Key Measurement in Restaurant Labor Cost Formula

 In 1. David Scott Peters, Labor

Creating the schedule in a restaurant is like fitting together the pieces of a puzzle. A proper functioning schedule is vital to your business. But putting all the right people in all the right places is just part of writing a schedule. The other part is knowing what your true needs really are and using an accurate restaurant labor cost formula.

Here at Restaurant Systems Pro, we teach several different kinds of systems that make your independent restaurant operate more efficiently, more profitably and without you.

For labor systems and calculating your restaurant labor cost formula, the key measurement is dollars per labor hour. This number will tell you with certainty when you don’t have enough labor and when you have too much labor scheduled for a certain shift.

But even quantitative measurements can lie. You have to be careful because you could be hitting your labor numbers and still be setting up your restaurant for disaster by having a combination of shifts that are either under staffed or over staffed. That’s when it’s important to combine your quantitative data (such as the numbers) with your qualitative data (the things you see in the restaurant along with your gut).

Ideally you want the right amount of people in place for the needs of the business and no more.

To get there, first focus on your quantitative measurement and begin tracking your dollars per labor hour. Dollars per labor hour is sales divided by hours. This tells you how many dollars are coming in the restaurant per hour worked. It’s a road map to scheduling your hours in the right places. You’ll see trends and be able to move hours from less-efficient shifts to over-efficient shifts.

Efficiencies are different for everyone’s restaurant, so track your dollars per labor hour and realize that three weeks is what makes a trend.

And if your gut is telling you something different, pay attention. But don’t forego the numbers just because it doesn’t feel right. Change is hard for everyone, and if your team is used to having a dishwasher on Thursday nights, they’re not going to like it if you tell them they’re not getting one anymore. Observe what Thursday nights are really like and what is really needed. Then compare that to your quantitative results of your dollars per labor hour and make an educated decision, not a guess.

The most important thing is to just get started, gather the information you need to combine your gut instincts with solid numbers, and you’ll be on your way to using an accurate restaurant labor cost formula and being on target for labor costs every time.

If you’d like to learn more about how to use these systems in your restaurant, request a free demo of our restaurant management software, Restaurant Systems Pro.

For more examples of systems you can use to lower labor cost in your restaurant, download our free report, How to Get a Handle on Restaurant Labor Cost. You can also view tips to lower labor cost in your restaurant on this YouTube channel playlist.


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