LFTL: Seasonality Revisited
Never panic.
With the pandemic firmly in the rearview mirror, our restaurant clients have seen a return to full seasonality in 2024. Many restaurateurs have been caught off guard by this "return to norm," as the last few years have accustomed them to operating on a week-to-week basis. However, the return to seasonal trends requires a mindset change.
A successful restaurateur has the discipline to absorb short-term data points, like a few bad weeks, but manages with one eye toward the long term and one eye toward short-term expectations, heavily informed by past trends. As an operator, the best thing you can do is not overreact to any given week. Instead, carefully manage your restaurant by predicting each week's sales (using the same week last year as your guide), and manage your controllable expenses, particularly labor, to those expectations. Here are some best practices to consider:
Align Labor Scheduling with Seasonal Sales
The driving force behind aligning labor scheduling with the seasonal sales cycle is the industry's inherently thin margins. Any discrepancy between labor costs and sales can significantly impact the bottom line. At Harmony, our Key Performance Indicator for Clients is no more than 30% of sales to be spent on labor (excluding benefits). To reach this goal, ensuring labor scheduling is in line with anticipated sales is critical.
Find the Floor
Setting a realistic labor floor is crucial to optimizing operations without compromising the quality of service and guest experience. A labor floor refers to the minimum number of staff required to ensure that the restaurant can function smoothly and deliver a satisfactory experience to its guests. Determining this threshold is a delicate balance: too few staff can lead to overworked employees, decreased morale, and a potential decline in service quality, while overstaffing can inflate operational costs unnecessarily and destroy any chance of sustainability.
This delicate balance makes setting a labor floor a great opportunity to examine assumptions around labor costs. To set a realistic labor floor, you must critically evaluate the product mix, workflows, peak and off-peak operational hours, and the specific roles and responsibilities of each staff member. Continual monitoring and feedback are essential, as this ensures that the established labor floor remains adaptive and dynamic.
Last Year, Same Week: The Guidepost
A key data point in this labor-scheduling puzzle is to look at the "last year, same week" sales figures. Historical data provides a reliable forecast, offering strong insights into expected sales—which is why we include it in the weekly reports to our clients. The sales figure from the same week last year will likely incorporate the same holidays, so it is a reliable starting point to evaluate your sales and corresponding labor needs.
However, it's essential to note that while historical data is a guiding light, it isn't a crystal ball. Sales figures from the same week in the previous year can provide a solid foundation, but adjustments might be necessary, especially if significant external events have arisen (e.g., a high-profile review, new entertainment options coming online, or competition opening).
Stay Updated: The Impact of Large Events
While historical data provides a robust baseline, it's equally crucial to keep an ear to the ground for any large events—think conventions, local festivals, or significant sporting events. Such occurrences can significantly drive up foot traffic and sales, necessitating more hands on deck. By staying updated on the local events calendar and integrating it into the labor scheduling process, you can preemptively scale your staffing needs to any special events and not be caught short-handed.
Scaling Labor Throughout the Year: A Continuous Process
In the restaurant industry, complacency can be a silent profitability killer. Regularly reviewing labor schedules in line with the sales cycle isn't just a one-off task; it's a continuous commitment that should happen every time the schedule is being considered. As the year progresses, variables such as promotional campaigns, weather, cyclical changes in consumer behavior, or even macroeconomic shifts can influence sales. By continuously monitoring and adjusting labor schedules accordingly, you can ensure you're positioned best to maximize profits and minimize inefficiencies.
Key Takeaways
Labor Costs as a KPI:
Controlling labor costs to remain under 30% of sales (excluding benefits) is vital for profitability. Monitoring this KPI consistently helps identify areas for improvement and ensures sustainable operations.
Setting a Realistic Labor Floor:
Determining the minimum staff required is essential to maintain service quality without overspending. Consider factors like product mix, workflows, and peak/off-peak hours to set an optimal labor floor.
Historical Data as a Guide:
Using sales figures from the same week last year helps predict sales patterns. However, this should be complemented with current market conditions and potential external influences.
Staying Updated on Large Events:
Being aware of local events can help anticipate spikes in sales. Integrating this into labor planning ensures sufficient staffing during high-demand periods.
Continuous Monitoring and Adjustment:
Regularly review and adjust labor schedules to adapt to changes in sales patterns, promotions, or external factors. This continuous process helps optimize labor costs and improve efficiency.
Additional Thoughts
Data-Driven Decision Making: Utilize analytics tools to track real-time sales and labor data. This can provide more precise insights into labor needs and help in making informed decisions.
Cross-Training Staff: Cross-training employees can provide flexibility in managing labor. Staff who can handle multiple roles can help cover shifts during unexpected demand spikes or absences.
Employee Engagement: Involving staff in discussions about labor management can foster a culture of efficiency and improvement. Employees often have valuable insights into workflow optimizations and customer needs.
Technology Utilization: Leverage scheduling software that uses algorithms to predict staffing needs based on historical and real-time data. This can reduce scheduling errors and improve labor management efficiency.
Feedback Loops: Establish feedback mechanisms to continuously learn from past scheduling and labor management decisions. This can involve regular meetings to discuss what worked well and what could be improved.
In Conclusion
The challenge of scaling labor according to the seasonal sales cycle is akin to a well-choreographed dance. It requires a blend of historical data insights, foresight into potential variances, and consistent attention. But when done right, it results in a harmonious balance of a great guest experience, staff morale, and profitability.
Given the thin margins on which restaurants operate, it's not just beneficial but critical to have a laser focus on labor. As we continue to navigate the ever-evolving landscape of the hospitality industry, let's prioritize aligning our most valuable resource—our staff—with the rhythms of our sales cycle, ensuring a win-win for everyone!
Our Restaurant Finance 101 Class is Now Available to Clients
The Harmony team was thrilled to partner with Regarding Her (RE:Her), a remarkable nonprofit committed to empowering women entrepreneurs in the food and beverage industry. Through this collaboration, we had the privilege of working closely with their academy scholars, diving deep into their financials to offer tailored recommendations for optimizing their financial systems and processes. Our goal was to equip these rising leaders with the tools needed for strategic growth.
As part of this initiative, we also conducted our “Finance 101” class, an accessible and comprehensive session that breaks down the essentials of financial management. We focused on demystifying the three critical financial statements, mastering effective budgeting, and preparing for future expansion.
This class isn't just for RE:Her participants—it's open to all managers, owners, and operators eager to boost their financial acumen. And for our clients, we offer a special discount. If you're ready to elevate your organization’s financial literacy—a crucial foundation for long-term success—don’t hesitate to reach out by clicking here.
Last Bites
Bad Tippers.
We’ve written extensively about the bad faith efforts to get rid of the Fair Labor Standards Act tip credit, the law that allows servers to have a lower cash wage as long as they make the statutory minimum wage through tips. Repeat again: there is no such thing as a sub-minimum wage because everyone is guaranteed the minimum wage.
Anyway, aside from the misdirection around server compensation the main argument to disincentivize tipping was that the tipping system was antiquated, devalued the profession, and had problematic roots. The essential argument was that America needed to get away from tips. Except maybe not...
In what is a darkly comic turn of events, both Kamala Harris and Donald Trump have proposed making tips tax exempt. This change would be a huge windfall for tipped workers and seems to signal unprecedented government support for tipping. Without scouring the code, the only direct wage we can recall being exempt from taxes is combat pay for American soldiers.
These stump promises would have a long road to becoming reality with multiple variables that aren’t worth getting into now but suffice it to say these schizophrenic positions don’t make running an independent restaurant easier.