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Top Labor Metrics for Quick Service and Fast Casual Restaurants

January 7, 2016

In this guide we present the top four labor metrics. We have put this list together from the combined experience of over 3000 fast casual and quick service restaurant managers.

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1. Labor cost

In quick service and fast casual restaurants you only have two profitability levers to pull, product and labor cost. Keeping labor cost under control as the week progresses is critical to your success. To get your labor cost right you need to measure it in context to your sales and customer numbers. This is why labor metric 2, 3 and 4 below are critical. Plan, measure and review; daily, weekly and monthly!

2. Labor cost as a percentage of sales

Labor cost percentage (labor %) is the cost of your wages as a percentage of your revenue. Most business owners will have a general sense of this number.  It is best to also measure labor cost percentage per hour. Use this as well as a hourly customer to labor hours metric to match staffing levels to customer demand.

Labor cost percentage is a great labor target. It gives your managers a target that scales as your sales increase and decrease. A common range for labor cost percentage will be 20-30% depending on average transaction value.

Ensure your managers meet the labor % target on their schedules. Before the week begins is when you can do something about your costs - before you have spent the wages! Keep track of labor % in real time throughout the week so that you can make adjustments before it is too late.

Then ensure you review any differences between your planned vs actual labor cost percent. This information is very telling - it will help you determine if the source of your labor cost issues is inadequate forecasting or employee time management issues.

3. Sales per labor hour

Sales per labor hour (also known as labor efficiency) is a KPI that can tell you how good your staff are at generating revenue. It's the number of sales per hour divided by staff hours. For example, if we have 3 people working between 11am and midday, that's 3 labor hours. If we make $900 in sales in that hour, the labor efficiency is $900 / 3 = $300. If this number increases, staff are making more sales per labor hour. If it decreases, staff are making less sales and so are less efficient. You can use this metric to identify and reward teams who are doing well. Also identify teams who need more sales or upsell training.

4. Customers per labor hour

Customers per labour hour is also known as productivity which is a measure of how efficiently your team can serve your customers. Hitting your ideal productivity drives the perfect customer service levels. Productivity is the number of customers divided by the labor hours in a given hour. For example, a sandwich shop may have an ideal productivity of 10 sandwiches per labor hour. This means with 5 staff on the counter at peak efficiency you should be able to produce 50 units in that hour. For a dine-in restaurant the CPLH might be the number of covers or transactions divided by the labor hours. There is a close correlation between hitting your productivity and maximising your revenue opportunity. Don’t miss out on revenue, figure our your magic productivity range today! Schedule to it, measure it, review performance, tweak the range, repeat.

 

Happy monitoring!  Rachael Skinner and the Zuus Workforce Team




About the Author: Rachael Skinner

Rachael Skinner

Rachael Skinner is CEO and founder of ZUUS Workforce Inc.Rachael has 18 years experience in managing teams, owning and managing businesses. Rachael has helped thousands of retail, hospitality, manufacturing and health care businesses improve their labor efficiency.