How Top Restaurant Operators Adopt New Strategy to Reduce Labor Cost

With today’s decreased labor pool and increased wages, most operators think the way to manage labor is to concentrate on the cost of that labor.

They are wrong. 

Today’s top operators forget all about labor cost (for a while) and instead examine hours and productivity. 

With escalating rates of pay (and the corresponding menu price increases I recommend to offset them) managing your labor by total cost equates to making decisions about how much allowance to give your kids based on what you received at their age.

Outmoded and outdated. 

What to Do Now

1. Hours. Compare the hours scheduled to times in the past when your units ran similar guest count. Gain knowledge of how to schedule at an optimal level.

   Many of the people you have recently hired from the current labor supply vacuum aren’t yet able to do their jobs quickly or efficiently – at least not as much as the more qualified ones you remember from that distant pre-COVID past.

   The industry lowered standards to combat labor scarcity in order to staff restaurants as close to full as possible. 

   That’s why smart operators compensate for their new staff’s lack of expertise by finding a way to increase education and training.      

2. Productivity. Determine how many labor hours (by job function) it takes to satisfy your guests compared to pre-pandemic.

   Because of the increase in wages and prices, use the best calculation for these times: the output/input ratio (divide one by the other) of labor hours to guests to learn how many labor hours per guest you use now. 

   This will help you schedule smarter and understand the benefits of education and cross-training.

Boost Your Bottom Line  

Not everyone believes me when I tell them, “We can drop two points to the bottom line” – at least, not until I explain that we do that by getting a quarter-point here, a half-point there.

Pretty soon it adds up. 

When you refocus on labor cost through the lens of hours instead of rates of pay – and productivity in terms of hours per guest – you start down the path to finding those points. 

Over to you. What actionable insights do you glean from using this perspective?