Restaurant Labor Cost 101

restaurant labor cost 101
  • Atosa USA
  • Simplot Frozen Avocado
  • Easy Ice
  • Epiq Global Payment Card Settlement
  • Imperial Dade
  • RATIONAL USA
  • T&S Brass Eversteel Pre-Rinse Units
  • AHF National Conference 2024
  • Inline Plastics
  • Day & Nite
  • DAVO by Avalara
  • RAK Porcelain
  • BelGioioso Burrata
  • McKee Foodservice Sunbelt Bakery
  • AyrKing Mixstir
Follow TFS on Google News

Restaurant labor cost 101 is a plan for any restaurant owner who wants to solve the end-of-the-week panic when you check your labor cost on your POS system and see that it’s too high, so you whip yourself into a panic and start cutting staff on your two busiest days.

The problem with this reactive approach is you’re setting yourself up for long ticket times and bad service, two of any restaurant’s biggest fears. Following restaurant labor cost 101 principles will also help you navigate the tricky labor shortage and save as much money as possible in a near-impossible situation.

To fix the most common mistakes made in managing restaurant labor, learn and follow restaurant labor cost 101.

First, you must use a budget and understand prime cost.

If you need to learn about budgeting or prime cost, I have a lot of free resources for you. Make sure you check out my YouTube channel and search for the many videos on prime cost and budgeting because it’s critical.

Why is it so important? Your budget is your plan up for success. You set your labor targets understanding where your cost of goods sold and labor is going to be based on where you’re located and more. To schedule properly, to grab the right labor target, you must have a budget.

  • BelGioioso Burrata
  • McKee Foodservice Sunbelt Bakery
  • Atosa USA
  • Simplot Frozen Avocado
  • Imperial Dade
  • DAVO by Avalara
  • Easy Ice
  • AHF National Conference 2024
  • Inline Plastics
  • T&S Brass Eversteel Pre-Rinse Units
  • Epiq Global Payment Card Settlement
  • Day & Nite
  • RAK Porcelain
  • RATIONAL USA
  • AyrKing Mixstir

One quick note is when you’re busy, your labor target will be lower than when you’re slow. It will be higher because your salaried managers chew up so much money, and you have these things called minimum staffing levels versus maximum staffing levels, or efficiencies, when suddenly you couldn’t add another cook to the line, and your customers are managing your efficiencies because your customers are on an hour wait. Understanding budget and where your prime cost should be is number one.

Number two, schedule based on that budget.

All too often you bring people to meet this idea that to offer great service you must have a lot of people around to offer that service. I’m sure you’ve noticed when you have more staff than you have customers, they’re too busy flirting with each other to pay attention to the guests. That’s when your bad Yelp reviews happen. To solve this, I teach my coaching program members to use a system called the Restaurant Payroll Guardian. It tells your managers how many hours and dollars they have to spend to go into the week on budget instead of bringing people in praying you’re busy and then sending them home when you’re slow but it’s already too late.

If you already had three slow hours and then start cutting people, you’ve already blown your labor budget. Instead, you’re going to tell your chef they have 350 hours they can schedule in the kitchen based on the budget. If you’ve been doing that thing where you just copy last week’s schedule, let’s say you have 364 hours scheduled. If you follow the budgeted 350 hours, that means you must cut those extra 14 hours. Your chef or kitchen manager is going to freak out on you when you tell them that. But little by little, if you cut a team by 15 minutes each day rather than two whole shifts, you can get there. For example, bring in four cooks 15 minutes later in the morning and the evening for seven days, and that gets you there. 

And finally, number three, track your running labor cost percentage and your daily hours.

Your POS systems should tell you your labor cost by day and your running total. But remember step one when I said, hey, you’re going to have a labor budget? Labor cost percentage for the month may be higher or lower depending on that month. That translates to scheduling the hours you have in step two, which means you’re going to set up your schedule based on the needs of the business.

This may mean you have a higher labor cost on a Monday versus a Friday because over the weekend you had your butt handed to you and now you have all this prep to do going into the week. Based on production, you’re going to have a higher labor cost because of lower sales. But the production needs to happen, whereas on a Friday you have no prep, and your sales are through the roof, which makes your labor efficiency lower. If you use those hours that have been allocated in step two, no more, no less, you will end the week on budget. If you schedule that way, it means you have a different labor cost percentage and a trailing budget that I’m going to be following.

Well, there’s one more piece and that’s hours. All too often we have these sales forecast. We expected a $5,000 day and scheduled 300 hours. What if the next morning you walk in and you see 310 hours were worked. What would your expectation be? Sales to be higher, on forecast, or lower? Higher, right? What if when you come in you find out it was either dead, on forecast, or it was actually $500 less. Why were 10 more hours needed? When this happens, you now know which manager you need to coach to make sure they get people out of there so that they’re not wasting your money.

These three steps are critical to controlling your restaurant labor cost. When you get the hang of it, not only will you drop your labor cost, but you’re going to get yourself ready for advanced labor controls. That puts you 100 percent in control of your time clock and your profitability.

  • McKee Foodservice Sunbelt Bakery
  • Imperial Dade
  • Day & Nite
  • Epiq Global Payment Card Settlement
  • Easy Ice
  • Atosa USA
  • T&S Brass Eversteel Pre-Rinse Units
  • AyrKing Mixstir
  • Inline Plastics
  • DAVO by Avalara
  • BelGioioso Burrata
  • RAK Porcelain
  • AHF National Conference 2024
  • RATIONAL USA
  • Simplot Frozen Avocado