In our two-part series, we are focusing on areas where your restaurant can find ways to reduce costs, focus on profitable items and how to move dead inventory more effectively. Today, we start by looking into labor costs and how you can save on unnecessary costs.
Look, we see it all the time: Restaurant flyers crammed into mailboxes offering a discounted deal. Facebook, Instagram and social media posts promoting daily specials. Hey, we have all done it.
Restaurants are constantly chasing down customers, spinning their wheels on ways to bring in more guests to drive up sales. But what happens if all that effort spent on attracting new customers doesn’t work? You can double your losses by spending marketing dollars that don’t bear fruit. But restaurants looking to grow their bottom line don’t need to chase customers in order to drive up profits. Looking internally to cut restaurant operational costs and reduce dollars tied up in inventory can help save restaurants.
Reducing labor costs
Finding ways to reduce labor costs at restaurants can help grow profits by making each sale more valuable. How can you go about cutting labor costs? First, you should segment the different employee costs in your restaurant. An easy way to do this is to split costs into these simple segments:
By segmenting these costs, you can identify which areas of labor contribute the most to your total cost of labor. Make note of areas where you can reduce labor.
Reducing overall restaurant costs
Overtime: Reducing overtime pay is a great way to limit your labor costs. Identify which employees tend to go into overtime more often than not. Then, look to see how duties can be delegated differently, or schedules can be reworked in order to reduce the potential for overtime.
Slow Times: Look at your covers and sales data during different points of the day. What times are your slow times? Can you make due with a smaller staff and still cover the necessary work?
High Value Employees: Reward employees that provide the most value per dollar spent on their labor. If you’re considering back-of-house employees, then ask questions like, “Which employee is most efficient in prep? When can line cooks be pulled from the line to take on some prep duties because business is slow?”
Or, if you’re considering front-of-house staff, then ask, “Which servers can handle large sections? Or, which bartenders are skilled enough to operate without a bar-back?”
Another important question: which employees average the highest sales? If you have a rock-star server who can sell bottles of wine at lunch, then give them more important time on the floor to increase revenue and sales to get better margins on labor/sales.
Be sure to check back next week when we conclude our series with how to focus on profitable items and moving dead inventory.