Ways to Cut Labor Costs in the Food Service Industry Part 2: Managerial Techniques

Labor costs are often the highest cost for a restaurant or other food service operation. Industry standards generally place restaurant labor costs between 30 and 35 percent of total sales. With nationwide rises in minimum wage, keeping labor costs low is becoming increasingly difficult. Luckily, there are a variety of ways to lower these costs through certain methods both in and out of the kitchen.

In this two-part series, I will share some effective methods for cutting labor costs through both equipment and managerial techniques. Here are a handful of ways to save labor and keep profits high using using managerial techniques recommended by experienced chefs and former restaurant managers that I’ve spoken to for this post.

Unlike labor-saving equipment, these methods have the advantage of being completely free, and are generally pretty easy to adopt.

For ways to save labor through management, check out the previous entry in this two-part series: “Ways to Cut Labor Costs in the Food Service Industry Part 1: Labor Saving Equipment”.

Labor Monitoring Devices

The first step any manager should take when attempting to cut labor costs is to closely monitor labor in a systematic and organized fashion, adjusting it accordingly. This can be done by referring to previous experiences in order to project sales and labor needs during specific days of the week, seasons, or other time periods. There should never be any more employees than the minimum amount needed, and it’s important that they stick to their exact schedules (if 6 people stay 15 minutes late, that’s an extra hour and a half of labor costs). Using an excel spreadsheet or another organizational method, labor usage should be continuously tracked and recorded every month or so relative to changing sales and budget. Number of employees and scheduling can then be easily adjusted based on the recorded data.

Quantity and Frequency of Production

An important labor-saving method in the kitchen is to pay more attention to the quantity and production frequency of certain food items you are producing, thinking specifically about their shelf life and sales rate. Ideally, you want to produce enough product to where it will all sell by the exact time its shelf life ends. In many cases, this doesn’t happen. For example, cooks will often produce one-time batches of marinara sauce that will last for two days, even though marinara sauce has a 5–7 day shelf life. What this often results in is the need to unnecessarily produce something more often, thus requiring more labor.

The key is to find that sweet spot between the amount sold and shelf life, so that you’re producing the maximum amount of product at once without having leftover food waste costs exceed what is being saved in labor. After each batch has either sold or gone bad, evaluate whether you need to make more or less of the product next time, considering how it sold, labor costs, and food waste costs. If all of the product was sold before the end of its shelf life, a larger quantity of product should be made at once. The perfect sweet spot lies where a product is being made as infrequently as possible while there is as little food waste as possible.

Keep a Healthy Roster of Part-Time Employees

Restaurant sales volume can vary drastically throughout a week, day, or even a night. In order to spend as little as possible on labor, it’s important to make sure no one is working when they don’t need to. Rather than hiring several full-time employees, keep a roster of part time employees who are readily available. When your employees aren’t committed to working 40 hours a week, you can easily add and drop workers on the fly depending on their current and projected sales volumes.