Restaurant Cost Control – Part 2: The High Cost of Cheap Labor

• Many restaurants use cheap labor to reduce labor costs, but this practice is counterproductive.
• This article will focus on labor cost control and its key benchmark: the measurement of employee productivity.
• Effective labor cost control requires audits that cover a restaurant’s input (hours worked) and output (guests served).

LABOR COST CONTROL AND EMPLOYEE PRODUCTIVITY

In a previous article (Restaurant Cost Control – Part 1: A Nickel-and-Dime Business), we discussed various strategies to control non-labor costs in your restaurant, and we highlighted the importance of using cost tracking and measurement standards as benchmarks to assess performance. Part II of this article focuses entirely on labor cost control and its key benchmark: the measurement of employee productivity. Improved productivity is the best way to control labor costs, and it is essential to a restaurant, because the additional income allows the restaurant to pay its employees competitive wages and enact measures that will strengthen its competitiveness in the marketplace. 

In this article we describe the link between low employee productivity and labor costs, and also analyze the causes of low productivity, including the adverse effects of hiring “cheap help”- employees who will work for very low pay because they may have  dubious qualifications or work histories. Finally, we show how productivity improves if internal inefficiencies in concept designs, business models, and management style are eliminated, resulting in higher revenue and profits.

The Productivity Problem

Productivity is defined as the efficiency at which inputs – hours worked - are turned into outputs – guest served, or revenue generated. Simply put, higher productivity means higher profits and is crucial to offering the competitive wages needed to attract qualified employees.

Historically the restaurant industry has fallen behind other sectors of the economy in productivity improvements.  One reason for this is that the service industry is not as amenable as are other sectors to technology improvements. For instance, you can design a restaurant concept that maximizes the productivity of a table attendant, but you cannot eliminate the table attendant. 

Restaurant jobs are inherently hard to fill because they require long and inconvenient hours and offer low compensation, …

Restaurant jobs are inherently hard to fill because they require long and inconvenient hours and offer low compensation, inadequate training, and scant advancement opportunities; hence, the positions are undesirable for most qualified workers.  These characteristics compel operators to hire individuals with inadequate and numeracy skills and sometimes questionable work ethics.

Other reasons include the industry’s short-sightedness in hiring and training its staff, its handling of employee relations, and the fact that some inefficient restaurant concepts present challenges that often stymie productivity.

Productivity standards and measurement 

Despite the fact that productivity measurement should occupy a prominent spot on management's "to do" list, most managers do not really measure productivity and rarely spend time improving it beyond the occasional schedule adjustment and reduction in hours worked.

…most managers do not really measure productivity and rarely spend time improving it beyond the occasional schedule adjustment and reduction in hours worked.

Productivity measures compare input to output, where the input is the number of employee hours worked and the output is the number of guests served (please note that “output” can also be stated as revenue). The productivity index is an indicator of the overall profitability of the operation, and both investors and multi-unit owners use the data to evaluate and compare different establishments. Here is a simple formula used to calculate the productivity index:

total number of guests ÷ employee hours worked = productivity index

Example:  You have 500 guests served, and 100 man-hours worked.Simply divide the number of man-hours worked into the number of guests served. 

500 ÷ 100 = 5

Here, the productivity index of 5 indicates that, for every hour worked, five guests were served.

If the same establishment served 600 guests with the same number of man-hours, the productivity index would increase to 6 to 1.  How is this possible that the same number of man-hours serviced more customers? There may be several reasons: work scheduling was possibly more efficient, or the employees received better training and became more proficient at their assignments.  Regardless of the reason, this increase in productivity has a positive effect on the bottom line because more revenues were generated with the same labor expense.

In the restaurant business, the productivity index varies according to the type of operation and the business model, and it fluctuates depending on the day of the week and the season.  For example, a Chicago ice cream parlor experiences low traffic in the winter months but an upswing in traffic during the summer months.  A fine dining restaurant will see a surge in productivity toward the end of the week to be followed by a substantial drop at the beginning of the week.  In both cases, the number of transactions and consequently revenue is directly proportional to the productivity index.

