Cut Costs with Labor Analytics
In this article, we’ll learn how to decrease your labor percent of sales in order to decrease costs. To do this, we will help you identify a target labor % of sales and determine if your labor costs are too high. Then you’ll track your success as you make changes, and help you quantify the impact of your success.
We will guide you through three steps to decrease Labor Costs:
- Getting Started - Establish a baseline to understand your current performance
- Set your goals and timeline
- Track your results and communicate your success
Getting Started - Establish a baseline to understand your current performance
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). You should typically plan salaried management to take up 10% of sales.
Let’s check if your establishment is hitting the mark.
- To do this, run the Labor Summary Report and identify the current labor percent of sales.
- We’ll get started by selecting a date range in the Report Generator for the past 3 months to establish our baseline. A broader timeline helps avoid impactful outliers that may skew your results.
- Some systems have your salaried managers included, please verify if these amounts are included when determining your baseline and goals.
- Click GO
Set your goals and timeline
Now determine what your goal is for labor percent, and take note of where your labor % is currently so you can quantify and communicate your results and successes.
- Based on your menu, concept, and needs, set an appropriate goal to decrease your labor percent of sales from the current state of _____% to ______% by next quarter.
- With your goal determined, set up a report to track your success on this initiative.
- Run a new date range for this Labor Summary Report, we recommend a trend for the last 8 weeks.
Track your results and communicate your success
Selecting a dynamic date range means the report will automatically update for you each week with new information. A dynamic date range is a term for date that constantly updates, like 'Yesterday' or 'MTD' (Month-to-Date) which will always be that condition. A static date range is fixed dates and will not update, such as January 1-15.
Track results at a glance on your dashboard
- Click the dashboard icon at the top of the graph to add to our dashboard. The dashboard is a great centralized location to track initiatives and key metrics. You can have multiple dashboards for specific purposes or initiatives.
- When you click the dashboard icon, make sure to select ALL the columns in your report to include so you don't miss any details!
Set a weekly progress report to email to all managers
Run your Labor Summary Report with the same parameters you used to set the baseline, and use a Dynamic Date Range, as described above.
- Click the envelope icon at the top of the report.
- Click weekly to set this email up to be delivered at the beginning of each week.
- We recommend sending this report to your management team every Monday morning at 9 AM (be sure to select the day that your fiscal week begins, if not Monday).
- Add a title for this email that is clear and short
Add a description that references the project, baseline, and goal so the management team knows exactly how to use these weekly emails.
- Select the entire management team to receive this email so managers can focus on constructive and targeted discussions during pre-shift meetings.
- Additionally, encourage them to hold tastings and test servers on descriptors on key beverage items. Both of these exercises will help to increase beverage sales by boosting team confidence in upselling these drinks.
- Consider adding a contest or server incentive for beverage sales and post weekly results to get server buy-in to your goal.
Calculate your success
In the last emailed report (determined by your target date) you can note your final labor % of sales.
Our baseline is ____% with the goal of _____%. If we meet our goal at the end of our program, we will have had a _____% decrease in labor costs.
Repeat these steps by breaking down labor further by comparing your BOH staff to Labor % of Food Sales and FOH staff to Labor % of Beverage Sales.