How to Manage Labor Costs for Your New Restaurant

How to Manage Labor Costs for Your New Restaurant

This article is part of our Restaurant Business Startup Guide—a curated list of articles to help you plan, start, and grow your restaurant business!

Whether you’re about to open a restaurant or have been running your place for a few months already, there’s no doubt that the process will be expensive.

Alongside food and beverages, labor is one of the most costly factors in the equation, but cutting wages isn’t the answer.

While you have a limited budget, you also need a fully staffed restaurant. Finding qualified, competent employees is not an easy task, and it won’t be made easier by trying to find great people who will work for less. While you may be trying to cut costs, you still need to wow new customers with personalized attention in order to keep them coming back.

So what can you do? How can you manage your new restaurant’s costs while also getting what you need?

Here are some tips for managing staffing costs in a way that both satisfies your employees and keeps your new restaurant running smoothly.

Know what you control—and what you don’t

In terms of labor costs, there is a lot you can’t change. Taxes, insurance costs, and other factors will likely be dictated to you instead of by you, but there are areas where you have more control, such as pay rates, employee schedules, and work attire. So managing labor costs starts with knowing not to waste time spinning your wheels where you can’t make changes. Invest your energy instead on the areas where you legitimately can cut costs.

Evaluate schedules regularly

One of the key places where restaurants waste money is in overbooking employees. So take a look at your shifts: Does the number of staff members suit the amount of business? Do you really need five servers during the slow mid-afternoon hours, or can you cut a few or move them to a busier time period? Finding places where you can reduce employee hours will be a huge money saver.

Likewise, think about the financial differences between full-time and part-time employees. Full-time employees will require costly benefits, but they may be more committed to your restaurant, saving you the cost of replacement. Part-time employees won’t need benefits, but they’ll be more likely to move on and need to be replaced. Most restaurants need a blend of both types of staffers. Weigh the cost differences for your restaurant and its needs, looking for the most economical solution.

Boost employee productivity

Productive employees are crucial in terms of lowering labor costs because they make the most of the dollars you’re putting into staff. To boost employee productivity, consider the following:

• • Training: Empowering your cooks, hosts, cleaners, and servers to be efficient starts with proper training. When each staff member understands how to do his or her job well, your restaurant becomes a well-oiled machine, churning out orders and satisfying customers easily. That’s why you must train every new employee thoroughly and why regular staff meetings—to brief everyone on new menu items, restaurant policy changes, and so on—are important.
  • Smart restaurant design: There’s more to kitchen and dining room design than aesthetics. In fact, a good restaurant design will go a long way toward boosting your staff’s productivity, because it saves them time, adds convenience, and prevents unnecessary bottlenecks in the workflow. Cooks can move around without bumping into each other, meals can be prepared efficiently, and servers can access plated food without complications.
  • Efficient equipment: The right restaurant equipment will empower your staff, speed cooking times, lower your energy bills, and boost restaurant productivity. From a commercial range to a deep fryer, the equipment you pick should match the needs of your cuisine and menu, while also adhering to all food safety codes. Try to think through your needs and goals and choose equipment to suit them; if your restaurant is already in operation, consider if the current equipment could be improved to enhance the way your team works. Ask the chef what equipment would make a difference.

When you’re running a new restaurant, it can be hard to find a balance between low labor costs and full service—but taking the steps outlined in this article is a great way to manage those labor expenses. By sticking to what you can tackle, namely employee schedules and productivity, you set yourself up to be ahead of the game and ready for success.

Do you have any tips for managing labor costs? What worked for you, and what didn’t? Tell us in the comments.