August 19, 2023
Lauren Platero

Restaurant Labor: The Complete Guide

Restaurant labor has a tendency to escalate costs. In this restaurant labor guide, we’ll discuss everything you need to know. From learning how to calculate the restaurant labor percentage to strategies to combat a restaurant labor shortage, you’ll walk away at the end knowing how to maximize your resources and save money. Now, let’s begin!

The Cost of Labor Formula 

The restaurant industry comprises numerous brands. The amount of people the sector serves results in massive labor costs. There are about twelve million people who work in the restaurant space, according to a 2023 report. The crazy part? The industry is constantly growing and evolving. 

It’s important to know what contributes to the labor cost and how you calculate it. Read on to learn all about it:

How to Calculate Labor Cost 

To calculate the labor cost, you need to know how many employees you have. Then, you must determine how much each of them are paid. Lastly, you need to find the sum of all other employee-related expenses, like benefits and insurance.

Labor Cost Formula 

Determine that labor cost by adding up all costs that pertain to your employees. To find the labor cost percentage of total operating expenses, use the following formula:

Labor Cost Percentage = (Total Labor Cost / Total Operating Costs) x 100 

If you want to calculate the labor percentage is relation to sales, you’ll want to use this formula instead:

Labor Cost Percentage = (Total Labor Cost / Total Sales) x 100

Try using a program like Google Sheets or Microsoft Excel to make calculations easier. This way, you can input formulas into columns, and it can do all the math for you. 

Restaurant Labor Cost Components 

Labor work is a major component of restaurant operations and the customer experience. So no matter how you invest your money, always keep the customers in mind. To keep costs at a minimum, thoughtfully analyze employee expenses and unit economics. 

Reaching restaurant success is easier said than done. However, it’s absolutely possible. Before mapping out a budget for labor costs, remember that labor in your eatery will consist of these positions:

Fewer Labor Costs, Greater Profits

Regardless of your industry, the labor cost is present. However, restaurants can have a hard time keeping up with it. But now that you know what to look out for, you can manage such expenses for long-term profitability. 

Labor Saving Devices to Reduce Costs

Some of the best investments you’ll add to your business are labor saving devices. They’re super important within eateries, as they allow the staff to do more with less. So, let's cover some of the best options that can improve your business. 

7 Best Labor Saving Devices

Can’t decide which labor saving devices to invest in? No worries, check out the following list for all the details. 

1. An Integrated POS System

Use the right POS software, and you can drastically reduce labor expenses. Plus, restaurant payment technology boasts so many innovative features. 

2. Self Ordering Kiosks 

With “self’ in the name, it’s quite obvious that kiosks can lessen labor expenses. Some of the most common places you’ll find this food tech solution is in fast casual eateries. It literally lets the restaurant employ fewer people, reducing related costs.

3. QR Codes

QR codes can serve as digitized menus. Plus, customers can order from the menu types through them. In turn, staff can be productive despite having fewer coworkers.

4. Restaurant HR Software 

You must be smart about hiring processes and delegating shifts if you want to reduce the labor cost. So, utilize HR software to assign the right amount of employees to shifts, depending on whether or not they’re needed.

5. Tabletop Devices

Pay at table restaurants revolve around the idea of doing more with less. With a tabletop device, customers can handle standard tasks while the staff tends to more important duties. 

6. Kitchen Display System (KDS)

A KDS can lessen the time it takes to relay messages amongst the guests, hosts, servers, and chefs. By using digital tech solutions, each platform will show changes instantaneously. Plus, these kinds of tools reduce risks, like errors and wrong orders.

7. High-Tech Kitchen Equipment 

Restaurant equipment can allow your team to multitask, lessening the amount of staff members you need to employ. From kitchen gadgets to multi-functional appliances, consult with your team to see where improvements can be made.

Doing More With Less

If you can tackle the feat of doing more with less, go for it. Doing so will steer you toward a successful restaurant business. And over time, you’ll be able to keep various restaurant expenses at a minimum. 

Staff Optimization Tips to Reduce Labor Dependency 

Staff optimization is a vital component of operating a lucrative brand. To dodge the risk of work overload or low employee engagement, optimizing your staff can be a game-changer. If you don’t realize this just yet, you will if you ever encounter a labor shortage. 

There are so many workforce management tips available to help staff optimization efforts. Read on to learn about seven of them. 

7 Ways to Reduce Labor Dependency 

Are you ready to reduce labor dependency at your restaurant Start using the following strategies right now:

  1. Cross-train all your employees so that they can cover for one another. 
  2. Invest in tech solutions that strive to reduce manual labor
  3. Automate frequent processes, like using a reservation system to assign tables.
  4. Digitize the menus with electronic boards or a custom QR code
  5. Use scheduling tools so that you’re never understaffed
  6. Outsource talent as needed, especially for restaurant marketing strategies.
  7. Prepare dishes and restaurant seating as early as possible.

Optimize the Staff for Optimal Success 

So how will you optimize your staff? With these tips, you should be able to reduce labor dependency at your restaurant in no time. And with the right restaurant tech solutions, you’ll be able to leverage your resources to accomplish goals and maximize profits

Restaurant Labor eBook

Labor Force Automation for Employing a Smaller Team

Every business owner requires a labor force to run the show. But how can they avoid labor expenses piling up? Well, that’s why you invest in labor force automation. 

