How to Control Labor Costs for Your Startup Restaurant

Managing your labor costs is one of the toughest things that restaurant owners have to deal with on a daily basis. You have to find the right balance between how much you’re going to spend on your workers and making sure you have enough people serving your customers. 

The food service industry norm is to spend 20 to 25 percent of your sales on labor cost. Spending lower than this would compromise quality customer service, but if you go higher than this, you’d risk going over your budget and having idle restaurant staff. If you can lower your labor costs and combine it with efficient tax planning, you may be able to increase your profit margin and help your business grow more. You can have a better grip of your labor costs by following these tips.

Control Turnover Rate

Compared to other private businesses, restaurants suffer from a higher employee turnover rate, owing to the high number of seasonal, part-time and teenagers working in them. And this turnover rate could end up costing restaurateurs as much as $5,000 for each employee who leaves. But you can prevent more turnovers by training managers to hire smart applicants with good references and long work histories, or much better, applicants with experience and require less training.


It also helps to provide flexible scheduling to accommodate your employees’ educational or personal demands and help them achieve better work-life balance. Find the right balance between how many full-time and part-time workers to hire so you will have trustworthy and affordable employees that can perform tasks that don’t really need much expertise.

Prevent overstaffing to avoid wasting hundreds of dollars and reducing the tips that the servers receive, which is bound to happen if there are too many of them working per shift. 

If you want to hold on to reliable employees, provide them with better incentives, better growth opportunities, developing employee loyalty programs, and improve work culture. Labor costs also include some hidden expenses that one day you as a business owner will face up with. For each employee, besides giving them their deserved salaries, you need to pay for FICA taxes. As an addition, Social Security and Medicare tax also need to be counted. These all mean that you need to pay for each time the full expenses for your business to survive. But the worst thing is that once you can be short of money to pay for them, so you can consider personal loans online for tax payments.

Streamline Operations

First up, review your menu and eliminate the ones that aren’t much of a hit among patrons to avoid wasting your staff’s time trying to execute too many dishes.

It also helps to check your current policies, especially those affecting employees, from when they should clock in or out and take a break and use the POS system to monitor their time logs to when they can complete side jobs.

Rethink your current floor chart to ensure that you won’t over staff a section when it’s not even busy. Let servers share sections during off-peak hours, for instance.

Change up how you use your space. Without taking on a costly renovation, you could provide a service well for your servers’ better access to drinks when you have a long bar. You could also change your kitchen so your fryer can be used at the same time someone is working at the fish station so orders can be completed more quickly, for instance.

Develop a Better Training Program

Break down services into steps that are easy to follow for new hires and illustrate them in detail in the training plan and employee handbook. Make it a habit to provide checklists that your employees can follow and use to maintain accountability. Cross-training your employees will also help them picture out their role in the whole restaurant operations, improve functionality, and prepare them to jump in whenever employees in other posts need help.

Regular staff meetings before starting a new shift present good opportunities to refresh your employees’ minds about the new menus, changing policies, or other important reminders that can help boost efficiency and reduce mistakes.

Performance evaluation plays an important role in improving your training program as it can pinpoint the areas that need improvement and the things that could help your staff deliver better service.

Improve Your Staff Scheduling

Plan everything, especially when you’re hosting big events, for which you’d have to have on-call staff that can be called off if the number of customers isn’t as huge as expected. This is an important backup plan during peak times.

Forecast peak times and the number of expected patrons based on the figures from previous years, especially during holidays and other special occasions.

It would be better to invest in automated scheduling systems that work online for a more convenient posting of schedules and swapping of shifts, if need be, among employees. It’s going to be worth the cost if it means reducing issues caused by scheduling complications or staff shortages. You may also want to invest in systems with features like online ordering, automatic billing, and table reservation, among others.

To have better control over your labor costs, you need to have a deeper insight into your hiring process, your restaurants’ needs, and what your staff wants, especially in terms of scheduling. Hire strong candidates, assess operational processes regularly to ensure efficiency, and develop a schedule that will still provide your staff with work-life balance without compromising your customer service.