

Get technical

Ensure you have built a financial plan to monitor your yearly deals and overhead costs. Through your financial plan, permit a rate of your deals to cover work costs. At that point, make a staffing calendar to mirror your planned goals for work costs.

Separate your yearly spending plan into month to month spending plans to isolate the cash into weeks to be monitored. This will give you a week after week spending plan, from which you can decide work expenses and make any decisions on whether you should expand your payroll.

Outline another week after week plan for all representatives. Depending on a settled calendar, after a few quarterly reviews, you need to recognize shifts in anticipated deals, changes in the climate or different variables that can influence your business. Alter the quantity of staff planned every week to keep consistent with your spending requirements.

Stick to the plan and you’ll eventually start seeing those labor costs drop down.