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How to Manage Labor Costs for Your New Restaurant: 10 Tips to Balance Expenses & Productivity

Posted on July 01 2019






Minimum wages are rising, and as the economy adds jobs good help is getting harder to find. With starting wages rising to between $9 and $12 per hour in many states, the cost to produce your menu keeps getting more expensive. Meanwhile, as the economy continues to improve, other industries are hiring potential candidates out from under you, making it increasingly difficult to staff your kitchens with qualified employees.

Some of those unskilled workers may become valuable—and skilled—employees with enough training and experience. But you have to spot the innate talent and convince them to stick around long enough. In the meantime, you still have a restaurant to run, and need to get more meals out with the same or less labor.

There are strategies that can help, experts say. While not all will deliver the results, you may be looking for, with some trial and error you’re bound to find some that work well in your operation. The goal is to use as little labor as you need, then try to make those employees as efficient as possible.

10 Tips to Improve Labor Productivity

Simplify to succeed. By closely examining two areas—process and product—you’ll likely find areas for labor efficiency.

Constantly evaluate each job in house: Old-fashioned time-and-motion studies break down jobs into small tasks and evaluate how each might be improved. General managers, chefs, shift managers have to do it on a local basis, they need to constantly evaluate the jobs in house and how they can be improved, which can make the work easier, ease bottlenecks and increase kitchen productivity.

Training on-site managers or supervisors to conduct these ongoing time-and-motion studies is more effective and ultimately less costly than bringing in experts every two years to evaluate your operations.

Identify bottlenecks: Figure out where and when slowdowns occur. Is the problem related to equipment or people? If it’s caused by equipment, evaluate whether a new/better piece of equipment is worth the cost or if there’s a process solution that will alleviate the problem. If people cause the bottleneck, determine the best way to resolve the problem. Is more training required? Can another employee with a different skill set fill the position better?

Streamline ingredient flow: Ingredients that flow through the operation with greater velocity save labor. The industry believes that fewer, larger deliveries mean less cost, but what we’re learning is that there are savings in inventory, energy, real estate and labor by getting more or more frequent deliveries, as well as greater value in a fresher, higher quality product delivered to the customer. It’s easier to retrieve ingredients from a small storage room with fewer things than finding products in a large, messy storage room.

Move ingredient storage closer to the point of use or service. Refrigerated drawers on the cook line, for example, can hold fresh meats, seafood and poultry as well as produce delivered that day for use that day.

Automate “skilled” tasks: We’re seeing a significant move to automation in equipment. One chain our firm worked with recently switched from open charbroilers to conveyor charbroilers in its new units, they lowered cook time, and the equipment delivers cooked-to-order product with incredible consistency and high quality because they took out the labor and guesswork out of it. It makes cooking less an art and more scientific and precise.

More operations are using equipment such as combi ovens, speed ovens, clamshell griddles and auto-fryers because they can be pre-programmed for specific menu items and are easy for non-skilled labor to operate. Combis and speed ovens in particular also offer tremendous menu flexibility, combining the functions of three or more pieces of equipment into one, and fast cook times.

Investing in new equipment, especially an entirely new cooking platform, is expensive and requires a relatively fast payback in reduced labor, energy costs, increased productivity, or all three. The key is squeezing as much productivity from the new equipment as possible.

Selectively invest in Technology: Technology is adding immeasurable value (in most cases) to our jobs and our lives. As noted above, when technology is applied to kitchen equipment, the result is often simpler for employees to use and delivers more consistent results. But that doesn’t mean you should get the latest, greatest version of all the equipment in your kitchen to save labor. If you’ve already invested in a clamshell griddle, for example, maybe you can save money by using the griddle to toast buns as well. Centerpiece stone-hearth pizza ovens do a great job on much more than pizza, including sandwiches, proteins and vegetables, and even individual portion casseroles.

Technology also is changing the way customers communicate and interact with your brand. Mobile apps, online ordering, self-ordering kiosks, social media pre-ordering networks and more are among the multiple ways in which customers are choosing restaurants and what to eat, ordering and paying for their food, and deciding where to consume it.

Things like kiosks may help save labor, but be prepared to handle increased sales. When tied into POS systems, all this technology helps capture more customer data, eliminate mistakes, and speeds service and payment. In many cases, instead of reducing labor, operators are using existing staff or adding more to handle the increased volume that’s resulted from faster service and greater productivity.

Marshal your resources: Match skills to jobs. That sandwich maker who’s slowing down the drive-thru at lunch? Move that maker to the cash register for a couple of hours and let Speedy Gonzalez take over sandwich assembly.

Schedule accordingly: Yes, you want to be fair to all employees and give preference to more senior and more skilled workers. But if you need certain skills on Friday and Saturday nights that weekday workers have, adjust their schedules accordingly, and compromise if the change might mean losing a solid performer.

Also, find ways to make the staff you have more efficient. Prep food that will keep, for example, in larger batches. Instead of having an employee slice only enough cheese for a shift, say 20 lb., have them slice 40 lb. before having to clean the slicer for the next use.

Make a menu assessment: Diametrically opposed to automation, the other concept we’re seeing is more food theater on core or specialty menu items, such as using a wood-fired oven in a pizza restaurant because your crust is what you’re known for.

Find your food focus: Whether you focus on your core items through automation (combining consistency with ease of operation) or theater (attracting customer attention away from other processes), that focus enables you to operate each shift with fewer skilled employees and more unskilled workers. Instead of four-line cooks who really need to know what’s going on to pull it all together, for example, you may need only one skilled cook and a few unskilled employees behind the scenes.

The singular focus also may help you: Simplify your menu. While some chains, like Cheesecake Factory and Red Lobster, have figured out how to manage huge menus through years of operations experience, it’s hard to train people adequately to handle a large menu, focus the menu on items that your customers really want and prepare them very well. Get rid of menu dogs.

Outsource some tasks. If you’re known for biscuits, or pizza crust, make it on site. But outsource prep of other items, like pizza sauce, or honey-butter to save on labor in house. Purchase more pre-prepared vegetables or salad ingredients, for example, instead of prepping them in your kitchens. Centralize production of soups, sauces, dressings and the like. Make them in volume and invest in a small blast chiller to extend shelf life.

Keep your eyes open for talent. I learned as a small business owner to keep a list of potential candidates on a constant basis, and if you find a really good candidate hire them, fit them in somewhere, and move them to a better or more appropriate position later.

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