Restaurant Labor Costs: Why are they so Hard to Control?

5th February 2014
Lego Waiters. A Flickr Creative Commons photo by Mak Filco

There are few major cost centers for any restaurant. Some are fixed, while many are variable. Labor cost is possibly the most challenging variable for managers/owners to control. Think of your major restaurant costs:

  • Labor
  • Food and Beverage Inventory
  • Real estate
Real estate is a set fixed cost for a period – say a three year lease (or mortgage payments). It is, for better or worse, very stable and predictable. Food and beverage costs are a pain, but generally controlled by one or two people. Real-estate is fixed while food and beverage cost variables are largely based on units sold; labor costs are mostly independent of either.


Labor is a different challenge. Scheduling staff who have different roles, responsibilities and skillsets can be painful and an exercise in guess work. If you are selling a lot of hamburgers, you can prep more hamburgers in a fairly short period of time. However, if you get a rush and are short staffed, it may not be possible to get someone in on short notice. The result is slow service and a poor customer experience.


Alternatively, if you over schedule, sending staff home can be difficult. Not only because there is a penalty (many state/provincial labor laws require a minimum number of hours be paid if someone shows up for a shift), but also because there are many people making the decision. A restaurant that is open for three shifts a day, seven days a week, has twenty-one opportunities where staff could be cut, kept or called in. In addition, various skillsets are required within those shifts. For example: A shift that is heavy on wait staff may be short on bartenders or prep cooks. In another case, a more highly paid manager must be kept on (although not needed), because they are the only key holder staff on hand available to set the security alarm or open a new till. In some cases, young managers (some still teenagers), have to consider local labor laws in order to make in-the-moment decisions. Do you trust them to make the right decision?


With all those variables it isn’t difficult to see why managing labor costs are so hard.


How to improve your labor costs

  • Invest in labor saving tools, particularly ones that save administrative time. Every minute your managers are not in the office, is time they are on the floor, relieving hourly staff and running a tighter shift.
  • Use a labor matrix. It doesn’t need to be complex, but if you are using staff scheduling software there should be a feature that allows you to input expected sales and determine the number of staff you should ideally have on hand.
  • Use predictive sales tools to determine how busy you will be. If your Point of Sale is tied into your scheduling software, you may have the ability to see what your week’s predicted sales will be, while creating your schedule. More on how that can be done here.
  • Cross train staff. Staff that are cross trained can flip between roles as needed, meaning you may be able to send someone home during a slow period.
  • Compare results over multiple locations and mirror best practices. If you own multiple locations, some are undoubtedly doing a better job at labor management than others. Use your HR software to see all your locations labor cost per sale and then find out what the best performers are doing.

What are your secrets to keeping labor costs under control? Let us know in the comments section below.

Chief Operating Officer at LIVELENZ. Greg began working part-time in restaurants when he was 15 and continued in the industry for a decade. He then began working for technology companies developing a passion for improving operational efficiencies at fast-growing organizations.

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