Avero's Tips & Tricks: Managing Labor Costs during Downtime
The hospitality industry faces slow seasons and downtimes over the course of a year. Perhaps the first few months of the year are a slow down post-holidays and there's a surplus of staff due to the holiday parties and increased business.
How can we use data to fight off seeing red?
Data-Driven Labor Management
Labor is one of the core Prime Costs which make up the bulk of restaurant expenses. Managing labor costs goes beyond simply scheduling fewer employees, reducing staff, or calling off surplus workers. These reactions may be too slow to manage costs with the agility and operator can gain from data-driven insights. Most managers are asking themselves:
How do we determine whether our labor costs are too high?
How can I effect change and rein in this prime cost?
Data-driven insights put quantifiable metrics at the center of decision-making, allowing you to make quick adjustments and changes to sustainably manage your team through all conditions.
- Monitor Punches
- A common tactic is regularly reviewing shift in and out times to ensure they align with schedules and business needs. Employees clocking in before their scheduled start time or staying after work is concluded may want to be helpful, but in reality are incrementally adding to daily labor expenses. Across an entire team this can quickly add up or become unsustainable.
- Is staff clocking in before their shift? Clocking out late? Focusing on a specific job class at a time, and tracking higher-wage positions (especially those who hit overtime) can ensure compliance. Follow up with team members to keep them to the set schedule.
- Labor compared to Sales
- All Prime Costs are reviewed in aggregate as a percentage of total revenue, with labor usually topping out between 20-30 % of gross sales (including management).
- Where are you landing? Instead of reviewing the month total after month is through, see trends as they are happening and respond appropriately. Check out your % on specific days of the week as trends to see where you can staff less by comparing Monday trends to staff for next Monday.
- Use the revenue associated with the relevant positions to analyze if your costs are in line. Compare food sales to cook labor expenses and beverage sales to the expenses for bartenders. Avero includes quick metrics to facilitate these insights.
- Labor % Gross Food Sales: Total labor dollars divided by total food sales, labor cost as it relates to food sales. Best used when analyzing kitchen or back-of-house employee productivity.
- Labor % Gross Beverage Sales: Total labor dollars divided by total beverage sales, labor cost as it relates to beverage sales. Best used for analyzing front-of-house positions related to beverage, such as bartenders, barbacks, and baristas.
- Labor as Productivity
- Many restaurateurs think only about total labor expense, or the expense a percentage of revenue, but this can miss key data that exposes when and how your team is most (or least!) productive and highlight opportunities to improve profitability by focusing employee energy where it is most effective.
- Review our Metrics Glossary to see the Labor Productivity metrics available for insights into when to staff, how large sections should be, and whether support staff is needed.
- Use a metric like Covers per Labor Hour to take sales out of the equation; for every hour of staff member expense, how many guests is your restaurant serving? This is unaffected by wages, inflation, or discounted sales; it is pure productivity. Your goal should be to raise this figure for improved efficiency.
- Use a metric like Checks per Labor Hour to see how many tables your restaurant can serve per labor hour expense, regardless of wages and check average. This can help determine how many tables hosts can seat in a 15-minute period, what size server sections should be, and whether support staff is needed for the average Wednesday volume of guests.
- Manage Overtime
- Planned or unplanned, overtime can kill prime costs. Set up overtime reports going into your busiest shifts and have them emailed to yourself and management before the weekend ahead to see where you can make your cuts and swap shifts if necessary.
- It is an industry best practice to choose a labor week start then ends on slower days such as Thursday or Friday so that it is easier to cut employees going into overtime, if this is available to you.
Learn more about managing your Costs, here are our walkthroughs of the recommended reports:
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