How to Build a Labor Schedule that Fits your Restaurant's Budget

With the help of sales forecasting software, you can be much smarter about your scheduling, and make sure your labor costs don’t spiral out of control.

Labor Optimization
With the help of sales forecasting software, you can be much smarter about your scheduling, and make sure your labor costs don’t spiral out of control.
Branden McRill
October 3, 2022

With a labor shortage continuing to plague the industry, it’s more important than ever to carefully plan your schedules. 

Restaurant operators know how important staffing is. According to stats from the National Restaurant Association, 3 out of 4 operators say recruitment and retention is their toughest challenge.

Schedules are extremely important to your team. Getting them right not only keeps your labor costs under control, it can help you retain staff for longer and encourage better performance. 

The traditional methods of building schedules rely on historical sales data, the intuition of managers, or just plain guesswork, and takes a lot of planning and trying to fit together a puzzle of constantly moving pieces.

In an age where we can use data to optimize every part of restaurant operations, restaurant owners need to rethink how they’re building labor schedules.

How is a labor schedule traditionally done?

Traditionally, a labor schedule was something that came from the creative mind of a restaurant manager, somehow juggling numerous special requests, business needs, and changing demand to create a schedule a week in advance. 

It involved a lot of planning, research, and trial and error – trying to juggle the competing needs of your team members while also getting the right number of staff on shift. 

Get too many people on shift and you’re wasting money and end up with bored employees standing around with nothing to do. 

But if you’re understaffed, your employees will feel overworked, stressed, and resentful. You won’t get the best out of them and your retention rate will suffer.

Trying to do this by hand and trawling through messages and emails for staff availability, or even using spreadsheets, is very time-consuming and inefficient. Ideally, you want to give employees as much notice as possible, but in reality schedules are often rushed out a few days before they’re due to begin. 

Schedules may be made weekly, every two weeks, or monthly. Although it’s difficult to gather all the information for more than a weekly schedule without help from software tools. But with the help of sales forecasting software, you can be much smarter about your scheduling, and make sure your labor costs don’t spiral out of control.

How to build a labor schedule to fit your budget

Rather than relying on intuition or trial and error, a better way to plan your schedules is to tie your labor costs to your sales. To make sure you labor costs are under control and fit with your budget, set a labor cost percentage goal and then work towards that target. 

Labor cost percentage can either be calculated as a proportion of operating costs or total sales for a given period. Most restaurants figure it out as a percentage of sales. That gives you a measure of how much you are spending on labor compared to how much you are selling in a given period. Whichever way you decide to go, make sure it’s consistent across locations so you can make a fair comparison. 

Typically, a good labor cost percentage is around 28-32%, with it being higher at fine-dining and sit-down restaurants than in fast-casual and takeout restaurants that need fewer staff at peak times.

Here’s an example of a labor cost percentage calculation for a fictional taco joint, Tommy Tacos: 

Total sales for July = $250,000

Labor cost for July = $70,000

Labor cost percentage = total labor cost / total sales x 100

Labor cost calculation: 

70,000 / 250,000 = 0.28 

0.28 x 100 = 28%

Once you have your target labor cost percentage, you can schedule based on what you’re going to sell in a given time period to make sure you’re within budget. All you have to do is stick to the percentage.

Scheduling based on sales also helps you make sure you’re properly staffed for the demand, so it’s a win-win.

How to use sales forecasting to build optimized labor schedules

For accurate forecasting, the best way is to use sales forecasting software that not only takes into account historical sales data but also real-time weather, traffic and event information. It uses AI-powered tools to analyze all the data and make predictions up to 95% accuracy. 

Here’s how to use it to optimize your schedules:

  • Step One: Figure out your ideal or target labor cost percentage

Use the calculation and your own business plan to figure out what your ideal labor cost percentage should be. This is your golden figure to stick to no matter what.

  • Step Two: Project your restaurant’s sales for a time period

Unless you want to do it the old fashioned way, you can use sales forecasting software to predict demand 21 days ahead with up to 95% accuracy. This gives you the opportunity to plan in advance with more certainty using your ideal labor cost percentage to determine your budget.

  • Step Three: Use your target labor cost percentage to calculate your budget for labor

If you’re projected sales are $200,000 for August, and your target labor cost percentage is 28%, your budget for labor is 0.28 x 200,000 = $56,000. With this concrete figure in mind, you can schedule labor with purpose, knowing that the figure is tied to what is likely to happen.

  • Step Four: Build your schedule according to your budget 

Go ahead and build your schedules according to your budget (or use your sales forecasting software to do it). You know that your labor cost isn’t going to take you out of a profitable zone if it is tied to projected sales.

  • Step Five: Analyze and adapt if necessary

Did you get the results you were looking for? Did you have adequate numbers of staff on shift? Did you stay within your labor budget? 

Sales forecasting software gives you the insights to see how well your projections matched up to reality and if you successfully managed to stick to your budget. If things didn’t go to plan, you can tweak your approach and improve your approach for the next schedule.

Get Smarter About Scheduling with Sales Forecasting Software

Sales forecasting software is a game-changer when it comes to making accurate future predictions about restaurant demand. 

You can schedule with far more certainty and clarity when you are working towards a budget informed by accurate projections. You can be sure you won’t blow the labor budget, and that staffing levels are tied to sales.

Find out how 5-Out can revolutionize the way you think about scheduling – book your demo today.

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