How to Measure Labor Cost

 In 1. David Scott Peters, Labor, Video Blog

Have you heard you need to use an industry average to measure labor cost in the restaurant business? Or, do you use the same labor cost target every day or every single month? What if I told you those are myths that are killing your profitability and leading to your scheduling problems? What if I told you that if you measure labor cost against your own numbers, you can change your bottom line and control your second biggest expense? Watch this video to learn how to properly measure labor cost, calculate your labor target and control it.

When it comes to how to measure labor cost, there are a lot of sources out there giving you average targets for labor hours and labor cost. But your restaurant is not average. You have to pay attention to the needs of your restaurant, from hours for prep and having enough staff for the busiest days.

Do you have a budget? If not, stop and go back to my videos and watch all my videos about how to make a budget and how to use a budget. You can start with, “How to Start a Budget.” Your budget is where you’re going to find your total labor cost, which is just your hourly and salary numbers – no taxes, no benefits, no insurance.

Over the course of a year, you should see a varying labor cost. Your slow months will likely have a higher labor cost because you’re at your minimums but not bringing in extra sales. In your busy times, your customers maximize your staffing.

Once you get your total labor cost, you’ll move to your scheduling. In this video, David demonstrates how to schedule using his online restaurant management software, SMART Systems Pro. Using this restaurant software, David shows you to allot your labor before you’re over hours because you’re using your total labor cost from your budget.

This video is a great look at how software can make doing these activities faster and more efficient – plus more accurate. Don’t leave yourself scrambling at the end of the week, cutting hours on your busiest days because you over budgeted hours at the front half of the week, on the slowest days.

Restaurant scheduling software is a great way to establish your monthly target, your weekly targets and proper scheduling. If you want to change your bottom line and control your second biggest expense (besides no customers), you need to be budgeting your labor cost.

If you would like to learn more systems to help you figure and measure labor cost, read our free special report, Breaking Away from the Insanity: How to easily take control of your restaurant and make more money. Download it here. Be sure to visit our YouTube channel for more helpful restaurant management video tips. 

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