How to Reign in Rising Restaurant Labor Costs as Operators See Increased Revenue

Restaurant labor costs are generally the highest expenses for restaurants. As explained by Upserve, “Restaurateurs commonly aim to keep labor costs between 20% and 30% of gross revenue. However, a full-service, white-tablecloth restaurant will likely have a higher labor cost percentage than a casual dining restaurant, since they employ more staff to provide a higher level of service.” However, labor costs are changing as revenue expands in the direction of third-party delivery, off-premise, and more convenience for customers. Restaurateurs need to know how to keep rising labor costs under control.

Driving Forces of Higher Labor Costs

As already noted, labor costs are the sum of all costs of people within a restaurant and include delivery service costs. Even those delivery people resources are not necessarily the responsibility of the restaurateur, commissions on third-party delivery can easily be 30% or more. That effectively means labor costs for delivery orders are your restaurant’s total labor cost percentage plus the cost of delivery. The result is poor profitability and effective loss of increased revenue. Unfortunately, that trend is not likely to change, especially as third-party delivery services expand. 

Labor costs are also changing as a result of social unrest. Wide movements across all industries have catalyzed the need to offer fair, equal pay and higher wages. Society is the ultimate judge, and restaurateurs that do not offer more than minimum wage will see customers turn to competitors for food and service, even at a higher cost of ordering food. 

Rising Restaurant Labor Costs Demand Efficiency and More From the POS

The point-of-sale system is the recordkeeper for your day-to-day activities, and in the world of e-commerce food ordering, the POS must reduce the labor needed to enter order details and send the order to the kitchen. As another Tacit client reiterated:

“So not only just the process and ordering, but we also had to add staff too. Order entry time is about a minute and 45 seconds. We did some time studies per order. Just to take it and put it in from the tablet into our POS. So, you know, I would say it has increased not only the [royalty] fees that we pay but also we’ve had some increase in our labor time.”

How to Regain Control Over Labor Costs Through Technology

Technology promotes efficiency in the modern restaurant. Integration between the POS and third-party platforms effectively eliminates the costs of rekeying orders. It reduces costs associated with lost orders due to human errors during rekeying. It improves reporting. Meanwhile, technology within the POS that collects and analyzes data can better plan the staff schedule, avoiding overtime and keeping employees accountable. Another opportunity for lowering labor costs exists by eliminating the server from the ordering process. Give customers the option to order by tableside or counter kiosks, and they will become an extension of your employees without adding to labor costs. The steps might not seem like much, but using more technology to put customers in control and letting systems do the calculating do lower labor costs

Grow Profitability by Keeping Restaurant Labor Costs Under Control Through Better Management

Profitability in the restaurant hinges on keeping labor costs under control and improving time management. Instead of risking it all, ensure your organization is ready for success by choosing the right technology partner. Request a consultation with Tacit online now to get started. 

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[…] of restaurant delivery models in both the quick-serve and full-serve restaurant market is changing. Labor costs are growing, and customers expect more from traditional restaurants than ever. They expect delivery […]

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