What’s the difference between struggling restaurants that make it and the ones that fail? It’s keeping prime costs—food, beverage, and labor—below 67 percent of expenses.
If your prime costs exceed that, it’s time to re-evaluate your business model. Unless you can easily raise your sales levels or reduce your occupancy and food costs, implementing controls over labor costs should be your first priority.
Here are four changes we recommend to help turn your struggling restaurant into a leaner, more profitable business.
Track labor costs every day
This step will enable you to sleep easier at night, knowing that you are on a disciplined labor budget. Determine your current labor cost percentages by running a daily report in your POS system to see what you’re paying employees each day. Then divide that by each day’s gross sales for your current daily labor cost percentages. Subtract three percentage points for your starting daily labor budget going forward. Then create your weekly schedule around your daily budgets, so that your total weekly costs don’t exceed your labor budget.
Reduce excess crew members
Many managers make the mistake of over-scheduling to ensure high service levels and faster ticket times. Of course your objective should be the best possible dining experience for your guests, but what often happens is that employees slow their performance down and become less accountable. Staff your team to a level that may feel slightly uncomfortable, where you think you could use one more waiter on the floor and one more cook on the line. You’ll likely be surprised at their higher level of attentiveness in the kitchen and focus on your guests in the dining room.
Project gross sales and track your projections
Once you’ve gone two months adhering to a strict labor costing and scheduling discipline, you will discover ways to compensate for fewer employees handling more tasks. With your profits back on the rise, your next step will be to apply the same rigor to gross sales projections. By the 20th of each month, review your previous month’s sales along with your marketing plans and reasonably estimate your sales for the next month. Then multiply your projected sales by your labor targets to give you a maximum budget for labor (including salaried management). When you start this practice, keep your estimates conservative, minimizing your risks. As you become more adept at making accurate sales projections, you can safely increase staffing hours.
Use the right recruitment tools
There’s something else well-managed, lean, and profitable restaurants do to keep costs down. They use industry-specific talent acquisition platforms to minimize the time and resources they need to find talented and committed workers. Combine this practice with the other suggested tips and you’ll be better able to keep your restaurant on track and profitable.