Q:With all the changes to minimum wage and the tightening labor market, what tactics can help us be more productive and remain profitable?


A: Maintaining the status quo or hoping higher wages are going to slow down contradicts the increasing momentum of the progressive political movement. With voters, labor unions and politicians taking an increasing role of driving wages up, the labor model of the past is fading. To stay relevant and protect profits, start planning and changing behavior today. Many businesses are using this time to “grow up” as a business by offering more predictable earnings and insurance for employees. The following tactics will assist in transition to a new era in labor management:

Employ fewer workers with more hours.
Busy people get more done. The old saying, “If you want something done quickly, ask the busiest person to do it,” holds true. Busy people have a certain number of hours they are willing or able to work; therefore, time is treated as a premium with emphasis on continued optimization of work habits and productivity. How many times have you witnessed an employee in high gear carrying more workload than you thought possible? Fewer productive people also cost less. There are employee based tax limits such as SUI and FUTA, per check charges for payroll, uniforms, employee meals and insurance all based around a single employee. Fewer employees also take less effort as there are fewer people to coach, develop, review and recruit.


Cross-train employees. Cross-training has been widely discussed for the last several years. With higher wages and fewer quality employees available, cross-training is wise. The most difficult positions to fill, currently, are in the kitchen. As a result, retaining kitchen personnel is a mission critical priority. Cross-train them in support positions such as expediting, bussing, running food, back bar support and front desk where appropriate to help them earn tips and drive up their earnings. Front-of-the-house personnel are typically generous in sharing with those providing the service and support they need to be successful with the guest. Additionally, this model provides protection to the kitchen during busier times. If more kitchen people are working in the front-of-the-house and the kitchen is having a difficult time keeping up, a cross-trained employee can jump behind the line and help smooth a rush.


Maximize hours of operation. Many restaurants open at certain times of the day, based on what is typical in an area or what time prep for the day begins. Look at sales in 30 minute increments throughout the day. Most restaurants experience a natural lull between 2 p.m. and 4 p.m. and often 5 p.m. Figure [1] displays business volume through the day for a typical restaurant. Analyze sales day by day and decide on the benefits of being open or closed during unprofitable days or hours. You may find closing for lunch or a day part advantageous especially as wages increase and menu prices high the limit for a day part.

Figure [1]

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Measure productivity with sales per labor hour. With the constant march north of wages and menu prices, managing by percentages is more difficult. Most increases in menu prices seem to disappear by the time they hit the bottom of the profits and losses, with everyone along the way taking a share. To measure real productivity track and use sales per labor hour (SPLH is calculated by dividing sales by labor hours used), the numbers increase naturally with higher check averages, higher sales and higher productivity. Set benchmarks by day and by front and back-of-the-house as the numbers change based on business levels and prep intensity. Start by calculating SPLH when forecasting sales and scheduling labor. Track the metric daily and study what worked to push the number higher. Keep detailed notes as time passes regarding what worked well, and as the metric is optimized, use it in reverse to forecast labor from the sales forecast.

These are unprecedented times in the restaurant industry. Many cities and states are responding to pressure applied by voters and labor unions by increasing minimum wage. As the minimum wage grows, the theory is that there will be more disposable income available and the economy will improve. Economic theory is difficult to prove one way or the other. By proactively managing employee development, training, and measurement, you’ll be successful in protecting and driving profitability.

For more information on improving profitability and driving performance, contact AMP Services at [email protected]. Rick Braa is the co-founder of AMP Services, an accounting and consulting firm specializing in helping companies grow profitability.