The productivity formula can be modified to evaluate specific positions, rank employee productivity and provide a quantitative benchmark to justify raises. For example, table attendant hours are compared to guests served; grill cook hours are compared to the number of steaks produced; dishwasher hours are compared to guest served, etc. By way of example, consider this:

How many guests does a table attendant serve during any given shift?

The adjusted formula to measure the productivity index in this case would look like:

guests served ÷ hours worked = productivity index (for that shift).

The difference from one attendant to the next is a function of speed, organizational skills and training.  Management should establish a base productivity standard against which the performance of each table attendant is evaluated.  As a matter of fact, such standards should be established for every key position.

Low productivity indirectly limits the funds available to pay better wages; this lower pay scale limits the number of applicants who possess the level of skills you want. 

One solution is to provide appropriate compensation to compete on an even footing with other employers; this particular solution is not fully embraced by an industry that, for too long, has been able to get by with low pay because of a seemingly unlimited pool of cheap labor.  Consequently, the restaurant business has, over the years, garnered a reputation for low wages, long hours and limited benefits.  A telling data point, according to Forbes’ List of 100 Best Companies to Work for in 2018, shows that only ONE restaurant company is listed: showing up as number 27 is The Cheesecake Factory (which incidentally is known for its relentless effort to integrate technology and increase productivity.)

In this article I will present a more pragmatic and thorough view of non-labor cost control.

THE CAUSES OF LOW PRODUCTIVITY AND HIGH LABOR COST

Reliance on low-skilled employees

The “Hiring Gold Standard” in the restaurant industry can be reduced to a simple slogan: “Cheaper Is Better”.  Restaurant managers have traditionally considered employees as easily replaceable commodities.  Irrespective of what the staff may contribute to the over all operation, employees' skills and their need for an effective hiring and training process  are rarely considered, resulting in low performance and a high employee turnover rate.  

The “Hiring Gold Standard” in the restaurant industry can be reduced to a simple slogan: “Cheaper Is Better”.

The reluctance to pay for talent has led the industry to rely mostly on teenagers seeking a first time work experience, students needing flexible work hours, or immigrants, who are unlikely to obtain more desirable employment opportunities because of their limited communication skills. Thus, a job in the restaurant industry is often considered a stepping-stone to better opportunities – “As soon as I have more experience”, or, “When I am done with school” or “When I have learned English, I will get a BETTER job.

Unfortunately, employees who will work for low pay are not as cheap to hire as they might appear to be.

Unqualified applicants often lack basic work skills and desirable work ethics; as such, they make careless mistakes both during and after their training, resulting in costly waste or poor customer service. 

Lastly, management preference for a bargain basement labor pool ignores the inevitable turnover resulting from employees seeking better pay, better training, better hours and better employment opportunities. It ignores the hidden costs of turnover and the impact this turnover rate has on productivity.

The cost of excessive employee turnover

Turnover rate is defined as the percentage of employees in a workforce who resign or are fired during a given period of time. According to the National Restaurant Association, the average turnover rate for the industry was 73% in 2017. This means that in a 100-employee restaurant, 73 employees were replaced during the year because they either quit or were terminated. Certain positions such as dishwashers may see 3 or 4 different individuals a year, resulting in a 300 or 400 percent turnover rate.

According to the National Restaurant Association, the average turnover rate for the industry was 73% in 2017.

Using a National Restaurant Association estimate of a $7,000 cost per occurrence of employee turnover, the annual financial impact of turnover for a restaurant with 100 employees and a 73% turnover rate exceeds half a million dollars.

$7,000 per position × 73 new hires = $511,000

Assume now that the turnover rate is cut by half as improved hourly wages and enhanced training lead to the recruitment of more qualified employees. The turnover rate is lowered to 36.5%, and more importantly the cost of the turnover is also reduced by half.

$7,000 × 36.5 = $255,500

Undeniably, a portion of these savings will fund both higher pay rates and improved training, but we expect that a substantial portion will go directly to the bottom line.

