Rules to control your labour costs

In my last post I discussed good margins and how to manage your food costs to improve your bottom line. Another factor that’s crucial to your bottom line is your customer experience. When you set up a restaurant, café, or other food business you likely have a vision for what the experience will be like. However, no matter how clear your vision is or how good you are at your job, you will need a team - big or small - to accomplish this.

Controlling staff costs

Labour of course is expensive. You’re already spending 25 cent on every euro earned on food costs leaving you just 75c for rent & rates, light and heat, sundries and staff. Not to mention that you have to eventually pay yourself. Loving what you do doesn’t get you that far when paying the bills!

How much should you pay your staff? A good rule is around 35% or lower. This was always difficult with our business. We needed scale to achieve this and the loss of some venues due to Covid-19 hit us hard. Before reopening we set very ambitious targets to ensure we would not only survive but thrive. We now laser focus on this metric to ensure we only ever spend what we can afford on labour.

Of course, you need to maximize the value you get from your staff. You should start strong with a clear and open on-boarding process. Explain to your new hire what you want to achieve, your company’s culture and what success is on a daily basis for you. Be proactive if cracks show in the first few weeks. If you sweep them under the carpet now you’re just creating bigger problems later on.

Monitoring staff performance

You should pick some metrics to analyze on your staffs’ performance. We watch customer retention, average spend per head (shows how good our team is at upselling), and complaints on Tripadvisor / Google Reviews (the bain of your life but since your customers take them seriously you need to too).

Depending on your size you can employ a company to carry out mystery shopper audits. Smaller operations can easily get friends or family to do this, especially in the early days when they are not known to your team. Set clear requirements with your mystery shoppers on what to ‘review’ and ‘measure’ to ensure you get value. Discuss the results in detail with your team and check that they make any necessary improvements.

Hiring staff

Don’t hire in a panic. At the moment it’s near impossible to get staff and the reopening is rolling at you like a boulder down a mountain. You may be tempted to quickly hire the first applicant you get. However, the wrong hires cause endless sleepless nights not to mention cost a lot. Give the hiring process the time and commitment it deserves - it’s the biggest spend of your company.

Another underrated advice is giving each team member a job description with a training plan. Every time someone leaves, you should review the description to ensure your business still needs those skills. This is also an important part of HR compliance. We use HR Duo, an Irish software tool, to help us with this but it’s fairly simple to create an excel sheet for your employee data.

Be sure to recognize and reward your team for jobs well down. This is key to continued productivity. Sometimes just a public expression of ‘well done’, ‘good job’, is enough and other times giving a gift can really boost your team’s morale.

This is a tough time for our industry and if you relate to anything I have written in my posts so far, I am happy to have a virtual or socially distant coffee, as I say to my team - My door is always open so don’t be afraid to ask for help!