7 Lesser Known Ways to Reduce Labor Costs in the Restaurant Business

Human resource is at the core of the hospitality industry and also accounts for the majority of its expenses. The percentage of labor costs to sales averages at 22–40% and in some cases in can be almost as high as 75%! This coupled with capital intensive nature of this industry makes running a restaurant a very costly affair. This also makes it necessary for restaurants and cafes to control their labor costs to maintain profitable margins.

Reduced revenues and stiff margins may lead you to desperate measures such as slashing down monetary incentives and even getting rid of people. But that is not the way to go. Use the following tips to cut down the labor costs in your restaurant.

Also Read: 5 Mantras to Control Restaurant Costs

1. Control Attrition Rate

According to a study, Hospitality sector in India has the highest attrition within the country and globally too. Attrition related costs include recruitment and training of new workers, not to forget the lost man-hours and efficiency. Heavy competition, long working hours and foraying for growth opportunities elsewhere are the driving factors behind this phenomenon. High attrition rate is one of the major reasons behind th towering labor costs.

Providing better growth opportunities, introducing employee loyalty programmes and improving work culture can go a long way in controlling attrition rate. A well-defined employee welfare policy and team building exercises are also known to be very effective in employee retention.

Also Read: 7 Golden Tips to Keep Your Restaurant Staff Happy and Motivated

2. Work on an Appropriate Salary Structure

Commission based salary structure can work wonders on cost control angle and acts as a great motivator for the employees too. Therefore, it is advisable to have a composite compensatory package for the staff which includes fixed and commission/performance based incentive structure. If you have any pension or retirement plans, then convert them into profit-sharing programmes. The temporary or part-time workforce can be appointed on a complete commission- based compensatory structure.

You can review the perquisites and salary levels regularly and eliminate the costs that put you above the industry average. This step should be taken only after an open discussion with employees who would be affected by this step otherwise it might lead to a high employee turnover.

3. Cross Train the Team

Cross training ensures that one employee is trained to handle multiple tasks and roles. This not only ensures that you have a workforce who can multi-task but also lead to a growth of professional capabilities of the staff. The latter is usually welcomed warmly by employees. It can also take care of unforeseen and sudden vacancies in the restaurant. Cross training increase efficiency, develops empathy and lends team building opportunities at the organisational level.

4. Employ Part-Time Help

Part time hires usually charge an hourly rate which is lower than permanent employees. Also entitlement of permanent staff in terms of statutory benefits is a much bigger financial commitment. This is why engaging part-time employees makes a lot of sense. A restaurant can offload unskilled and general chores to such temporary labour force thus reducing the burden on professional and permanent staff.

5. Invest in Hiring

Investment in recruitment goes far beyond money and funds. The process needs an investment of time and effort. Focus on your requirements, and review job profiles accordingly. Look for the best fit instead of hastily filling up the vacancy.

Remember a wrong person for the wrong job would only add to attrition and additional cost on recruitment and training. According to conservative estimates by the experts of the industry,the cost of recruitment is about 25% of the average employee salary! Misfits can be bad for the reputation of the restaurant and affect the business in long run.

Learn how to create a proper hiring structure for your restaurant here.

6. Review and Schedule

The restaurant business is very dynamic and is affected largely by seasonality and occasions. Review your customer footfalls on the weekends, holidays and festive seasons, and accordingly schedule your full-time employees, hire part time help and plan your food budget. This will help you control your payroll cost, minimize wastage in the kitchen and run your restaurant at its best capacity during the peak season.

7. Invest in Equipment, Kitchen and Restaurant Resign

A good restaurant design is not only about attractive facade, but also about the facilitation of workflow within its four walls. A well-designed kitchen and restaurant can provide restaurant staff with ample arm and leg room without creating bottlenecks in the workflow from orders to delivery. Familiarize the staff with their work floor and train them well in using the equipment. Such simple training sessions boost productivity and lead to efficient use of equipment as well.

You can also use technology to significantly lower your restaurant costs. Table billing allows your customers to order and pay at the table, thus eliminating the need for a waiter to take orders and communicate them to the kitchen.

Also Read: 7 Pro Tips to Manage Restaurant Food Costs


Originally published at blog.posist.com on October 10, 2016.