The cost of turnover can, of course, be impacted by the positions being turned over. The recruitment of a table attendant is less costly than that of an executive chef (which often requires a finder's fee to a management recruiting firm that can amount to 1/3 of the annual salary), but this number reflects the average hiring and training costs for all employees – from line workers to executives. Any headhunter finder's fee is in addition to the $7,000 estimate.

Regrettably, it is difficult to establish the exact cost of employee turnover because most companies don't track these costs and some costs are difficult to quantify. Furthermore, the costs are spread out among various line items on the income statement.

• Hiring costs: Advertising, Interviewing, Screening, and Recruiting Firm search fees
• Onboarding costs: Orientation
• Lost productivity costs: It may take some time for a new employee to reach the same productivity level as that of an experienced employee.
• Lost engagement costs: Workers in organizations that have high turnover tend to disengage and become less productive. Whenever someone leaves, other employees’ confidence in the organization is shaken. According to James L. Heskett, a strong corporate culture “can account for 20-30% of the differential in corporate performance when compared to ‘culturally unremarkable’ competitors.”
• Customer service and error costs: New employees make errors and are often less adept at solving problems.
• Reduced or loss of business costs because of lost expertise: The favorite table attendant quits, and regular guests feel “abandoned” and do not return.
• Training costs: As a new hire is learning the ropes, two employees are, in effect, needed to fill one position..

While it may be difficult to eliminate employee turnover entirely, it pays to try to reduce your turnover rate by implementing better hiring practices, offering increased compensation, and conducting more robust training. We will discuss the latter next.

Inadequate training

Managers perceive that most tasks are simple enough that they do not require much training. Because of this, they find it difficult to justify spending time and money on training employees who will soon seek other employment.

Training has several purposes: to familiarize the new employee with the company culture, explain specific tasks, communicate standards of behavior and performance, highlight best practices, and foster consistent performance among the staff.

Training is about job skills – providing new employees with what they need to acquire the necessary aptitude, soft skills, and attitude to become valuable contributors to your operation. Training also helps management determine if the employee can meet the operation’s performance standards. It is an extension of the hiring process and should be conducted by a member of the management team. It requires planning, organization and a feedback loop to ensure that the training is effective. Properly-trained employees are proficient and productive and contribute to customer satisfaction.

Unfortunately, in most establishments training is perfunctory and consists of shadowing another employee for couple of shifts, …

Unfortunately, in most establishments training is perfunctory and consists of shadowing another employee for couple of shifts, after which the new hire is deemed proficient enough to be on her own. This approach sends the implicit message that the job itself and the employee are not important enough to warrant management time and involvement. A halfhearted approach to training contributes to low productivity, inconsistent performance, errors and employee turnover, and therefore affects the bottom line.

Difficulties in incorporating technology to improve outputs

The restaurant industry is labor intensive and challenging to “scale up.” Each sale requires a certain amount of employee time. A table attendant is limited in the number of tables that she can handle. The more complex the service or the menu, the smaller the number of guests that can be served and the higher the cost of labor in the kitchen. Unfortunately, opportunities to integrate technology to improve production and service are limited and their impact often marginal.

Inefficient Business Model

It is essential to design efficient operations and processes that incorporate production efficiency and increase table turnover, offer limited yet appealing menus, and provide for competent and attentive service. Unfortunately, such an approach requires thorough planning, but most operators are attracted to the industry because they have a great appreciation for food and believe in delivering outstanding service in a well-designed setting; assessing the financial implications of their decisions is not paramount in their planning process. This often results in inefficient concepts that are labor intensive and thus costly to operate. For example, all-encompassing menus dilute profit by complicating the guests' decision-making process (hence increasing the time between seat turnover), increasing the need for manpower in the kitchen, and requiring larger food inventories and more storage space.

HOW TO INCREASE PRODUCTIVITY: IMPROVING THE BUSINESS MODEL THROUGH AUDITS

Audits are tools used to gage where you are and to set goals that point to where you want to be. To paraphrase Peter Drucker “You can’t improve it if you do not measure it.” There are two ways out of the low-productivity conundrum. One is to increase the output – the guest count and revenue. The other is to decrease the input by reducing the number of hours worked by improving employee performance, eliminating operational inefficiencies in the business model, and minimizing employee turnover.

