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Shrink Restaurant Labor Costs: Four Fundamental Best Practices

In the restaurant business, you're only as good as your last meal. With the challenges that many restaurant operators are facing economically, it is not only crucial to ensure that customers leave satisfied, but also that operators are doing everything that they can to evaluate and manage business costs. Many operators manage dozens of restaurants across multiple national concepts, so standardization and cost savings in this one area are substantial across whole businesses.

Determining "what's right" for labor is an eternal pursuit that involves chasing the labor percentage and budget, creating the right chemistry between staff and management teams, and combining the expertise of managers with the science of money and labor forecasting. There are fundamental best practices that, if followed, can make your life easier - and make your business more successful with smarter labor management.

1. How well do you know your business?
This may seem to be an obvious question, but it involves a lot more than knowing the numbers and the recipes. Do you know your community? What about the events happening year round? Without being prepared with this information, restaurant operators can't accurately schedule staff and forecast labor hours. At the end of the day, significant labor savings means being completely aware of the number of hours you use.

2. Create a labor plan, and stay accountable to it.
A restaurant manager leads not from a computer in a cubicle, but from the floor and the kitchen. Managers do not have the time to plan a business strategy as soon as they walk in the door, so expectations need to be set so the entire management staff can be held accountable to the plan for that day's shifts. Creating this plan must involve collaboration and communication, and with the right labor management tools integrated with the POS, forecasting hours based on sales and guest counts is a great base to formulate that ongoing plan.

For forecasting, manager communications, and easy employee scheduling, operators can use tools such as HotSchedules web-based labor management solution. It enables managers at Concord Hospitality to plan their business from anywhere online, and allows employees to have more control and flexibility in their scheduling. Because it's easily interfaced with the POS at all locations, it helps managers forecast more accurate labor plans and ultimately reduce overtime and control labor costs.

Concord Hospitality tells its managers, "The computer doesn't run the business, you run the business." Still, having this level of analysis and forecasting power has enabled Concord Hospitality to schedule more accurately and has resulted in a labor cost reduction or .5-.6%, which adds up quickly for a company that size.

3. Hire the right people, and keep them happy.
The restaurant industry is notorious for its turnaround rate. Less than 100 percent is considered "good," while the reality remains that this kind of turnover is very costly for businesses. During the hiring process, restaurants should routinely use employee screening tests to find the best match for their needs. When you hire the right people, you are rewarded for it, and you reward them in return. It is crucial to have the right management chemistry in a restaurant, so that must be taken into consideration when hiring. This chemistry encourages productivity and motivation.

For both managers and employees, the ability to access employee scheduling tools available online anytime, anywhere is another way to keep employees happy.

4. Keep an eagle eye on your budget, and be prepared for changes.
The Federal Minimum Wage is increasing again this summer and for companies that train new employees on a regular basis, this could impact the bottom line unexpectedly if they don't prepare for it. Whenever operators hear of an increase coming, they should work it into the budget by evaluating all the other costs for the restaurant such as cleaning vendors, energy use and more.

Richard Zierke, Project Manager with Concord Hospitality Inc., has worked in foodservice for 30 years, 20 of which he has spent in management.

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