Are There Leaks in your Labor?

There are many successful restaurants out there, but just as many or more that are marginally profitable or on the verge of disaster. This business is known for its high risk and failure rate, so operators need to give themselves every advantage. Here’s what I mean.

I started and I've run restaurants for over 20 years and when I began my first place, I had no restaurant experience. I could just as easily have become a statistic, but instead succeeded beyond my wildest dreams. Right from the start, I had an “Exit” strategy firmly in mind. Back then, I decided to work “ON” my business “Now”, so I could decide how or if I worked “IN” my business later. As it turned out, I was able to enjoy my restaurant as a customer, seeing and experiencing what my guests were seeing, while the staff had my back. Implementing systems across my operation maximized my profits and efficiencies, built an “unstoppable” Brand and created so much turn-key value that years later, I was able to sell for a high price tag.

The two things made the critical difference for me? Systems and business skills. Two “key” elements not generally found in the typical seat of the pants restaurant. But stay tuned as they can easily be learned, and I’ll show you how.

Systems

So let’s talk about systems. One of the most important is monitoring your labor cost, as this is one of the biggest expenses in your restaurant. In my experience (and most restaurants), there are also many abuses. People punch in early and stand around, staff punch each other in and out and the list goes on. With a few simple tools, pencil and paper; you can analyze your critical numbers in just a few minutes each week, make better informed decisions and watch your bank account grow.

It is good practice to first start by staggering your entire schedule. This means that if you have three hosts on a busy night, you open the doors with just one and then an hour or two later, bring in reinforcements as needed (or better yet, institute an “On Call” system where the staffer stands by if needed and comes in if called). Later, as things start to slow down, you cut two of the hosts. Apply this simple concept to all departments, and your restaurant will be more efficient and you’ll quickly save dollars. I call this operating in the “sweet spot.” Although watching the work habits of all staff is important, remember that your service staff are the lowest paid (as they work primarily for tips), while your Kitchen labor costs you the most.

Minimizing Labor Costs

Years ago, I noticed that people were standing around before things got busy so I dug a little deeper, looked at my payroll reports and compared them with my schedules for each department. I quickly found out that out of 52 employees, on average about 15 to 20 would clock in anywhere from 10 to 15 minutes early. Was I paying for productive time here? Certainly not in all cases. I’m talking about the staffers who would just wait until their shift was supposed to start before getting to work. You can do the simple math and see if you have 10 or more people clocking in 10 minutes early every day of the month, how much extra you’re paying with no return on that labor investment. Here’s what to do.

Often, employees get called in early for legitimate reasons because work needs to be done, and you want to pay them for this time. To keep everyone honest, create a simple chart with the employees name, time originally scheduled, time changed, reason and manager sign off. Tell every employee that unless their name appears on this “Schedule Change Authorization” with manager approval that they will not be paid for early punch-ins. Then, when doing your payroll, most P.O.S. systems will allow “time edits” to change an early clock-in back to the scheduled time. This practice alone saved me 2% off my weekly labor cost.

Next, a simple “Labor Analysis” sheet compares week by week sales against labor and provides your weekly labor cost percentage. This simple sheet has the dates of the pay period (week or more), and both a Sales column and Payroll Cost column for both Overall Total Labor (Including Management) and just the Kitchen. For overall labor, plug in Total Sales of everything you sell and your Total Payroll Cost including taxes. For the Kitchen, remember to isolate just your kitchen labor and your food sales only. Divide Payroll Cost by Sales for each to get your labor cost percentages. Once your percentage is in range and you have just enough staff to provide each guest a great experience, you have found your “Sweet Spot”. Make a note of these numbers, as a benchmark to shoot for each pay period.

Now here’s the kicker. From time to time you may notice that you have comparable sales from a prior period, but higher labor costs. Here’s how you can quickly zero in on the variance and get back in your labor sweet spot.

Make a list of your employees in each department, their hourly wage rate and the hours worked that week. Total the columns and then compare against a prior week with comparable Sales where you hit your “Sweet Spot”. Make a note of any variances by employee and/or department. Armed with this information you can now investigate any large increases for abuses or inefficiencies.

I mentioned earlier that many simple systems can be implemented and easily executed in your restaurant to save you time, maximize your profits and allow you to focus on delivering great service to your guests. I wrote a book and created a series of simple automated spreadsheets you can use to analyze all your critical numbers in just minutes each week. Learn more at www.rockyourrestaurantbook.com


Roger Beaudoin is a 22-year veteran restaurateur, hospitality consultant and the host of the “Restaurant Rock Stars Podcast”. His most successful restaurant rang over $1.2 Million each year in just a 4-month season with “Double” the bottom-line Net Profit of the average full-serve restaurant. Roger attributes his success to staff training and profit maximizing “systems” he created years ago which allowed him to dominate his competition for over 20 years. These systems are available here.

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