Hidden food costs and labor optimization tend to be the two areas restaurant owners and managers focus on in order to reduce expenses. With profit margins so low, (some estimates put it at cents on the dollar), it is no wonder many restaurants struggle.
What can restauranteurs do about it? All answers come back to one thing: tracking & adjusting. Track costs, track trends, track efficiency… then adjust. Today’s restaurant managers are implementing technology to help with this process and from there have been able to make decisions and adjustments based on the data.
It seems data-driven decision-making is the way to profitability, regardless of industry. In restaurants dealing with high staff turnover, minimum wage requirements and new laws on predictive scheduling coming down the pike, savvy owners must stay on top of labor efficiency or risk losing their business.
High Turn Over
The true cost of employee turn-over is high in every business and industry, and restaurants are no exception. Most estimates put the price tag between a few thousand dollars and tens of thousands to replace a worker. In an article published by Zane Benefits, for example, they state:
“Average costs to replace an employee are: 16 percent of annual salary for high-turnover, low-paying jobs (earning under $30,000 a year). For example, the cost to replace a $10/hour retail employee would be $3,328.” Source: Employee Retention – The Real Cost of Losing an Employee
Look at ways to encourage employee retention including understanding the true motivating factors for those you employ. Here’s a great resource from SHRM for that.
Data to obtain: What do employees really want and need to stick around? Are you meeting that? What systems, processes, awards, etc., could be implemented to reduce turnover and/or turnover expenses?
Minimum Wage Requirements and Labor Optimization
As far as labor costs go, restaurants have no control over labor laws, only adherence to those in a way that balances with profitability. According to PEW Research, fifty-five percent of minimum wage earners work in the leisure and hospitality industry. This means restaurants are among the top industries most effected by minimum wage increases, many of which went into effect this year.
Labor optimization seeks to ensure a high level of customer service with a balanced level of labor cost. Too few staff can result in lost sales and poor customer experience, while too many can kill the day’s profitability. Balance then comes in finding the ideal level of workforce to meet demand, with little to no variance as much as possible.
Data to obtain: Sales data in smaller increments than monthly to determine true ratio variance, cost of benefits, overtime costs, actual vs. scheduled hours worked, your restaurant’s KPI’s. Basically, anything you want to change or manage needs to be tracked, adjusted, and re-tracked in order to make progress.
Predictive Scheduling and Best Practices
Large urban areas such as New York City and Seattle are implementing laws designed to better support workers with unpredictable schedules. Even cities who haven’t yet seen this type of predictive scheduling legislation can benefit from moving towards using them as best practices. This legislation requires employers to post schedules two weeks in advance or pay a higher differential for last minute schedule changes. Some strategies to manage this include:
Systems that allow for easy changes by employees. Cloud-based scheduling programs can allow employees to have some flexibility while also allowing employers to control scheduling gaps and labor costs.
Cross training opportunities. By cross training employees, during times of sales flux, roles can be shifted to better meet demands, without the need for schedule changes.
On-call rotation calendars. Develop an on-call calendar that helps employees predict when they are specifically on call in the case of sickness or unusual demand. This creates predictability in controlled ways for labor cost management.
Data to obtain: sales forecasting information, staffing demand information, staff interest in cross-training, schedule variance reports
Zuus Workforce is a worldwide resource for labor compliance and labor optimization for the retail, restaurant, hospitality, security, healthcare, and manufacturing industries. Have questions about how they can support you? Contact them today.