CONTROL RESTAURANT LABOR COSTS

Undertanding the basics........

To make your journey easier, it is advisable to download your .XLSX files of the SALES & LABOR PROJECTION form and the PRODUCTIVITY MATRIX or SCHEDULE as some prefer.

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These notes will be of particular interest to those Restaurant owners and Managers that operate Restaurants and have Rostering or Staff Scheduling responsibilities.

Due to the impact of penalty rates in many Restaurant Industry Award structures, labor control processes are probably the single biggest "headache" faced by an operator.

These notes apply equally in all States in Australia and for that matter in any Restaurant world wide, but you will find they are most useful in States with penalty rates (higher rates of pay) operating on Saturdays, Sundays and Public Holidays. These controls are even simpler where Work Place Agreements are in place or the rate of pay does not vary from day to day.

Continual bombardment of having to react to extreme sales fluctuations, food cost control, staffing shortages, skill levels, training demands, Superannuation, Workers Compensation, special promotions, OH & S issues, HACCP and payroll processes makes the task of contolling labor costs one of the toughest responsibilities in the Food and Beverage industry.

There are numerous Computer Roster and Scheduling and Payroll programs on the market that do an excellent job of ironing out some of the "headaches" we experience every day. However it is the interpretation and forward planning that goes on prior to writing a Restaurant Schedule that matters the most.

But for those interested in a more hands on process of controlling labor costs, then these notes will lead you down the path to absolute control of labor costs to (+ or - ) .50 % of Sales Turnover. And with skill to (+ or -) .10 % variance between your targeted / budgeted labor % and the actual labor %.

"Impossible" you say.

The skills you will learn here will develop top of mind awareness of the mechanics that drive low labor % through the simple process of "filling out the form" and keeping your Sales and Labor Projection Form up to date.

Once the basics are understood then the user can easily transpose these controls to a spreadsheet that is tailored to individual needs. Once the basics are in place and understood then this function can be delegated to an Assistant Manager that has a rostering function within the organisation.

But first the " building blocks" have to be in place.

There are many Restaurant Operators out there that fly their operations " by the seat of their pants" but want to deliver productivity gains in their operation in order to deliver $$
So what are the "building blocks" of Labor cost control. These are :

1. SALES, and effective projection of SALES and the factors that impact our sales internally (through staff incentives) and externally. (through seasonal and holiday variations)

2. HOURS, the number of rostered hours (including training hours) and the relationship between HOURS and........

3. GROSS LABOR DOLLARS, leading to one of our most important measuring tools of.....

4. LABOR %, measured by {SALES divided by GROSS LABOR DOLLARS X 100 } plus another key measuring tool called.......

5. PRODUCTIVITY and measured in SALES divided by the HOURS on the roster on a weekly basis, which leads us to.......

6. AVERAGE RATE, measured in GROSS LABOR DOLLARS divided by TOTAL HOURS

The next blog will cover the 6 "building blocks" of absolute labor cost control.

Nick

Understanding and implementing a sales and labour projection can result in adding 5.00 % to the bottom line.

So what are the "building blocks" of Labor cost control. These are :

1. SALES, and effective projection of SALES and the factors that impact our sales internally (through staff incentives) and externally. (through seasonal and holiday variations)

2. HOURS, the number of rostered hours (including training hours) and the relationship between HOURS and........

3. GROSS LABOR DOLLARS, leading to one of our most important measuring tools of.....

4. LABOR %, measured by {SALES divided by GROSS LABOR DOLLARS X 100 } plus another key measuring tool called.......

5. PRODUCTIVITY and measured in SALES divided by the HOURS on the roster on a weekly basis, which leads us to.......

6. AVERAGE RATE, measured in GROSS LABOR DOLLARS divided by TOTAL HOURS

The next blog will cover the 6 "building blocks" of absolute labor cost control.

Nick

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