Profit Erosion In A Very Tough Labor Market

August 2019 Newsletter - Profit Erosion in a Tough Labor Market

MAJOR PROBLEM #1

My kitchen labor cost is way up and my kitchen staff turnover is ridiculous.

Challenge

Most of my time is spent running ads, interviewing (if they show up), hiring and trying to train the new people and then they don’t show up for work 20% of the time. This feels like an endless struggle. Help!

Solution

We believe that all our people should be treated with respect and dignity and regard them as assets of the business. If you do this then you will create longevity with employees.

So, how did RGI help with the solution?

We are meeting with management and ownership on spending more time with their people in short one on one meetings and sometimes one on two or three meetings.

We coach on listening, asking good questions, being concerned about the staff member’s well-being, and understanding their concerns. We discuss granting staff members to make more contributions to the business and the environment.

We follow this up with one on one meetings with management to check on their progress with staff members.

Result

I am seeing the staff becoming more engaged in their work and seeing and hearing contentment within the ranks.


MAJOR PROBLEM #2

Food cost while maybe not going up needs to go down to help subsidize the increases in kitchen labor cost.

Challenge

Be very careful about raising any prices to get a better food cost. Now is not the time to better one’s food cost through price increases. The marketplace wants more and more value not more and more price increases.

Solutions

  1. I suggest you talk with your vendors about value propositions to help you achieve your cost goals.

    The suppliers are in for the long haul and are “your partners” in your business. I have found visiting with them about your dilemmas with costs has proved to be quite fruitful for the clients. It is just a matter of working with them on a closer basis.

  2. The second part of the food cost is to evaluate each item for its cost and see if there is any trimming in order with regards to the ingredients and the specifications.
  3. Fully engage your chef to be the driver on this process. Have him show you in writing and in metrics weekly what he has accomplished in terms of costing and bringing the overall food cost down. Track the purchases weekly and compare them to the sales.

RGI helped on this process by working through each one of these items with calls to vendors, evaluation of each item food cost and then working closely with both the chef and management to help engineer the food cost down.

Result

I’ve seen this year food costs go down some 2%-4% this year by following the above pathway.


MAJOR PROBLEM #3

Part of reducing kitchen labor cost is scaling the prep work and making some menu items adjustments.

Solutions

  1. Take all your daily prep items and list them on a sheet with a time spent for each task. This chart will show you where you are spending your time in the prep kitchen. I’ve seen prep reduced in the kitchens up to 20% when doing this study.

    One group was spending 2-3 hours per day making house-made crackers to serve with an appetizer dip. When we costed out the labor to do this task, we saw that we were spending $60/day, 6 days/week or $18,720 + the labor taxes of another $3000 or over $21,000/year. I am going to guess that you have several of these prep items on your list.

  2. I also found that some of the prep people were inadequately trained by the chef’s own admission, so we discussed furthering the development of these people through additional training. We want the prep person to feel good about what they are doing so we gave them a pathway to furthering their productivity which directly resulted in their salary level increasing.

    When explained well and when shown how to do the work more efficiently they got faster, and they made more money. Win-Win deal.

  3. Here is another item I found out about. I have a good friend who manufacturers high end sauces, marinades and dressings. The restaurants of course make all their own sauces, marinades and dressings because this is what prideful kitchen staffs do.

    Well, when doing a blind taste test of these various items we found out the manufactured ones exceeded the flavor of ones we made ourselves. And we now reduced the workload of the kitchen staff.

Result

I’ve seen labor cost be reduced by 10%-15% and we are working on this more to get better results but still paying “good-great” wages and maintaining a prideful, happy kitchen.

This service to management takes several hours per week of intense discussion with management and ownership to discuss the process, monitor the actions and view the results and then start the process over again until we achieve our objectives.

Generally, I’ve seen a total reduction of costs about 5%-8%. It takes some time, but it is well worth it to all concerned.