Restaurant Solutions to Effectively Lower Labor Cost

If you’re an independent restaurant owner looking for restaurant solutions, I am going to give you three restaurant solutions to lower labor cost. These restaurant systems are a guide to lowering labor cost and hitting your target labor hours. Watch this video, or continue scrolling, to learn three effective solutions for controlling your restaurant labor cost.

With COVID-19 we're seeing restaurant sales drop, restaurant food costs go through the roof and restaurant labor costs go through the roof. As a restaurant owner, you're searching for how you can take control even when times are good.

To help you right now let’s focus on labor. First, without a budget your restaurant is running off the wrong labor cost percentages. With the right target, you're going to be able to proactively schedule and hit your profitability goals.

There are three things I want you to put in place to start getting control over your restaurant labor cost.  

  1. A budget
  2. Restaurant Payroll Guardian
  3. Restaurant Labor Discrepancy Finder

These three restaurant solutions are going to help you lower and control your prime cost and truly take your profitability back.

As a restaurant coach, I talk to independent restaurant owners on a daily basis. Chefs, managers, owners, general managers. I can tell you when I was running a business as a restaurant manager and as a chief operating officer of a 30-unit sports bar chain, labor cost was one of the top things we worked to control. But today it's worse. Minimum wage is creeping up to $15 an hour across the country. And now with COVID-19 and lower sales, restaurants have to look at new ways to run the business. You’re finding your labor creeping up because you’re working with minimum staffing levels, which is also making your prime cost go up (read about restaurant prime cost and get the prime cost formula here).

These three restaurant systems I’m going to teach you here can lower your labor cost.

Restaurant budget

If you see me speak at any point in time, or you've been searching my YouTube channel, you know that I say a budget and recipe costing cards are the two most important systems for an independent restaurant. Guess which two systems independents practically never have? That’s right: a budget and recipe costing cards.

A budget is critical because it allows you to proactively respond when things don’t go exactly how you thought they would. Sales can be higher or lower than projected any given day. Once you set your prime budget target, the truth is with a budget, that target is different every single month. When you’re in your off season, your managers are chewing up all the money. But you still need to cover your business. You still need servers and cooks. These are what I call minimum staffing levels, which means you’re going to have a higher labor target in the off season. When you’re in season, you have so much money you can't even add another cook to the line or another server on the floor to spend the money. You have the money, which means your managers take a salary and take up a smaller percentage. You have a lower labor cost percentage when your sales are really, really high because your customers manage my efficiency.

With the higher labor cost in the off season and a lower labor cost in the high season, you still need to hit a certain number by the end of the year to be on budget to hit your prime cost target goals. Let’s say that number is 30 percent, and you run 38 percent in the off season and 24 percent in season. But in a year, you hit your target. You cannot do that properly if you don't have a budget.

Know how many hours to schedule

The next piece is setting the right labor targets based on that month, I teach a system to my members called the Restaurant Payroll Guardian, which is like magic. By taking my POS report from last week, my sales forecast for next week and my budget target for my budget, I can tell each one of my managers how many hours and dollars they have to spend next week to be on budget to proactively manage.

In the restaurant industry we have the bad habit of bringing people in and then praying you’re busy, then sending them home when it’s slow. That doesn't work. When you bring four cooks on the line at four o'clock and it’s slow, and you don't get busy till eight o'clock, even though they may have done some side work, the clock is bleeding. You can send them home early at the end of the night when the dining room empties and the orders dry up, but it's too frickin’ late. At $15, $16, $18, $20 an hour, you are getting bled dry with no productivity for it.

A different approach might look like two cooks to set up the line at 4 p.m., one at 5 p.m., the other one at 7 p.m. You still have the four cooks when it’s busiest, but you’re not bleeding labor dollars. It's no different for servers. The Restaurant Payroll Guardian allows you to proactively manage to make changes.

Balancing labor week to week

How do you know where those changes are? That is the third solution, which is the Restaurant Labor Discrepancy Finder, also known as a schedule variance report. When you see the Restaurant Payroll Guardian tells you where your number should be and then you copied the schedule from last week, you can see how many hours to add or cut. Let's say, for instance, you tell chef they have 300 hours to schedule in the back of house. You schedule based on last week and come up with 314 hours. You need to cut 14 hours. The Labor Discrepancy Finder tells you where your variances is. The job of the manager is to that variance to zero. Fourteen hours may seem like a lot, but you can trim 15 minutes here and there and get to 14 pretty quickly. Bring in four cooks 15 minutes later in the morning because the nighttime crew set up the line so it’s ready to go. That’s 15 minutes from four people, that’s one hour. If the daytime crew sets up the line, make sure all prep is done and the PM shift is ready to go so you can bring in four cooks 15 minutes later for the PM shift. That's 15 minutes from four people. That's another hour for a two-hour savings per day. Seven days in a week and there are your 14 hours.

When you start to look at your numbers, start with a budget, use the Restaurant Payroll Guardian and then look for the discrepancy with the Restaurant Labor Discrepancy Finder and make those small changes to get your variance to zero, you're taking control of your labor cost and your prime cost, putting your restaurant on a path to make money. None of this is possible without a budget.

If you want to learn more restaurant solutions like these and how to get your managers to do the work, sign up for my free four-part video learning series where I go into all of this in more depth.

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