Consistent labor cost tracking is important for any kind of restaurant business, especially if you expect to turn more tables during the holidays or peak seasonal periods. Just as you want to keep labor costs low during slow periods, tracking makes sure you have enough to pay out during busy periods.
How do I calculate labor costs?
In the past, calculating labor costs meant breaking out the ol’ pen and paper and your trusty calculator. Today, though, online scheduling software makes it easy for you to determine labor costs and monitor schedule compliance. With technology taking over the heavy lifting, tracking your labor costs is a simple matter of saving time.
What is the normal labor cost for a restaurant?
Unfortunately, when it comes to how much your labor should cost, there is no magic number. Industry experts recommend keeping labor expenses within a range you determine is best. In general, we’ve found labor costs vary according to your food service operation; starting at 25 percent for QSR’s and getting as high as 40 percent for fine dining restaurants. We found another source citing 60 percent as the standard given increasing payroll costs and razor-thin margins. Overall, the rule of thumb is consistency. That is, try to keep your labor costs around a steady percentage of your prime costs, not a specific dollar amount.
How do increase my revenue and lower labor costs?
Develop efficient processes, increase employee productivity, and track hours worked with the following options in mind. Labor and employee salaries are a burden on your total revenue, but equally important to your restaurant’s success.
- Hire the right employee for the job. In an industry with high turnover, hiring the right employee for the job is key. Asking simple questions during the interview can save you time, stress and money later. Hiring the wrong employee can cost you as much as 30 percent of their annual salary.
- Cross-train employees. Cross-training employees to do other jobs helps to fill the gaps if a shift worker is tardy. Instead of a server getting overtime, perhaps your hostess can pick up a few tables.
- Reduce employee turnover. Employees who are happy with their jobs are more motivated to work hard, and are more likely to stay. Regular recognition and praise for hard-working employees can boost your bottom line by encouraging them to provide better customer service, and reducing employee turnover. Homebase subscribers can send notes to the entire team with just a few clicks.
- Use the right technology. Online scheduling software like Homebase will help you manage your labor costs with forecasts and schedule notifications. You can compare labor costs over time, or look at hourly breakdowns. Also, our attendance tracker lets you view on-time arrival rates to manage costly tardiness and schedule compliance.
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What are you currently doing to reduce labor costs in your restaurant? Let us know in the comments below.