6 Ways to Offset Rising Labor Costs in the Restaurant Industry

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Rising labor costs are a constant headache for today’s restaurant operators.

Labor is already one of a bar or restaurant’s top costs, but as minimum wages and healthcare costs rise across the country, owners and operators are seeking new, creative ways to cut costs and stay profitable.

Let’s examine a few below.

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1. Optimize Costs with Advanced Forecasting Capabilities

Demand forecasting, when done right, uses machine learning to automatically capture POS data, weather forecasts, historical trends, local events and more to calculate a daily baseline forecast at short intervals by sales item. This enables operators to ensure they have both the appropriate staff and the necessary stock to deliver a great guest experience and cut back on unnecessary spending. By understanding demand, operators can offset labor costs by never over- or under-staffing.

There are a multitude of factors that lead to increased labor costs, including high employee turnover, new minimum wage laws, increases in healthcare, compliance, and restrictions on labor. Restaurants must focus on improving operational efficiencies and employee engagement to thrive in an increasingly competitive industry.

2. Proactively Manage Labor Compliance

Regulatory compliance in the restaurant industry has always been a challenge for operators, and the increased complexity of the last few years means that operators need to be sure they’re following the rules now more than ever. Labor legislation is constantly evolving, presenting operators with new obstacles that can vary from city to city. Laws around minors, meals and breaks, and predictive scheduling can result in costly fines if they’re not followed.  To address this unique scheduling challenge, and avoid costly penalties, operators can implement scheduling technology that can automatically alert them to potential compliance violations, enabling operators to catch scheduling mistakes before they happen. 

3. Eliminate Rogue Spending with Optimized Purchasing and Inventory Management

Managing a restaurant is hard, and when you’re in the weeds, quickly ordering an item that is out of stock makes sense. But all those tiny, one-off rogue purchases add up. On top of that, sales suffer when items are out of stock.

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To optimize profits and avoid unnecessary spending, managers need to have complete visibility into their operation. This means understanding when and how much inventory is being used and planning accordingly. By connecting back-of-house activity with front-of-house demands, operators can create accurate forecasts to purchase only what they need when they need it.

4. Increase Visibility into Vendor Management

Choosing the right vendors, negotiating good purchasing deals, and setting routine delivery schedules is critical to effectively managing costs. However, managing multiple vendors is challenging and requires a significant amount of oversight.

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Gaining visibility into vendor performance is a great way to determine if any might need to be swapped out for more cost- and time-efficient options. Additionally, implementing automatic invoice matching technology to ensure the details on the invoice match the original order guarantees managers are only paying for what they’ve ordered and what was actually delivered.

5. Boost Profitability with Recipe & Menu Engineering

Food waste is one of the biggest expenses for restaurant operators. But with the ability to analyze the popularity of menu items or the amount of food leftover from a dish, restaurant operators can see where to make improvements to increase profitability and decrease unnecessary spending.

For example, popular but expensive dishes can be tweaked to reduce the cost of ingredients, underperforming dishes can be removed from the menu entirely, and larger portion sizes can be scaled back.

6. Engage Employees with Tools for Communication and Ongoing Training

High employee turnover plagues the restaurant industry, costing restaurants significant amounts of money and time in re-hiring and training. To help attract and retain top talent in today’s gig economy, operators must keep their staff engaged. Specifically, restaurants should invest in technology that improves communication and boosts collaboration between employees and their managers. Messaging capabilities, information on new hires, and shift openings must be readily available at the employees’ fingertips.

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Providing ongoing training to staff is another way to keep them engaged. By investing in employees through on-demand training solutions accessible via mobile devices, managers offer staff a clear career trajectory and a means to move up to the next position. It’s not just an investment in training software—it’s an investment in your team members. Fostering employee engagement—from communication tools to training opportunities—not only drives efficiency but helps reduce turnover, limiting expensive labor costs.

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