Controlling Labor Costs
If you currently operate a restaurant, you almost certainly have a labor cost target and you know how to remain under it. I learned how to control labor cost by walking over to the POS terminal at my first restaurant and checking the cost percentage on the screen. If it was over a certain number, I had to send employees home. If it was under the same number, employees could remain on the clock. It doesn’t take a brain surgeon to do that. But I learned over time that there were subtle nuances to reaching the right labor cost target—knowing who to send home, knowing which times it was okay to exceed labor cost targets, knowing when I just needed to do the work myself.
In a business bubbling with uncertainties, labor cost is one number an operator has to get right. Most restaurants run a labor cost somewhere between 14 and 20 per cent, and the number your restaurant should target depends on the needs of your business and your revenue. Generally speaking, a higher labor cost percentage is more tolerable when it is reflective of higher revenues (higher revenue = higher margin, even when percentages grow). Higher revenues usually require more employees on staff anyway to handle the workload. On the other hand, the need to push staff out the door increases during those slower days and slower times of the year. How you cut labor depends on a personal philosophy that should be pre-determined and clear to all management staff members.
Some people like to keep labor costs low by limiting the number of people in the kitchen. The restaurant where I first learned how to control labor never employed bussing staff. Other restaurants like to have more employees on staff with lower hourly wages. My recommendation to new restaurant operators is always to work to find reliable employees who take ownership of their work space, even if it means climbing above your wage window for that position. That said, paying a little extra for the right staff tends to mean getting them out the door at the earliest possible time, and that means a little extra work for you and your management team. In other words, by paying extra and pushing them out the door, you and your managers will usually wind up bussing some tables and seating some guests. You may also find yourself on your back line tossing cole slaw together or prepping lettuce-tomato-onion set-ups. Most restaurants in their early stages require this work from their management team. However, many successful restaurants with a track record of reaching long-term goals still hinge their labor cost on extra work from the management team.
Many a corporate chain achieves labor cost goals by squeezing every drop of work out of its management team. Salaried employees working more than 65 hours per week are a standard in this business, and are the staple of many successful P+L reports. I grew up in this business working 65 hours per week, and I know it’s an effective way to keep costs low. However, I have come to believe that the hours a manager spends on the job should be quality ones, and not merely the result of a twisted endurance test. Hourly employees who sense reward for their work, buy into the project of the business and take ownership of their workspace can augment the work of the management team and keep costs down by leaving before accruing overtime (gasp!).
That is one model for controlling labor costs. However, there are many others, including not hiring certain positions and paying minimal wages across many employees. Ultimately, the operator has to have a business model for keeping costs low. It has to be thought out in advance. It has to be something more pre-meditated than walking over to the POS terminal and checking the labor cost percentage.