How to Manage Rising Food Labor Costs in 2016

12.11.2015 by Ken Claflin

There is a profit-destroying tidal wave bearing down on the food service industry right now: labor costs. While every owner/operator is being forced to adjust to higher hourly and overtime costs, how each company uses analytics to create efficiencies within its workforce will determine how much their bottom lines improve.

The first wave of increased costs is coming in the form of minimum wage increases on the state and city levels. Cities like San Francisco and Seattle have already raised their minimum wages to $15/hour, while states like New York are debating legislation that would raise wages to the same level. Many other states such as Connecticut, Nebraska and West Virginia also have automatic minimum wage increases coming in 2017.

The second wave of increasing labor costs comes in the form of proposed new federal overtime rules, that would make an estimated 5 million workers eligible for overtime pay. The proposal, which could become law next year, increases the threshold for overtime pay from $455 a week to $970 per week. For restaurants this means many more people would be eligible for overtime pay, expanding the costs of positions such as managers. These changes are coming on top of the still recent health insurance regulations that force many larger restaurant chains to offer insurance to employees who work more than 30 hours a week.

When you add up all of these new considerations, any food service provider is facing increased costs for every single employee, and hour worked. The key to adapting to these new rules is not cutting staffing or using part-time employees. The optimal way for restaurants to reduce labor costs in this new environment is to use analytics to create labor efficiencies. That’s exactly what Adriano Paganini of Back of the House Restaurant Group plans to do. “Don’t go on a diet,” he told Restaurant Hospitality. “Always look for efficiencies.”

Spark Analytics’ Restaurant Solutions give food service providers the ability to reduce their labor costs by 1-2% of sales by increasing efficiencies and productivity within the existing workforce. Our solution provides the unique opportunity of pulling data on all activities at the store level - from individual associate performance, to guest counts on an individual location level.

Furthermore, Spark Analytics’ proprietary algorithms recommend changes such as additional training or closer monitoring of individual employees responsible for specific tasks. After the directive is completed, you can compare results from before and after the directive to see if the issue is resolved, resulting in measurable financial improvements. This invaluable information and advice reduces risks and labor costs by giving restaurants the insights needed to make operational changes, even in today’s current labor costs reality.

To learn more about how Spark Analytics can reduce your restaurant labor costs and improve your profit margins, contact us today.

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