As a restaurant and cafe owner, you rely on your staff to cook and serve the meals, greet your customers and clean up the venue. The cost of labour for all these tasks to be performed can be your biggest operating expense so it would be helpful to use benchmarks for labour cost standards and be flexible when evaluating your payroll, especially the short-term figures. Plenty of variables factor in your labour costs and these temporary spikes usually even out over time. Seek help from experienced café accountants so you can do this properly.
In the hospitality industry, about 25 to 40 percent of your restaurant’s gross revenue is the acceptable labour cost percentage. Expensive restaurants that offer fine dining experience are often at the high end of the spectrum whereas fast, casual restaurants with simple menu items are at the lower end.
With the help of café accountants, you can understand your payroll and determine where there is room for improvement by tracking the hours relative to your labour tasks such as the back and front of house. Doing so will show you which parts of your restaurant are overstaffed or inefficient and tell you where payroll costs can be reduced.
You can also assess your margins by reviewing your restaurant’s or café’s prime costs (ingredients and labour combined) instead of solely looking at your labour costs. It may be feasible to have higher labour costs if your food costs are lower and vice versa. Labour and food costs combined should be at around 66 percent or two thirds of your gross revenue. If you can’t trim down your labour costs because all of your restaurant’s elements are done in house, you can save money on ingredients instead. Alternatively, you can buy prepared items from a food service warehouse, increase your food costs and reduce your labour costs.
Labour is often considered as a variable cost because it fluctuates in relation to your restaurant’s or café’s transactions but the truth is you incur fixed labour costs to maintain your core team even if you don’t get any customers. Business volume is unpredictable but even through slow days your staff have to be ready to handle a rush. Once your restaurant gets enough business volume to cover the costs of minimum staffing consistently, you will have better odds and more flexibility at improving your labour cost percentage.
Cafe Accountants, Bookkeepers & Hospitality Accounting Specialists
Need a bit of assistance with your hospitality business? Contact cafe accountants today and learn more about our fixed fees. You won’t regret it.
Some of our clients include Buckley’s Entertainment Center, Ballarat Leagues Club, Daylesford Hotel, Bacchus Marsh Golf Club, Campbell Point House, Midlands Ballarat, The Urban Newtown, Maryborough Midland Society, Brink Drinks, Dontek, UV Wraps and many more.
Aside from business consultation, we also offer accounting, bookkeeping, back office, SMSF and POS services designed to help you achieve greater financial success.
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