5.4. Labor Cost Management 

Labor costs represent a major component of the total foodservice expense in most organizations today. Until recent years, food was the first component, and labor the second. Together, food and labor made up around 75% of the total expense. So, controlling and reducing labor costs and simultaneously increasing productivity have been growing challenges among managers of all types of foodservices operations. If you have more staff than is required, your labor costs will be too high, and the company will lose money. If you have insufficient staff for a particular period, customer service will suffer. Your goal in planning staffing needs is to match labor supply with customer volume so that you can provide quality service without excessive cost. 

Factors Influencing Labor Requirements in Foodservice Operations

Several factors can affect the required amount of labor in foodservice operations, necessitating a comprehensive approach to managing labor costs effectively. 

Menu Items: The number and complexity of menu items directly impacts production hours. Menus with numerous, complex items requiring intricate production techniques demand more preparation time. Conversely, a limited menu with simple items requires less preparation time. 

Use of Convenience Foods: Utilizing convenience foods, such as pre-portioned meats or pre-made desserts, can significantly reduce preparation time and labor costs. However, this may increase food costs and potentially affect product quality. High-quality convenience foods prepared as recommended can maintain excellent quality and uniform portions. 

Type of Service: The type of service offered also influences labor requirements. Restaurants with complex dishes need more labor and skilled staff, resulting in higher wages. In contrast, cafeteria-style or fast-food operations require less labor. 

Quantity of Meals and Number of Meal Periods: The volume of business and the number of meal periods affect labor needs. Restaurants must maintain a minimum staffing level to operate effectively. More meal periods may reduce productivity if different menus require additional setup and teardown time, thereby increasing labor. 

Facility Layout, Design, and Production Equipment: Efficient kitchen layout and appropriate production equipment are crucial. Poor kitchen design can limit operational efficiency, requiring more staff to manage dispersed tasks. Production equipment, like mechanical peelers and mixers, can reduce labor time, provided they match the business volume. 

Work Environment and Number of Hours Worked: A comfortable work environment and reasonable working hours enhance productivity. Stressful, uncomfortable environments and long hours without breaks can reduce staff performance and productivity. 

Productivity Standards: Establishing productivity standards is essential for determining staffing needs. These standards measure the time required to produce food of the desired quality and are expressed in either labor dollars or labor hours. Labor dollars measure the cost to generate revenue, while labor hours indicate the number of hours needed to produce meals or sales income. 

Determining Requirements: Productivity standards are determined by comparing scheduled labor hours to meals served or sales income generated. These standards can be detailed by department, shift, position, or a combination, allowing precise identification of problem areas. 

Staffing Guide: A staffing guide helps managers plan work schedules and control labor costs by specifying the number of labor hours needed for each position and shift to produce a given number of meals. This guide, based on good employee performance, is more useful than industry guidelines as it accounts for specific workplace factors. 

Fixed and Variable Labor Costs: Fixed costs, such as salaries for managerial positions, do not vary with business volume and must be considered in staffing guides. Variable costs, including food and hourly labor, fluctuate with business volume and need careful management. 

Scheduling Staff: Effective scheduling matches labor hours to projected sales volume. Strategies include staggered work schedules, part-time staff for peak periods, and temporary employees for short-term needs. Legal considerations and staff capabilities must be factored in. 

Staying within Budgeted Labor Costs:  Comparing actual to budgeted labor costs helps plan future expenses. Analyzing labor cost percentages and continually reviewing performance standards can identify areas for improvement. Adjusting menu prices may be necessary if labor costs cannot be reduced sufficiently.