Labor cost is typically 25%- 35% of a restaurant’s overhead expense, so restaurants should be working to improve that percentage and keep track of what it is, and understand the data behind those numbers. The result of raising the minimum wage for restaurants significantly impacts both the employers and employees. While the employees are seeing higher pay, restaurant owners are seeing smaller profits and wondering how to optimize labor costs. The good news is that although your profits might be shrinking at first, you can modify your business and find ways to keep costs down by utilizing reporting software to better understand crucial data and get your profits back up!
Decrease Employee Turnover
It costs a lot of money to look for new employees, set-up interviews, and train them. Work on ways to retain the employees you have. We have said it before and will say it again, don’t rely on the “you learn best by doing” approach and just throw them out there with little knowledge. Instead, put a proper training program in place. Not only will your employees appreciate the detailed information on what they need to do and how to do it, but it will leave less room for mistakes that could cost you money. Recognize employees who are doing a great job and reward them with praise, a social media post, or even a gift card from time to time.
Invest in Labor Scheduling Software
Find a labor scheduling and managing software to help you better manage your staff. It is sometimes an honest mistake of showing up a few minutes early and clocking in when you arrive or clocking out a few minutes late after your shift. It might not seem like much, but those few minutes can add up quickly. Labor scheduling software will notify you when someone is getting close to going over their scheduled work hours, so you can take action before it’s too late. You can also look at scheduled labor and sales for previous weeks, months, and even years to create educated schedules so you’re not overstaffed. This software is designed to simplify the scheduling process and save you money, so take advantage of the many benefits it offers.
Adjust Operating Hours
This might not be the first option you resort to when scaling back on costs, but if you are feeling the pinch, then you can consider reducing your hours. If you are very busy in the evenings but mornings are typically slow, maybe try opening around lunch and see what that does for your bottom line. If you have some type of enterprise reporting software, look back and see what times were the busiest last year and brought in the most money, so you can make informed decisions that will give you the best results.
There are many different ways to save money when it comes to labor. Instead of hiring new seasonal employees, try seeing if you currently have staff willing to work extra hours. This way you are not training new employees who will only be there a couple of months and are giving your staff an opportunity to earn more money.. Look at your restaurant and see what makes the most sense for you. Raising menu costs is an obvious choice, but you want to go beyond just that and look holistically at how you can save your shrinking profits and boost your bottom line.
