Restaurants have been known as the ultimate “service business,” but labor costs can be quite high. However, the implementation of digital menus can significantly reduce these expenses for restaurant owners
You always expect a waiter/ waitress to be available and take your order and serve you. However as the restaurant industry is evolving and using more technology to their advantage ,the trend is shifting to a more contactless approach.
It is making more business sense to many Restaurant owners to not depend entirely on their work staff for the success of their Restaurant. But introducing automation to their workflow so the wait staff can focus more on customer experience .
What if you can have a digital waiter? that does all the manual and repetitive tasks ? works 24/7 and actually is enjoyable for your clients. In this Article you will read about the future of interactive restaurant menus that complete orders, payments and even help you do your marketing campaigns.
Why You should reduce your labor costs
Labour costs are expensive !
Wait staff is often one of the HIGHEST expenses for a business. For a typical restaurant, labor costs will make up about 30% of revenue. ..That said, this figure can vary depending on the type of restaurant.
Keeping your restaurant’s doors open requires a huge investment of time and money into its staff.
Especially after the pandemic the restaurant industry is going through a crisis. But we know that hard times create smart solutions . Orderific has created a smart digital menu that can be your personal online waiter, and do most of the manual tasks 24/7 with no errors.
Here are some typical labor costs percentages according to BDO:
– Quick service: 31.6%
– Fast casual: 28.8%
– Casual: 34%
– Upscale casual: 31%
– Pizza: 30.1%
Restaurants already operate on razor thin margins. With food costs rising due to the current recession along with wages, restaurants are walking on the edge of profitability. If you’re not careful, labor costs can spiral out of control and negatively impact your profits.
What does “labor cost” mean?
You need to have a proper understanding of what labor cost is and how to calculate it so you can make the best decision to reduce these costs.
You don’t need to be a rocket scientist to calculate your labor cost. Let’s break down how you can figure out what yours is .
According to Investopia the definition Labor Costs is “The cost of labor is the sum of all wages paid to employees, as well as the cost of employee benefits and payroll taxes paid by an employer.
The cost of labor is broken into direct and indirect (overhead) costs.
Direct costs include wages for the employees that produce a product, including workers on an assembly line, while indirect costs are associated with support labor, such as employees who maintain factory equipment.”
Labor cost is more than hourly wages and salaries, it also includes:
– Overtime and bonuses
– Payroll taxes
– Health care
– Vacation and sick days
– Any other labor-related costs
How to calculate labor costs percentage for restaurants
Determine your labor cost percentage by dividing your restaurant’s labor cost by its annual revenue.
So if you’r restaurant paid 200,000 to it’s employees in the last calendar year and it brought in 1,000,000 in sales divide 200,000 by 1,000,000 and get .2. Move the decibel over two spots to the right or multiply .2 by 100. This will give you 20% which is your restaurant’s labor cost by percentage.
Why would you want to know your labor cost percentage? That way you can calculate your prime cost! Prime cost is the most important calculation in restaurant business management. Prime cost is how much it costs you to put a year’s food on the table. It is calculated by adding your total labor cost to your production cost.
Production cost is how much money in raw materials it costs you to produce food.
Once you’ve added up your production cost and labor cost the result is your prime cost. For example if your restaurant’s labor cost is 200,000 and your production cost is 100,000 then your total prime cost is 300,000.
Ideally your prime cost should be less than 60% of your total sales. So you can figure that out by dividing 300,000 by 1,000,000 is .3 times 100 equals 30%. Your prime cost would be 30% of your total expenses.
How can you reduce staff to lower labor costs?
Now that we know what labor cost is, what’s included, and how to calculate it.
The question is, “What is the solution in today’s world to reduce it?” And, “Can you actually run a successful restaurant without any waiters?”
The answer is YES, and I’ll tell you exactly HOW!
Nowadays, we can order pretty much anything with our smart phones including placing an order at a restaurant.
With a smart digital menu such as Orderific, which can take orders, payments and has the best user friendly interface that anyone can use.
By simply scanning a QR code with your camera app, an interactive menu opens up in your web browser allowing them to place orders, pay the bill and more.
This type of technology can be free to get started and has a lot more extra features . Check out Orderific feature list to know more
Why you should use a digital menu to reduce staff costs?
- Lower your business dependancy on service staff.
- Reduce the waiter / waitress costs by 100% if you have a grab and go cafe.
- Save your wait staffs time and cut down manual tasks . Taking orders and payments can be automated.
- Digital menus are low maintenance , reliable , and available 24/7.
- Paying overtime wages is the fastest way to drive your labor costs through the roof.
- Hiring wait staff is not easy and includes a lot of training.
Create your own Digital Menu for Free , and start putting it to work for you today!