Tips for Managing Restaurant Labor

Editor’s Note: This post was originally published in February 2017 and has been revamped and updated for accuracy and comprehensiveness. 

As a restaurant owner, you know very well that managing your expenses can be a real headache. It doesn’t take long for high food or restaurant labor costs to start eating away at your bottom line. Fortunately, Xendoo is here to help. Aside from fixed expenses like rent and insurance, food cost and labor cost are the two most significant expense categories that an owner will wrestle with daily. We’ve already shown you how to manage your food costs, so let’s take a look at some tips for managing restaurant labor costs efficiently.

What Is Restaurant Labor Cost?

It’s a given that without your cooks, servers, bartenders, and hosts, your restaurant is nothing more than a grocery store with tables. Hiring the right team to give your restaurant legs and make it go is essential. But bringing on that team entails some restaurant labor costs because you have to pay them. Your restaurant labor costs are the ratio of what you spend on payroll during the month to your gross sales for the month. Restaurant labor cost is almost always expressed as a percentage.

If you have Xendoo’s bookkeeping for restaurants, all the figures you need should be at your fingertips. For example, if your gross sales for the month are $100,000 and you spend $25,000 on payroll, that means your restaurant labor cost for that month is 25%. Unlike food cost, there is no set labor percentage at which you should be running because labor varies widely in different segments and markets. But generally speaking, your restaurant labor cost should be between 25% and 35%.

a server stands by a booth full of customers

Break Down Your Payroll by Category

Servers are paid very differently than cooks or managers, so it’s often helpful to break payroll down into groups so you can see exactly which restaurant labor costs the most. Staff should be cross-trained to give you the flexibility to shift things around when you need to cut some costs. For example, front-of-house staff may offer some accessible opportunities to trim things down a little.

Depending on your current labor laws you can cross-train staff for certain roles. If your hostess is making $8 per hour and servers are making $2.13 per hour, maybe you could try staffing an extra server during slower times and make that person responsible for greeting guests who walk in. The same goes for bartenders, who are typically paid more than servers. If your servers are properly cross-trained, they should be able to fill in as a bartender during slow times. They don’t have to be experts in everything, just good enough to carry a little extra water when things are slow.

Calculate Restaurant Labor Cost Daily

Naturally, you will want to study your restaurant labor costs on your monthly P&L along with other expenses like filing taxes, but it’s also helpful to look at it daily. If something is amiss, you don’t want to let it go unchecked for a whole month, do you? It’s easier to manage it day-to-day when your memory is fresh about what happened that may have affected your labor. Run an end-of-day report and give it a quick once over to compare sales to payroll and adjust the next day’s schedule accordingly if you need to.

A restaurant owner looks at his POS system for scheduling.

Use Smart Forecasting

Many modern point of sale (POS) systems offer features to help you analyze your sales patterns by day and hour and create forecasts to help you schedule staff very accurately. If your system doesn’t offer these features, it might be worthwhile to consider upgrading. If you need to do forecasting by hand, sit down and compare the upcoming week to the same week last year and factor in any changes in the market. For instance, if you did $20,000 in sales the same week the previous year but you’ve been averaging 10% more year over year, then you would forecast sales of $22,000. Multiply that number by your target food cost, and then you know what your payroll budget is for the upcoming week.

Beware Turnover Cost

The restaurant industry is notorious for having a ridiculously high staff turnover rate. As an owner, you need to understand both obvious and hidden costs to employee turnover. The obvious restaurant labor cost is training time. You have to pay an employee to shadow another employee during training, essentially doubling the restaurant labor cost of that position for that period. That can spike your labor cost in a big way, but there are also more subtle restaurant labor costs associated with turnover.

A new, inexperienced employee will make mistakes that a more seasoned employee might not make, and those mistakes come with a price tag. Whether it’s unnecessary food waste, a customer refund, or a lost sale, it’s a cost that eats into your bottom line. So you should consider whether, in some cases, it might be advantageous to pay just a little bit more than the market average to keep those experienced employees and avoid turnover costs.

Xendoo is here to help you keep your restaurant’s bottom line as healthy as possible, and by using these strategies, you can keep those pesky restaurant labor costs in line. Be sure to check out Xendoo’s full suite of services for restaurants to find other ways Xendoo can help boost your profits.

This post is intended to be used for informational purposes only and does not constitute as legal, business, or tax advice. Please consult your attorney, business advisor, or tax advisor with respect to matters referenced in our content. Xendoo assumes no liability for any actions taken in reliance upon the information contained herein.


7 Time Savers for Service Retailers

If you’re a retailer with a service offering, there might be nothing more valuable than your time. So whether you run a salon, gym, or dry cleaning business – If you feel like there just aren’t enough hours in the day, read on.

Here are seven time-saving tips so you can spend more of your valuable time with customers and grow your business.

1. Track it

The best way to know where you need to save the most time is by taking a brutally honest look at how you spend it. A few minutes checking email here, a few more looking up at the ceiling there – before you know it, precious hours have gone by. A simple notebook or free time tracking app can help you get a real handle on your time management before the day gets away from you.

2. Let go

As a business owner or manager, there are areas of your work you’re very proud of and probably can’t imaging handing off to someone else. But one of the most important aspects of leadership is delegating tasks to others. Not only will it free up your time to focus on the bigger picture, but it will give team members you see potential in the chance to develop and grow.

3. Outsource the non-essentials

Look hard at the areas of your business you struggle with or that take up more time than they should. If there isn’t a dedicated person on staff to handle them, outsource it. With Xendoo’s bookkeeping services, you can spend less time crunching numbers and use that data to make decisions to help you grow.

