Let’s talk labour cost optimisation.
You’d be forgiven for thinking labour cost optimisation is simply cutting hours to save money. Instead, it’s a much more complex and nuanced concept that can boost your profits, protect service quality, and give you that competitive edge – if it’s done right.
Here’s the lowdown.
How to think about labour costs
Everyone knows the restaurant industry is harder than ever, right? Whether you want to focus on minimum wage rises and labour shortages, or customer expectations and inflation, it’s tough out there.
Which is why most restaurant owners, at some point, sit down and face the reality that labour is their single biggest controllable expense. We’re talking 25-35% of revenue.
And that can make them see it as waste, something to feel resentful about. Something to cut.
But it’s entirely possible to take a step back and see labour costs as a strategic lever to pull, rather than a problem. To see that you can use data and streamlined business operations to take control of your labour costs. To see that mastering labour costs could be your ticket to healthier, more profitable business.
But let’s take a step back
What do we mean by labour cost optimisation? It’s a strategic process that aligns your staffing levels and scheduling with your operational needs to maximise productivity and profitability. Or in other words, having the right people, at the right time, for the right cost.
So, not cutting. Just being smarter. Labour cost optimisation is about using data to forecast demand, then using that information to develop smarter schedules, cutting wasted hours, rather than people. It means every hour of labour counts.
Because when your staff’s time is more efficient, you can start to see real benefits: revenue freed up, lower labour costs, money you can put into fun things like guest experiences, renovations, talent, or growth. You’re a streamlined labour machine that’s better equipped to handle market swings. Your agility means you can flex to demand. You’re more resilient. The long-term outlook looks better.
So, what makes for great labour cost optimisation?
- Accurate sales forecasting: Using historical and real-time data to build an accurate picture of demand on specific days and times, so you can match your staffing to it.
- Smart tools (not spreadsheets!): Using tools that track staff in real-time to show how labour costs match sales. This can be used for in-the-moment calls, but can also feed into long-term data to give you intelligent, action-based insights you can use to plan more efficiently.
- Clear KPIs: Setting – and having visibility of – key performance indicators like labour cost percentages (ideally as low as possible), sales per labour hour, and customer satisfaction. They can all help you understand and grapple with labour cost optimisation more effectively – even in real-time. Keeping an eye on them means you can make the proactive adjustments that make the most sense.
And what doesn’t?
- Overstaffing and understaffing: Getting staff wrong may be one of the most common mistakes in the industry, but it is avoidable. Overstaffing means your labour costs shoot up, even when your profits aren’t. And understaffing can hit the customer experience when it comes to wait times, food quality, and employee happiness. Guesswork just doesn’t cut it.
- Being unaware of demand patterns: Holiday? Football team playing down the road? Pouring with rain? There are so many factors that can affect demand; if you’re not across them, you’re doomed to get staffing wrong – and miss out on chances to capitalise on the rush.
- Static schedules: By now you might be seeing a theme. Relying on static, finger-in-the sky guesswork doesn’t make for good labour optimisation. Using a dynamic, real-time platform that can react to changes fast is very much a great start.
Where Nory comes in
Nory’s all-in-one, AI-powered restaurant management platform has helped businesses around the country cut their labour costs, improve profitability, and streamline their operations.
Take Rocksalt, the award-winning cafe and restaurant. With multiple sites and no real-time labour management system, they found it hard to track schedules and optimise shifts to meet demand. Our real-time insights helped them accurately predict demand across venues to maintain optimal staffing levels at each location, cutting labour costs by 7% and forecasting sales to within 97.5% accuracy.
Barge East cut labour costs by 10% by using our platform to put everything – shift scheduling, stock counts, labour tracking, and real-time sales forecasting - all in one place.
We’ve also just rebuilt and supercharged our Labour Insights feature to be faster, smarter, and more intuitive. That means it’s now easier than ever to spot trends in cost and productivity at every level, make more informed decisions, and boost profitability.
So, ready to start getting to grips with labour costs optimisation? We make it easy. Book a chat today to learn more.
FAQs
What is a good labour cost percentage for restaurants?
A good labour cost percentage in hospitality is typically between 25–35% of total revenue, though this can of course vary depending on a number of factors. The main thing is to maintain service quality while controlling costs through accurate forecasting and efficient scheduling – all of which Nory can help with.
How can restaurants reduce labour costs without cutting service?
Focus on better forecasting, dynamic scheduling, and cross-training staff so they can cover multiple roles. This ensures the right coverage during busy periods while avoiding overstaffing in quieter times. Nory’s Labour Insights can manage forecasting and scheduling all in one place.
What tools help with labour cost optimisation?
Modern restaurant management systems, like Nory, use AI to forecast sales, recommend optimal schedules, and track labour performance in real time — helping operators make data-driven decisions.
How often should labour costs be reviewed?
Weekly reviews are best for keeping costs in check. Tracking labour as a percentage of sales in real time allows operators to adjust shifts on the fly and prevent costly overages. Instead of using static methods of tracking, tools like Nory can help you analyse data, spot trends, and act more effectively.