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DIVING INTO LABOR COSTS…. THEY ARE NOT STEALING, YOU ARE SIMPLY NOT MANAGING

With labor and related costs generally being the highest or second highest of your prime costs, are you spending as much time and effort managing it as your food cost?

The reality of the situation is that using labor cost as a percentage of your sales is not the optimum indicator of how you are managing your labor resources. If your target as a percent of sales for labor costs is 25% and the numbers come in at 27%, what do you do?

Most store operators might say one of the following:

• We had significant turnover this month, that’s likely the reason.

• Sales in dollars overall are down, so of course the percentage would be up.

• Let’s see if the trend continues next month (by now, it is next month and you won’t know for four more weeks).

That will get you no control, or change over your labor cost quickly… which can create a negative downward spiral.  Here are some of the comments/questions you should be considering:

Did we run a promotion for a menu item that took significantly more prep time?

Did we have too many employees working for the sales demand that was incurred (not just by volume, but by items sold)?

What was the ratio of sales dollars to labor hours throughout the day? (week/ month)

Did we have to pay overtime because of ineffective scheduling? Or employees not showing up for a shift?

If you are not asking those types of questions, why not?

Are you aware of the multitude of issues that impact your labor cost?

Do you believe that there is no additional way to “control or manage” your labor cost?

Are you still scheduling manually and don’t have access to the correct data to compile?

You need to review the necessary data that is available and start analyzing the data to make the proper decisions that will have a positive impact on your bottom line.

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