Reducing input - the number of employee hours worked – is feasible when management conducts a number of audits to identify inefficient areas.

Reducing input - the number of employee hours worked – is feasible when management conducts a number of audits to identify inefficient areas. Rarely will one improvement directly add several thousands of dollars to the bottom line. Rather, it is it is the compounding effect of several efficiency improvements that adds significantly to profits. The audits below are listed in order of importance, and restaurants should implement them in this same order. The cost of implementation may vary but in most cases is relatively low.

Input audit: employee turnover

The first area of investigation is the employee turnover rate. Calculate your turnover for the last year, and this rate becomes the benchmark on which you will measure improvements. Next comes the diagnosis phase; what are the causes of turnover?

• Find out why employees quit. Is it scheduling, supervision style, lack of respect?
• How competitive is the wage structure in your establishment?
• Are regular performance evaluations provided, and is outstanding performance rewarded?
• Are employees cross-trained and afforded opportunities for advancement if they are interested?

Employee retention initiatives are critical, but at the same time they offer limited benefits when they are not combined with sound hiring practices.

Input audit: hiring practices

Whether you hire through word of mouth, local advertising, on-line media or a software platform, the acquisition of qualified staff starts with accurate job descriptions.

• Do you have and use job descriptions to advertise open positions and evaluate candidates objectively?
• How thorough is your interviewing process?
• Do you sugarcoat the job duties and responsibilities during the interview process?
• Is the compensation scheme competitive?
• Do you check references?

Input audit: orientation and training

In the restaurant industry, there is often a disconnect between employees and management. Employees are viewed as uncommitted to the organization and disposable, and most managers are not proficient at fostering new hires to develop them into engaged employees and cooperative team members. Lack of an effective orientation program and insufficient training send an undesirable message and contributes to low-productivity, poor service, and increased difficulties in retaining skilled employees.

Through orientation and training, successful managers set the tone for employee engagement - an emotional commitment to the work and the company and a willingness to give one’s best at work. Auditing the orientation and training processes allows management to ascertain if they are only paying lip service to these two functions.

• Do you make employees feel welcome by providing a new employee orientation?
• Do you overwhelm employees with information during the orientation?
• Do you preach teamwork while the orientation is not interactive and does not encourage employee questions?
• Do you provide new hires with an employee handbook that they can consult when there is no one readily available to address questions or concerns?

The goal of new employee orientation is to help the new hire feel welcomed, integrate her into the organization, and make her successful in the new job as rapidly as possible. During an effective orientation program, you should:

• Introduce the new employees to supervisors, managers, and co-workers.
• Explain the company history and the company culture: it’s mission, vision, guiding principles and values.
• Assign a mentor to assist employees during the sometimes-difficult transition period of starting a new job.
• Make plans for management to meet with new employees after 30, 60, and 90 days to assess progress and address concerns.

A purposeful orientation demonstrates that the establishment is a well-managed organization that pays close attention to details.

Training, on the other hand, is a process of imparting knowledge, skills, and competence to new hires so they can perform specific job duties; it is the last step in the hiring process. Unfortunately, perfunctory training is too common in the industry and contributes to poor and inconsistent performance. Training should not be, "Here is your uniform. Follow John for one day and then you are on your own."

• Thorough training starts with comprehensive job descriptions from which the training program is devised.
• It is more effective if most of the training is done by a member of management, preferably the supervisor, who can, by her presence, reinforce the importance of the training and establish a connection with the employee.
• Training sets up clear expectations for performance.
• Training methods should be adapted to the learning style of the trainee.
• A good training program should provide a feedback loop to make sure that the employee is proficient after completing the training.

Input audit: employee schedule

Too often, scheduling is considered an after-thought; schedulers ignore fluctuations in traffic, resulting in under or over staffing. Management must analyze the need for staffing in conjunction with guest forecasts and patterns of business during all shifts, and this process should start with an analysis of each position. Is the position needed and does it reflect the correct start time and an appropriate length of shift? There is nothing etched in stone about an eight-hour shift being the required norm.