Restaurant automation systems let eateries accomplish more with less people. In doing so, you’ll experience improved operational efficiency. Plus, you might even see higher profits.

5 Tips for Employing a Smaller Restaurant Staff

Once you determine how you’ll reduce labor work, you’ll never turn back. Keep reading to learn about five tips for staying successful with a niche team:

1. Believe In Quality Over Quantity

Conduct labor forecasting to find out how large of a staff you need. Then, hire a team according to your budget. Just always bear in mind that when employing a small team, quality is vital. After all, it’s better to have a handful of experts than dozens of people who don’t meet the credentials. 

2. Integrate Innovative Tech Solutions 

One of the best parts of technology is that it can put mundane and time-consuming processes on autopilot. Since roles throughout the whole hospitality industry have their hands in so many different lines of work, these tools are essential. Plus, they boost accuracy and efficiency.

3. Digitize Staff Development for Simplicity 

In order to accomplish more with less, you need to make the most of the resources you have. In the restaurant space, this definitely includes the staff. Ensure that everyone is equipped with training materials and the knowledge to successfully perform their job. Take this one step further with digital resources, like training and employee surveys. 

4. Maintain Simple Communication

Open lines of communication are absolutely essential when keeping automations in motion. When you employ fewer people, less people will have more conversations. To keep everyone on the same page, use project management software or a cloud based POS system. This way, everyone can have access to the same information at all times. 

5. Outsource Marketing Automation Tools and Workers 

Restaurant marketing can be a time-consuming endeavor. Opt for third-party agencies and contractors to tackle such projects. Not only will it keep your team minimal, but you won’t have as many labor expenses associated with it. 

Automate Processes to Achieve More With Less 

Working amongst a smaller team doesn’t always lead to a hectic workplace. Once you find systems that lessen work and boost efficiency, you’ll be on your way to success.

Labor Forecasting Metrics Every Restaurant Should Monitor

Does lessening the cost of labor in your business ever cross your mind? If so, labor forecasting should be high up on your list of priorities. Each restaurant owner is aware of who they assign to each shift. However, there are ways of planning such activities based on historical data. In turn, you can reduce the overall labor cost.

How Restaurants Can Collect Data 

Before labor forecasting can take place, you must get a hold of the right data. Utilize a restaurant POS platform to collect consumer data from orders and reservations. You’ll be able to access valuable restaurant data while streamlining operations. It’s truly a win-win across the board. 

As people place orders and they roll into the system, you’ll quickly be able to view customer data in live dashboards. The best part? Restaurant data analytics will guide decisions regarding your labor force. 

For example, if you find that more restaurant reservations are booked during a certain season, then hire seasonal staff. Or, if there are an increased number of orders for deliveries during the week, then may assign more shifts to the chefs instead of servers. 

So, we covered that data collections can be beneficial for labor forecasting–but which metrics are most important? Read on to find out:

9 Important Labor Forecasting Metrics 

Labor forecasting has the potential to completely transform your restaurant. From a more engaged team to better customer service, we encourage you to keep an eye on the following metrics:

  1. The labor budget and how much of it you’re spending each month. 
  2. Restaurant inventory levels and if you ever run out of ingredients. 
  3. The busiest seasons, as well as days and times during the week. 
  4. The average employee turnover rate, and any relevant trends. 
  5. The frequency in which your employees are absent. 
  6. How often your employees are able to work a full shift. 
  7. Projections for growth opportunities, for the business and staff. 
  8. Restaurant industry trends as well as popular food trends
  9. Responses from employee feedback surveys.

Effective Strategies Begin With Labor Forecasting

As a business owner, your team is your most valuable resource. Make sure that you’re making smart decisions when delegating shifts. When you do so, you’ll be able to manage a more productive team. And over time, you’ll constantly see them produce results.

Solutions to Combat a Restaurant Industry Labor Shortage

Many factors can affect the restaurant space. However, one of the most difficult ones to manage is a labor shortage. With this in mind, let’s discuss other industry sectors that suffer from inadequate labor forces and how they can all combat it. 

Industries That Feel the Heat of a Labor Shortage

Any business model that relies on customer service to survive will feel the effects of a labor shortage.without enough people, they’re not able to function to their full potential. As a brief overview, these business styles suffer the most during a labor shortage:

10 Solutions to Ease the Stress of a Restaurant Labor Shortage

Innovative restaurant technology can reduce the stressors associated with a labor shortage. Here are ten options that are certainly worth looking into:

  1. Self-service kiosks to speed up customer and table turnover rates. 
  2. Pre-order functions so that the staff can make the most of their time. 
  3. Tabletop devices, which let employees reduce the staff’s number of responsibilities. 
  4. Online ordering apps, which let eateries expand their reach without needing more servers.
  5. Implement the ghost kitchen model so that you don’t need bussers and servers. 
  6. The use of a restaurant inventory management system to better manage inventory levels.
  7. Marketing automation software to put such processes on autopilot. 
  8. Detailed analytics dashboard provides you with a frequent point of sale report
  9. QR codes so that customers can view the menus before the server even arrives. 
  10. Thorough staff development resources to ensure that the team is as efficient as possible.

So How Will You Work Against a Labor Shortage?

Despite what you might read online or hear on the news, a labor shortage doesn't have to be detrimental to your business. With the right solutions in place, you can fight against related issues and maximize revenue as usual.

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