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Payroll

Workers Compensation Law Discussion

Payroll

Postby Blithe » Sat Dec 10, 2016 12:02 pm

My labor cost is 38%. To calculate the labor cost for my restaurant I add my wages  including the pay roll expenses(SDI and SS and the rest) and then I also add the workers comp. insurance. This also includes a  fair salary that I pay myself for managing the restaurant and a book keeper. The gross sale of the 90 seat restaurant in California is $900,000/year. Lunch and Dinner only. Beer and Wine only. Why is my number so much higher than 30% that is the industry norm.

Thanks in advance,

Ray
Blithe
 
Posts: 38
Joined: Fri Feb 07, 2014 7:00 pm

Payroll

Postby Biecaford » Sun Dec 11, 2016 12:07 pm

Hi Ray,

Many restaurants report labor without benefits, reporting benefits(social security, etc) as a separate line item.  They will also typically break out the percentage of staff labor as a separate expense from management labor.  Worker's Compensation Insurance is sometimes reported under the "insurance" category versus under labor costs.  The point I am trying to make is that when you compare your operation to others in the industry you may not be comparing apples to apples.  You mentioned that your book keeper's wages are included in labor.  If they are strictly an employee, this may be the right place to put it but many, if not most restaurants pay an outside service for bookkeeping - another reason your labor costs may appear higher.  

Not knowing how good of a job you do when it comes to scheduling to your volume and letting employees go home early during slow meal periods, I can't tell you whether or not you are doing a good job managing your labor costs.  I always recommend scheduling based upon expected sales volumes and adjusting up or down as you go.  Also, having enough people cross-trained so that you can avoid overtime unless absolutely necessary is very important.  Forecast your sales and make your schedule and then, at the end of the week, look at actual hours worked versus hours scheduled.  If there are more hours worked than scheduled find out why.

Increasing sales volume during your existing dayparts is the easiest way to lower labor costs.  During peak periods, there are only so many people you can put into the kitchen.  Increasing those peak dayparts decreases labor costs and increases the profitability of your restaurant.  You may be due for a menu makeover as well.  This can impact your revenue and therefore impact your labor costs as well.

Some types of concepts are, by nature, more labor intensive than others.  I always try to look at that before passing judgment as to whether an operation's labor costs are too high.  Are you prep intensive?  Are you perhaps making from scratch items that you should reconsider?  Good examples might be an operation that cooks potatoes and then shreds their own hash browns versus purchasing shredded potatoes.  The same goes for shredding block cheese versus purchasing shredded.  

Last but not least, I look at the combined labor cost and food cost together.  If you can keep the total of these two numbers at or below 60%, you can typically be profitable.  65% is borderline...and over 70% makes it very, very tough.

I hope this helps.  We are available to help you troubleshoot your operation should you need more assistance.  Best of luck!

David Foster

Foster and Associates

[email protected]

(417) 849-1903
Biecaford
 
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Joined: Fri Mar 28, 2014 4:54 am

Payroll

Postby Rush » Sun Dec 11, 2016 7:10 pm

My labor cost is 38%. To calculate the labor cost for my restaurant I add my wages  including the pay roll expenses(SDI and SS and the rest) and then I also add the workers comp. insurance. This also includes a  fair salary that I pay myself for managing the restaurant and a book keeper. The gross sale of the 90 seat restaurant in California is $900,000/year. Lunch and Dinner only. Beer and Wine only. Why is my number so much higher than 30% that is the industry norm.

Thanks in advance,

Ray
Rush
 
Posts: 50
Joined: Sun Feb 23, 2014 5:20 am


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