Once the positions have been scheduled based on accurate forecasting, the assignment of employees takes place. This is a challenging task because scheduling is a source of possible conflicts for three reasons: First, is that the allocation of the “good shifts” by management can be perceived as preferential treatment of some staff over others. Second, employees resent the dreaded “clopens” when a worker closes the establishment and reopens the very next day with limited time to go home and sleep. Finally, the use of on-call scheduling and last-minute scheduling places an undue burden on employees who can no longer accurately predict how many hours they will work (and by extension, how much they will be paid) each week.

Furthermore, employee turnover adds an element of complexity to the scheduling process because the training of new employees requires that positions be doubled up until the new staff is proficient.

Scheduling improves when management:

• Prepares detailed revenue forecasts, noting special events.
• Allocates positions to match forecasts.
• Publishes the work schedule well in advance, allowing employees to plan.
• Avoids last-minute schedule adjustments, except for unforeseen circumstances.
• Avoids “clopens,” on-call requests, and split-shifts and if unavoidable, assigns “clopens” and split shifts on a rotating basis.
• Assigns shifts with fairness and consistency.
• Shows flexibility in accommodating special requests and keeps a digital trail for schedule changes in order to avoid confusion.
• Schedules breaks during shifts
• Documents overtime, changes to assignments, no-shows, etc. for future conversations with staff
• Analyzes the efficiency of the schedule using the productivity index noted earlier in this article, and makes necessary adjustments

Fortunately, technology can assist both in the planning and communication functions and in the tracking of information such as requests for days off, shift switching and other allowances. If the schedule is created fairly and in advance and only modified in extreme circumstances, it will go a long way to foster good relations with the employees.

Input audit: management style and employee engagement

This audit and the necessary improvements will likely take some time because it may involve a change in the establishment's culture – a difficult task. The question is whether or not line supervisors foster a culture where employees believe in the operation’s mission and perform better as a result. Studies conducted in the last two decades suggest that there’s a correlation between employee engagement and organizational performance. According to "The State of Employee Engagement Survey of 2018," over 90% of the respondents believe there is solid evidence linking engagement to performance, and they believe having an engaged staff has the strongest impact on customer service and productivity”.

There certainly seems to be a great deal of room for improvement in this area: A Gallup survey states that only 34 percent of U.S. workers report that they are engaged at work, and just 22% of employees strongly agree that their leaders have a clear direction for their organization.

Successful restaurants have a high level of employee engagement and as a result attract talented employees. An effective supervisor:

• Provides more direct oversight when employees need it and autonomy when employees perform well.
• Rewards achievements, and helps develop talent.
• Builds a relationship with employees, who, as a result, will be more open to constructive criticism.
• Values and respects employees.
• Provides regular performance evaluations that are fair, thorough, and well thought out.
• Listens to employees’ concerns and acts upon them when justified.
• Incorporates valuable employee suggestions and credits those who contribute innovative ideas.
• Sets clear goals and demonstrates strategic vision

In addition to the improvements in performance, one of the side benefits of having strong employee engagement is that your operation becomes the local "employer of choice," making recruitment a lot easier. But while the industry is slowly shedding its reputation for authoritarian rule - think about the cliché of the French chef with an anger management problem - it has a long way to go.

The focus so far has been on inefficiencies having to do with people. We must know focus our attention on operational inefficiencies.

Output audit: business model and operation

Productivity increases with improvements in the business model, as the tracking and benchmarking of operational data allows management to identify areas to improve and to assess the effectiveness of those improvements. For instance, are the check average, seat turnover, and the wait time for guests monitored? They should be monitored, because it is possible that an overly complex menu slows down kitchen production, increases wait time and consequently seat turnover and revenue. The various audits below are listed in terms of their impact on revenue and productivity.

