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3 Ways Labor Costs Can Really Affect Your Restaurant’s Margins & Bottom Line

3 Ways Labor Costs Can Really Affect Your Restaurant’s Margins & Bottom Line

As an owner or manager of a foodservice establishment, it can often feel like controlling costs is a gargantuan beast that is impossible to fully tame. Juxtapose that with the fact that patrons are doing their best to save money as much as possible when going out, and the ledger can start to look like it’ll never balance. But just because you’re looking to keep expenses in line at the same time your customers are, doesn’t put you at odds against them.

In part one of this three part series, we addressed the ways in which service delivery—possibly the most important aspect in your customers’ minds—can affect your bottom line. For the second part of the series, we’ll dive deeper into the business, where costs might appear to be well-managed or even well-intentioned, but left unchecked can start to really work against you: labor.

Losses from Labor Costs

1. Time Theft

Employee time theft is a major problem for small businesses with hourly workforces, including restaurants. Time theft takes different forms: clocking in before or after the start and end times of scheduled shifts, taking longer breaks than permitted, intentionally inflating hours to qualify for overtime, and asking a coworker to punch in on one’s behalf. This dishonest behavior always has the same end results: higher labor costs and lower productivity.

In a 2015 survey by Software Advice, 43% of workers admitted to stealing time at least once. When exaggerating hours, 41% added 11 to 20 minutes to their shifts, which ends up being a significant amount of padding, especially when done routinely. Most disturbingly, 25% admitted to inflating hours 75% or more of the time. For some employees, wage theft is quite literally part of the job.

Revel’s intuitive, automated employee management system in their restaurant POS makes it easy to track clock-in and clock-out times, along with hours worked, to determine whether employees are habitually (or even incidentally) committing wage theft. Nothing can prevent wage theft from occurring in the first place, but Revel makes it much easier to detect and act on before it affects the bottom line.

2. Overstaffing for Volume

“Staffing for volume” is one of the many mantras restaurant operators live by. You can’t deliver the service your customers expect if you’re not staffed to handle demand. If your shop is consistently understaffed, you eventually won’t have any volume to serve.

Of course, “staffing for volume” often turns into plain old “overstaffing,” especially at newer locations still running off pre-opening projections. Even at long-established locations, operators overstaff to compensate for expected inefficiencies – in other words, they proactively throw bodies at the problem.

Since overstaffing doesn’t necessarily impact the customer experience adversely, it’s probably better than understaffing. However, that doesn’t mean it’s ideal for operators facing paper-thin margins.

Restaurateurs serious about actually staffing for volume need to invest in more efficient, predictable, productive operations – operations that need fewer employees to achieve the same results. That starts with a next-generation of Restaurant POS Systems that doubles as an effective house management system.

3. Human-Driven Ordering Process

In the not too distant past, human employees simply had to touch every incoming order, whether it came by phone or in person. The good news for operators concerned about creeping labor costs is that human order processing is no longer a requirement for effective service. The bad news? Far too few operators have embraced this new reality.

That’s a shame, because it’s pretty easy to see how restaurants that embrace ordering automation can cut down on operating costs and improve their margins. When employees aren’t required to take every order by phone or in person, and instead can simply pull incoming online tickets or glance at newly sent orders on a screen, operators need fewer bodies to handle the same amount of work. The employees that remain can then focus on higher-value tasks, such as checking every order for quality, cleaning tables, or managing customer flow.

 

Employees are, and will continue to be, a vital part of your business. While some processes may become automated over time, many customers will still want that personal touch. So as you navigate the waters of properly controlling your labor costs, keep in mind that the key to success is where meeting customer expectations reasonably and actual business need merge.

Service delivery is as important to your patrons as good labor practices are to your operations, but surely there is plenty more that impacts your bottom line. Check back for the final set of variables we’ll cover in this series when we address the reality of preparing for the unexpected.

Rob Williamson is a business owner and tech enthusiast who writes about strategies for utilizing tools to improve sales & productivity.