4. Get your head in the clouds

Do you have business files and data spread across offices and computers? By consolidating everything into one place and using cloud storage like Google or Dropbox, you save time wasted searching for info and can access it from anywhere. You can even manage permissions so different team members have access to only what they need.

5. Join us in the 21st century

After you get all your data loaded in the cloud, look at updating your company’s software and technology. If you’re using outdated POS software or equipment that is slow or fails, you could be wasting valuable time. Fortunately, there are dozens of free and affordable options that make this easy to do.

6. Make your space work for you

Whether in your back office or at cash out, having everything needed to get a single job done in one place helps the task go smoother and faster. That might mean an initial investment in more equipment, but your newfound efficiency will pay off in the long run.

7. Don’t be afraid to automate

From communications to billing and invoicing, is there an aspect of your business you can automate to save time? We’re not talking robots to offer your services, but administrative tasks that can be automated without sacrificing any part of your customers’ experience. Xendoo’s…. (not sure what services Xendoo offers in this area?)

Don’t delay when it comes to making your business more efficient…the clock is ticking!


This post is intended to be used for informational purposes only and does not constitute as legal, business, or tax advice. Please consult your attorney, business advisor, or tax advisor with respect to matters referenced in our content. Xendoo assumes no liability for any actions taken in reliance upon the information contained herein.


Increase Efficiency to Reduce Retail Labor Costs

While retailers struggle to maintain their profit margins, labor costs continue to rise. Check out these smart ways to keep them under control.

Fine-tune schedules.

This can be tricky in retail; there may be too many employees on the job when customer traffic is low, or not enough when the store is jammed. Analyze your POS sales data to more accurately schedule the right number of employees for each shift. (Or obtain scheduling software that will do it for you.)

Avoid overtime.

Instead of having your full-time employee work extra shifts at the time and a half, pay a part-time or temporary worker the base rate to cover the same hours.

Eliminate time theft.

A time and attendance app will ensure that employees are not being paid for the time they didn’t actually work: coming in late, leaving early, long breaks, rounding up hours or buddy clocking in/out.

Cross-train employees.

Most people are happy to learn new skills and take on new roles. And you’ll be happy that fewer people are needed to get the work done. Plus, if one employee quits, you’ll have another ready to step in without the costs of a new hire.

Reduce employee turnover.

Recruiting and hiring new employees is expensive; it’s much more cost-effective to keep the ones you have. That doesn’t mean you have to give them raises; the number one reason people leave a job is happiness, not money. Provide opportunities for engagement and career advancement to keep them on board.

Increase employee productivity.

Another benefit of keeping employees happy is that it also keeps them more productive and efficient — up to 20% more, according to some studies. That means you could get the same work out of fewer people.

Re-evaluate wages and pay structures.

  • Check whether your pay rates are consistent with industry norms at PayScale or Glassdoor. If they’re too high, bring them in line for new hires.
  • Convert sales roles to a commission-only pay structure.
  • Give pay raises based on performance, rather than an automatic annual increase.

The best way to reduce labor costs isn’t to reduce staff. It’s to increase efficiency in managing the human resources you already have. That’s how you have your cake and eat it too: keep customer satisfaction while taking a giant step toward improving profit margins.


This post is intended to be used for informational purposes only and does not constitute as legal, business, or tax advice. Please consult your attorney, business advisor, or tax advisor with respect to matters referenced in our content. Xendoo assumes no liability for any actions taken in reliance upon the information contained herein.


The Happiness Factor in Reducing Employee Turnover

Surprise: the biggest reason people quit isn’t the money (it’s not even in the top 5). What sends them out the door is unhappiness with the working conditions. That’s good news for your payroll budget, but you may have other issues to address if you want to retain valuable personnel. So what do employees list high on their happiness scale?

Relationships with superiors and co-workers.

  • Promote a corporate culture of mutual respect and support.
  • Praise employees when they do well at least as often as you point out mistakes.
  • Create a comprehensive, clear employee manual so everyone knows what’s expected.
  • Take employees’ comments and needs seriously.
  • Treat everyone the same, even relatives.

Job activities and opportunities.

Employees are happiest when they are interested in what they are doing, feel that they are stakeholders in the company’s success, and are given new challenges from which they can grow professionally and personally.

  • Hold regular meetings in which everyone has a voice.
  • Set goals for career growth.
  • Offer cross-training.
  • Establish achievement reward programs, such as sales competitions.
  • Get involved as a group with the community or charitable events.

Work/life balance.

Putting in so much overtime that there’s nothing left for friends, family or fun causes stress and burnout, leading to mistakes and poor productivity. This factor is especially important for employees from the millennial generation.

Work environment.

The physical workspace can greatly help or hinder productivity. This includes:

  • Comfort, cleanliness, health, and safety
  • Efficient and effective tools and equipment
  • Clear paths, workflows, and processes

Employer’s image.

Being proud of where they work is a powerful motivator for employee happiness and loyalty. This means:

  • A good reputation within the industry.
  • Corporate values of quality, honesty and fairness towards the community, customers, and workers.
  • Financial stability.

All these happiness factors come before the compensation package when employees are deciding whether to stay or go. Some attention to interpersonal relationships, management style, and employee recognition may be all it takes to turn dissatisfied workers into enthusiastic, hard-working ones.


This post is intended to be used for informational purposes only and does not constitute as legal, business, or tax advice. Please consult your attorney, business advisor, or tax advisor with respect to matters referenced in our content. Xendoo assumes no liability for any actions taken in reliance upon the information contained herein.