Productivity increases with improvements in the business model, …

Output audit: the wait time and seat turnover

The first step is to track average wait time to determine its optimum level. The presence of a wait line is perfectly acceptable and demonstrates that the restaurant is a sought-after establishment, but if the wait line is too long, some guests will walk away, resulting in a loss of business. It is important to figure out the “sweet spot.” Wait time depends on different factors, such as the popularity of the establishment, the complexity of the menu, the seating capacity, and seating configuration compared to traffic and size of the parties, the efficiency of the staff in turning over the tables, the staffing itself, and finally the reservation process.

The second step is to track the seat turnover, which illustrates how well the restaurant uses its assets - in this case the seats in the establishment - to generate sales. This figure varies according to the style of restaurant, the time of the year, and the day of the week. Seat turnover is important because operators pay rent based on square footage, so each seat comes with a fixed rent cost. To the extent you maximize the seat turnover, you minimize the rent cost per guest and add to the bottom line.

The formula to determine average seat turnover is:

number of guests per shift ÷ number of seats = seat turnover

Assume a restaurant with 250 guests during a shift has a seating capacity of 110:

250 ÷ 110 = 2.27 seat turnover rate for that shift

This means that every seat in the restaurant is used 2.27 times during the shift in question. A very strong performance considering that when a dining room is “full of guests” it does not mean that every seat is occupied: A single guest can occupy a deuce, three guests a four top, or five guests a six top.

Wait time and seat turnover improve when:

• Management tracks wait time and seat turnover.
• The menu is paired down to limit options but speed up the guests’ ordering process.
• Management tracks production times for menu items and eliminates those that have unreasonable production times.
• The tables are reset immediately after guests leave.
• The kitchen delivers menu items in a timely manner.
• The table configuration (deuce, four tops, etc.) is flexible enough to accommodate different size parties while minimizing empty seats.
• The dining room scheduling is efficient enough, so the guests are attended to promptly and the service flows efficiently.
• The dining room staff has clear performance standards in terms of check average and number of customers handled.

If a long wait time cannot be avoided, it is important to guide the guests toward the lounge area and promote the sale of drinks.

Output audit: menu analysis

Menu prices and size influence the maximization of revenue. If prices are too high for the market, the guests may forego purchasing additional drinks, appetizers or desserts, thus negatively impacting the guest check average. Furthermore, when guests mostly limit their purchases to entrées, the food cost percentage increases because the mark-up on entrées is typically less than that of appetizers, drinks and desserts.

If a menu is too extensive, it slows down ordering and, consequently, the seat turnover. Furthermore, it increases the cost of inventory handling due to the need for additional manpower and space. On the other hand, a menu that is too narrow limits the potential to attract more customers.

The production time of each menu item also influences the seat turnover, so each menu item must be analyzed to determine its production time. For example, is the excessive production time explained by the difficulty in producing the item or by the lack of equipment or space to produce it? Answering this question allows you to decide whether the item must be eliminated, simplified or if proper equipment must be installed.

Regardless of the type of operation, a maximum production time should be established, and any dish exceeding that time limit should be modified or eliminated. Furthermore, this maximum production time limit should be centered on the projected seat turnover ratio. Assume, for the sake of illustration, that the goal is three turns (arguably a high turn rate) during a 6 pm to 9:00 pm shift. In this case the entire meal - from the greeting and seating of guests, suggestive selling, order taking, and serving of drinks, appetizers, entrée and desserts - should take less than an hour to fit 3 turns during the given period.

Menu efficiency improves when management:

• Management tracks wait time and seat turnover.
• Prices menu items to encourage upselling beyond entrees.
• Eliminates or simplifies menu items that are too time consuming to produce.
• Provides the necessary equipment to produce menu items efficiently.
• Monitors the menu mix daily for changes in sales patterns, with regular modification or replacement of items that are less popular and have limited profitability (See our Menu Engineering article). If this is done properly, the check average should increase.

Output audit: upselling

Upselling increases the check average and boosts profits and tips. It also enriches the guest’s experience and should be part of the establishment culture. Too often servers are simply order-takers and do not attempt to upsell. Management must invest significant time in teaching staff the appeal of the menu and how to both read the customer and use evocative imagery to upsell. Rather than asking the guests if they are interested in dessert for example, they should use enticing language to describe the tiramisu or the crème brulée.

