Lower Labor Costs in 5 Easy Steps

By Bruce Macklin

Illustration of restaurant employees in front of stacked bills and coins

If you’ve scheduled too many servers, you might notice right away. The happy hour rush is kaputz and you’re left with four bored servers Windexing windows, cleaning menus, and rolling napkins, chances are good that your scheduling tactics weren’t exactly on point.

But what’s the cost of that mistake?

If you’ve scheduled too many servers, you might notice right away. The happy hour rush is kaputz and you’re left with four bored servers Windexing windows, cleaning menus, and rolling napkins, chances are good that your scheduling tactics weren’t exactly on point.

Many of us take the short-term approach to fix the problem: a server or kitchen staff member is cut early so you can save on labor. 

But if this error continues to happen, it can have a long-term impact on labor costs. With fewer tips, fewer tables, and less to do, your service staff might just start looking for a workplace with a higher table turnover and a lower staff-to-table ratio. You may then be stuck with the higher costs of losing – and subsequently hiring and training – a new staff member. 

All restaurants have slow nights, but you need to get strategic. This should involve both an HR strategy with analysis and technology. In this article, we’ll look at a few ways you can cut down on long-term labor costs. 

Restaurant manager with laptop making notes on a notepad

1) Check POS Labor Reports

Check your labor reports regularly against seasons, holidays, times of days, etc. to make sure you schedule the exact amount of staff when you need them – and not when you don’t.

Your ability to schedule effectively is directly proportionate to your ability to analyze labor data and schedule accordingly. In the article “Boost Productivity to Control Labor Costs,” Dr. David Pavesic, Graduate Program Director of the Cecil B. Day School of Hospitality at Georgia State University suggests that we remember we’re purchasing labor, not just putting a name on a calendar.

This means every time you schedule a staff member, you’re buying the work they’re doing. You wouldn’t buy a car without doing some research first. The same goes for your staffing, which is why it’s a best practice to analyze your past labor cost percentage by daily and hourly trends (not just weekly).

But the labor cost metric alone isn’t enough. Labor must be analyzed in conjunction with forecasting and analysis to be effective. By accessing average sales data from your POS and projecting that data forward over time, you can create a reasonable forecast basis. Then, using forecasting techniques like Sales per Man Hour (SMPH), you can calculate how much revenue is generated by employees in an hour, and therefore schedule to match your hourly revenue. 

It’s important, however, to read data with a critical eye. Keep in mind other variables that might affect sales trends. You may have overprojected your staffing needs during last year’s Superbowl event, and your labor report from that time can remind you not to schedule as many bartenders this year. You can also save in smaller ways that will build up over time, such as cutting back on the number of staff you schedule at 5:00pm, when everyone is just starting dinner and only ordering drinks. Scheduling the bulk of your dinner staff just an hour later can save on labor costs in the long run.

For times when you just can’t be sure, placing service staff on call is a great way to navigate cost variables that can only be determined day of.

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2) Cross Train Your Staff

Cross training is one of the most efficient ways to make sure your staff are able to take on multiple types of shifts and feel like they’re advancing their skills.

A host who can run food, clean tables, manage the wait list, and, with some sort of unique brand of customer service magic, lull hangry customers into a placid state should not be undervalued. But at the same time, if she’s the only one who knows how to manage the hosting app, she’ll have to be scheduled at all times, even slow nights. 

You’ll also find that when you crosstrain staff, they develop better relationships with more employees, which can improve your staff morale as a whole.

Cross-training also ensures another employee can pick up the slack. Normally, we think of cross-training as advantageous in situations where your restaurant gets slammed or an employee calls in sick, but really, cross-training reduces your reliance on specific individuals. This saves you labor costs because you’re not dependent on one person to do one job. 

For example, if your customer turnover is manageable Sunday through Wednesday, you might train all wait staff on how to use the host management app and perform hosting duties like taking and confirming reservations. This way they can manage the host stand and tables in tandem on low-volume evenings, and you can reserve hosting staff for busy nights.

Restaurant employees looking at tablet POS

3) Keep Staff Happy

The restaurant industry is notorious for its high turnover rates, but that doesn’t mean you can’t buck the trend with a great staff retention strategy. Retaining your staff is one of the best long-term strategies for minimizing labor costs. Investing in your current staff can save on the more significant costs of training new staff, and that means investing in training.

Use staff reports to find out who’s selling the most or bringing in the most tips, and reward them with public recognition, a free meal, some cocktails, or – even better – paid time off. When your high performers are publicly recognized, you’ll kill two birds with one stone by making your best staff feel great while letting your other staff know how they can succeed. 

4) Minimize Overtime

Jean has worked 40 hours, but Alex has worked 15. Who gets the extra shift? It’s obvious that Alex would be the best candidate, but if you don’t know Jean is heading into overtime, you might pass the shift to her – which would put you in the red.

Since serving hours are fluid, clock-out times are rarely predetermined. So keeping track of employees’ hours is an activity that should be monitored daily. Your reporting system should allow you to craft an hours worked report that includes a breakdown of hours worked by each staff member, the number of shifts they worked, and pay accrued for those hours, all while accounting for different roles (bartending vs. serving vs. managing.) By reviewing your hours worked report daily, you keep a pulse on the changing beat of hours worked and avoid small but costly mistakes.

5) Invest in Self-Ordering Kiosks

Welcome to the future, where machines make your gluten-free eggs benny with double paprika and a latte! 

While we may not be there quite yet, the self-ordering kiosk is saving restaurants on labor costs. By allowing management to supplement counter staff with technology, customers input their orders into intuitive kiosks that deliver their order straight to the kitchen. Lines move faster, which means more sales, less errors, and, of course, less labor costs. 

Also, kiosks can’t cough! They are impervious to human afflictions like the flu, don’t need vacations, and never have social obligations like prom or weddings. With self-serve terminals, managers can spend less time rejigging schedules, sick days, recurring wages, and overtime – and more time on making money. 

When it comes to labor costs, management should take the long view. By using self service kiosks, cross-training staff, and keeping your nose to the numbers, you’ll be better able to manage busy nights, slow nights, and staffing needs without getting into the weeds or kissing your precious pennies goodbye.

Photo of Bruce Macklin
by Bruce Macklin

Bruce has been in the restaurant industry for more than 20 years. He started in the dish pit and worked his way up to management, where he helped several restaurant owners cut their costs, effectively manage their staff, and fine tune their operations. Bruce has been working as a software sales consultant for TouchBistro for more than four years, and he’s passionate about setting restaurants up for success with his deep knowledge of the industry and the technology restaurant owners need to run their businesses.

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