22 Feb Another Way to Survive Minimum Wage Increases in the Restaurant Industry
At this point, you’ve probably started to feel it. The biggest cost associated with operating your restaurant is on the rise and there is nothing you can do to stop it.
You know that you need to keep labor cost below 35% of revenue to squeeze out profits; but how is that possible while paying dishwashers and bussers $15 an hour?
Common sense would tell you to either raise your menu prices or to use less hourly labor; but if you’re in a competitive market and you’re not ready to cut corners when it comes to customer experience, the difference has to come from somewhere else.
Your ingredient prices aren’t going down and that voicemail from your landlord is probably not an offer to lower your rent. That doesn’t leave a lot of places to make cuts; but one option to seriously consider is ELIMINATING SALARIED POSITIONS AT THE STORE LEVEL. This may sound extreme and probably won’t go over too well with mid-level managers, but it is a trend that is already picking up steam in the industry.
Here is why…
While we are still a few years away from robot servers and drone delivery, restaurant technology designed to automate management functions is already here and ready for primetime.
Here are just a few of the traditional restaurant management tasks that can now be fully automated or outsourced:
- Maintaining daily, weekly, and monthly sales and expense reports
- Payroll administration and labor law compliance
- Sourcing, screening, and onboarding new employees
- Educating and updating employees on company procedures and menu changes
- Monitoring employee performance & development
- Tracking guest satisfaction
- Driving customer loyalty
From cloud-based POS systems to all-encompassing human resources and financial reporting platforms, there are plenty of solutions out there that not only handle these tedious tasks, but also provide ownership with unprecedented organizational visibility and financial control without the need for a middle-man.
Now before you go and replace your GM with an app, there are few important points to consider:
UNDERSTANDING THE VALUE OF YOUR SALARIED MANAGERS
For some higher-grossing organizations, the General Manager is an absolutely indispensable resource. They are the CEO of the company, responsible for making crucial business decisions and propelling the business forward on behalf of the stakeholders. They command respect from the staff and are the closest thing to having an owner on-site daily.
In the current labor market, these employees are very difficult to come by. They are the exception, not the rule, and they can be the key to helping a passionate owner build significant wealth in this challenging industry. If you have a salaried General Manager or Director of Operations that fits this description, keep them incentivized and continue to provide growth opportunities for them within the organization.
However, if you are like the vast majority of restaurant owners that plays this role yourself, take the time to analyze exactly how your other salaried personnel spend their time. Does that combination of salary, benefits, and overhead translate into a discernible edge that you would not expect from an automated or outsourced alternative?
CHOOSING THE RIGHT TECHNOLOGY PARTNERS
It is important to understand the difference between a software tool and a comprehensive technology-enabled solution. There are a ton of inexpensive software tools available to help managers and back office personnel do their jobs more efficiently, but very few solutions that will actually do the work for them from end to end.
If you are seriously considering eliminating headcount in favor of automation and outsourcing, make sure you answer the following questions when exploring options:
- Does this solution require somebody to set it up and maintain it?
- If so, who is going to do that?
- Is this solution integrated with my key data sources, like my POS?
- If not, who is going to do the data entry?
- Does this solution cover everything that my salaried employee is currently doing?
- If not, who is going to fill in the gaps?
FILLING THE GAPS WITH HOURLY EMPLOYEES
Outside of their administrative duties, salaried restaurant personnel often play a key role in ensuring a consistent guest experience from day to day. They can be responsible for ‘touching tables’, monitoring employee performance during a shift, opening and closing the restaurant, handling money, and being available to troubleshoot any unforeseen problems that occur while the restaurant is open.
In most restaurant settings, these are not job duties that can be underestimated or ignored, but they can be handled by hourly floor managers, shift leads, or senior waitstaff. Between increased hourly wages and abundant tips, these may already be your highest paid employees, many of whom would have gladly taken on management responsibilities sooner if it didn’t require a pay cut.
Ultimately, the nuances of your individual concept will dictate the viability of eliminating salaried positions in your stores. Like raising menu prices or replacing servers with kiosks, this is not a silver bullet for every concept looking to get costs in line; but it is a creative option to consider in the face of rising labor costs and it is finally viable thanks to continuing advancements in restaurant technology.
WRITTEN BY ALEX RACIOPPI
Alex is the Founder & CEO of KitchenSync, which provides comprehensive online bookkeeping and payroll services to restaurants and bars throughout the United States. He is passionate about helping creative operators better understand their business’ finances and he strongly believes that no restaurant owner or manager should have to spend time sitting at a desk.