Upselling is not about suggesting the most expensive item. Effective suggestive selling promotes items that have high contribution margins, not always high prices, because high-contribution items drive higher profits. Consequently, management must identify these items, so the staff can develop a sales pitch. It is also useful to have staff taste the food, so they can appreciate each item.

Staff must also understand if suggestive selling is welcomed by diners. This implies a good understanding of guests’ body language clues and the group dynamics. Staff should, for example, direct suggestive selling to that person who seems to be the dominant personality at a table and “manages” the selection of dishes.

Management must monitor upselling by comparing the check average for each member of the waitstaff. This is easily done through the POS system. Remarkably, there is always a server whose performance far exceeds that of her colleagues. Observe this server to understand her techniques and incorporate her methods into your training plan.

Finally, seek menu input from the staff. They are the ones who have direct contact with guests. Consider this feedback when contemplating making menu modifications. Staff input often balances the chef’s impulses with a more realistic perspective.

Remember that suggestive selling must not significantly slow down the seat turnover. During very busy shifts, a higher seat turnover may be more beneficial to revenues than will a higher check average.

Suggestive selling improves when management:

• Instructs the staff on the menu items’ characteristics and profitability and helps develop selling points.
• Trains staff in suggestive selling techniques: group dynamics, reading the customers, etc.
• Illustrates for staff the relationship between check average and tip earnings.
• Tracks check average per server and rewards servers with the highest check averages.
• Consults the wait staff for suggestions on how to improve menu items.

Output audit: reservations

The decision to take or not take reservations is not a straightforward one. Taking reservations can add to the service experience, but the process defeats its purpose when guests with reservations are told they must wait thirty minutes before being seated. At the same time, taking reservations risks slowing the turn around time by leaving seats unoccupied while waiting for parties to arrive, and it limits the number of walk-in guests. Not taking reservations, on the other hand, may dissuade diners from visiting your establishment.

One compromise is to accept reservation for large parties only (5 or more). The table size limitation reduces the risk of making some guests wait while preserving a potentially lucrative market segment: office birthday parties, group luncheons, etc. We recommend, however, avoiding taking reservations for large parties (five or more) during the busiest times because it will slow down service. A good option is to suggest an earlier time for larger parties. Also, when using reservation software such as “Open Table”, management may want to limit the availability of certain, more desirable time slots to have more flexibility and control over the flow of guests.

The reservation process improves when management:

• Limits the number of seats to be reserved.
• Tracks reservations with reservation software and sends text or email reminders to guests.
• Overbooks to account for no-shows.
• Puts a limit on the amount of time a table will stay available after the reservation time has passed.
• Puts one person in charge of the reservation process.
• Avoids booking large parties during peak traffic periods.

Audits identify productivity problems and track productivity improvements that are key to labor cost control and increased profit. To this end, management must invest the time and money required to root out inefficiencies and improve both human resources practices and business models. Ignoring productivity inefficiencies causes financial difficulties that lead to indiscriminate cost cutting, and this in turn has dire consequences for the quality of service, the food and the future of the establishment.

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You may also like:

• Restaurant Cost Control – Part 1: A Nickel-and-Dime Business
• Menu Engineering: How to Raise Restaurant Profits 15% or More
• How to Write Powerful Menu Descriptions That Increase Profits

About the author  

Christine Letchinger received a B.A. in history in her native France before earning an M.B.A. from Southern Methodist University. Now retired, she began her hospitality career by overhauling financially troubled operations and in 1988 began teaching at Chicago's Kendall College. Her teaching focus was on accounting, cost control, and finance, while her interests encompassed feasibility studies, financial sustainability, and the reasons behind restaurant failure. She received the United Methodist Church's Exemplary Teacher Award in 1990 and the Kendall Outstanding Student Commitment Award in 2009. She also served as Interim Dean of the Hospitality Management program at Kendall College.

Chris can be reached here:

• Email: cletchinger@gmail.com
• Phone: 847-668-5532