Do you remember the anxiety in the restaurant industry when the $15 minimum wage was looming? There was so much fear about how it might impact, and even destroy, businesses.
Fast forward to today, with the advent of COVID-19 and the ongoing labor shortage in the United States, the landscape has shifted. Restaurants are now offering wages higher than $15 per hour to stay competitive.
In places like Los Angeles, a proposed $22 minimum wage adds another layer of complexity.
So, how can a restaurant not only survive but thrive in these challenging conditions? Join me as we explore effective strategies for navigating wage increases in the restaurant industry.
Table of Contents
Embracing higher restaurant wages: A necessary shift
Before we delve into solutions, it’s important to acknowledge that, despite the challenges, the self-correction of higher wages was long overdue in the restaurant industry.
While this correction may pose a negative impact on establishments running on slim profit margins, there are ways to adapt and thrive.
The proactive plan for restaurant success
Step 1: Establish a budget
The foundation of success begins with a budget, a comprehensive review of the trailing 12 months. By creating a template that factors in sales, costs and monthly expenses, restaurateurs can predict their financial outlook for the coming year.
This sets the stage for developing a proactive plan.
Step 2: Adapt to dynamic labor costs
Understanding that labor costs are not static is crucial. Monthly variations, seasonal fluctuations and unexpected factors can all impact labor expenses.
A rigid adherence to industry standards is no longer feasible. Restaurateurs need to adapt to the ever-changing landscape of labor costs.
Step 3: Schedule on budget
With a budget in place, the next step is to implement a scheduling system aligned with financial targets. The goal is to use allocated hours efficiently and avoid the common practice of bringing in staff based on assumptions about business volume.
I teach restaurant owners how to do this with a systems I call the Restaurant Payroll Guardian. It helps them break away from this outdated approach (available to my coaching members).Â
Step 4: Hold managers accountable
Restaurateurs must ensure that managers align their scheduling decisions with the established budget. The introduction of a labor discrepancy finder allows for real-time monitoring, holding managers accountable for any deviations from the budget.
Step 5: Track labor
Beyond tracking dollars spent on labor, it’s crucial to monitor hours worked. This provides insights into whether sales were met with optimal staffing levels or if adjustments are needed to enhance efficiency.
Step 6: Understand labor efficiencies
The final step involves delving into labor efficiencies. Utilizing tools like the labor efficiency finder allows restaurateurs to calculate dollars per labor hour worked.
This metric provides valuable insights into the productivity of staff, helping identify areas for improvement and cost savings.
Proactive adaptation for prosperity
Successfully navigating government and market-imposed wage increases requires a proactive approach.
By embracing change, establishing a budget, adapting to dynamic labor costs, scheduling on budget, holding managers accountable, tracking labor, and understanding labor efficiencies, restaurateurs can not only survive but thrive in the evolving landscape of the restaurant industry.
