Restaurant Operations Management: Principles and Practices© 2006 Pearson Education, Inc. Ninemeier/HayesUpper Saddle River, NJ Factors Impacting Quality and Number of Staff Needed to Operate a Restaurant Menu – Number of items; extent to which many and/or complex items must be produced. Food Preparation Methods – Extent to which convenience foods are used. Desired Service Levels – Consider, for example, counter service and table side preparation or service. Quality of Training – Training impacts the employees’ knowledge and skills. OH – 14.1

Restaurant Operations Management: Principles and Practices© 2006 Pearson Education, Inc. Ninemeier/HayesUpper Saddle River, NJ Four-Step Labor Cost Control System OH – 14.2 Step 1: Step 2: Step 3: Step 4: Select Productivity Measures Forecast Guests and/or Revenues and Staffing Needs Schedule Staff Evaluate Labor Control Results

Restaurant Operations Management: Principles and Practices© 2006 Pearson Education, Inc. Ninemeier/HayesUpper Saddle River, NJ Labor Cost Percentage What is “cost of labor?” It includes: Salaries/wages (payroll) Social Security taxes Unemployment/workers’ compensation taxes Employee health, dental, vision insurance premiums paid by the employer Vacation/sick leave/personal days Employee meals Employee training expenses OH – 14.3 Cost of Labor = Labor Cost % Revenue

Restaurant Operations Management: Principles and Practices© 2006 Pearson Education, Inc. Ninemeier/HayesUpper Saddle River, NJ Calculation of Lunch and Dinner Labor Cost Percentages OH – 14.4 Meal PeriodCost of LaborRevenueLabor Cost % Lunch$2,500.00$5, % Dinner$4,000.00$12, % Total$6,500.00$17, %

Restaurant Operations Management: Principles and Practices© 2006 Pearson Education, Inc. Ninemeier/HayesUpper Saddle River, NJ When Using a Labor Cost Percentage: Consistently use the same types of labor cost information when computing and comparing the labor cost percentage Realize that labor cost percentages are affected by changes in wage rates Recognize that labor cost percentages are affected by changes in menu selling prices and in total revenues generated OH – 14.5

Restaurant Operations Management: Principles and Practices© 2006 Pearson Education, Inc. Ninemeier/HayesUpper Saddle River, NJ Revenue Per Labor Hour Note that: Operations with different wage rates can still have the same revenue per labor hour The productivity measurement is easy to compute The ratio can be used to schedule employees if revenue estimates and historic revenue per labor hour data is available OH – 14.6 Total Revenue Labor Hours Used

Restaurant Operations Management: Principles and Practices© 2006 Pearson Education, Inc. Ninemeier/HayesUpper Saddle River, NJ Labor Dollars Per Guest This measure is easy to calculate It effectively measures productivity when the number of guests stays relatively constant OH – 14.7 Total Labor Dollars Total Guests Served

Restaurant Operations Management: Principles and Practices© 2006 Pearson Education, Inc. Ninemeier/HayesUpper Saddle River, NJ Guests Served Per Labor Hour Cost of labor Changes in menu selling prices Total revenue dollars generated OH – 14.8 Number of Guests Served Number of Labor Hours Used Note: This measurement is not affected by

Restaurant Operations Management: Principles and Practices© 2006 Pearson Education, Inc. Ninemeier/HayesUpper Saddle River, NJ Guests Served Per Labor Hour: Example by Functional Area OH – 14.9 Functional AreaLabor HoursComputationProductivity Ratio Servers1001,000 ÷ guests per hour Bartenders401,000 ÷ 4025 guests per hour Cooks801,000 ÷ guests per hour Dishwashers301,000 ÷ guests per hour Total Hours250

Restaurant Operations Management: Principles and Practices© 2006 Pearson Education, Inc. Ninemeier/HayesUpper Saddle River, NJ Productivity Measurement Comparison OH – Measure of Productivity (Ratio) AdvantageDisadvantage Labor Cost PercentageMost widely usedVaries with the price paid for labor, changes in menu selling prices and total revenues Revenue per Labor HourEasy to computeVaries with changes in menu selling prices and total revenues Labor Dollars per Guest ServedEasy to computeVaries with changes in labor costs Guests Served per Labor HourDoes not vary with changes in menu selling prices, total revenues or labor costs Most useful only if computed by functional area

Restaurant Operations Management: Principles and Practices© 2006 Pearson Education, Inc. Ninemeier/HayesUpper Saddle River, NJ Historical Data for Forecasting Future Revenue Prior day’s sales Average sales for the prior four same days (for example, Sundays or Tuesdays) Prior week’s average daily sales Prior month’s average daily sales Actual sales on the same day (prior year) Average actual sales on the same day (prior two or more years) Average actual daily sales in the same month (one or more prior years) OH – 14.11

Restaurant Operations Management: Principles and Practices© 2006 Pearson Education, Inc. Ninemeier/HayesUpper Saddle River, NJ LaToya’s Restaurant: Weekly Revenue Forecast OH – DayFood RevenuesBeverage RevenuesTotal Revenues Monday$ 3,000$1,000$ 4,000 Tuesday$ 2,500$ 800$ 3,300 Wednesday$ 3,500$1,100$ 4,600 Thursday$ 5,500$ 700$ 6,200 Friday$ 8,500$4,000$12,500 Saturday$ 9,000$4,800$13,800 Sunday$ 4,850$ 750$ 5,600 Total$36,850$ 13,150$50,000 Note: Assume a 30% labor cost for food revenue and a 25% labor cost for beverage revenue: $36,850x.30=$11,055 labor to generate revenues $13,150x.25=$3, to generate beverage revenues

Restaurant Operations Management: Principles and Practices© 2006 Pearson Education, Inc. Ninemeier/HayesUpper Saddle River, NJ Factors to Consider Before an Employee Schedule Is Developed Labor costs do not maintain a fixed relationship to revenue. Labor cost percentages decrease as revenues increase and increase as revenues decrease because salaried labor is spread over a larger (or smaller) revenue base. Up to a point, no additional employees are needed as revenue levels increase (consider the possible need for only one receptionist in a dining room with a capacity of 50 guests). The need for fixed and variable labor employees should be forecast separately. OH – 14.13

Restaurant Operations Management: Principles and Practices© 2006 Pearson Education, Inc. Ninemeier/HayesUpper Saddle River, NJ An Effective Employee Schedule Impacts: The quality of products and services provided to guests The employees’ level of job satisfaction The restaurant’s profitability The perception that the manager’s own boss has of his/her ability to manage effectively OH – 14.14

Restaurant Operations Management: Principles and Practices© 2006 Pearson Education, Inc. Ninemeier/HayesUpper Saddle River, NJ Basic Information for an Employee Schedule The dates covered by the schedule The day of the week covered by the schedule Employee first and last names Scheduled days to work Scheduled days off Scheduled start time (designate A.M/ P.M.) Scheduled stop time (designate A.M/ P.M.) OH – 14.15

Restaurant Operations Management: Principles and Practices© 2006 Pearson Education, Inc. Ninemeier/HayesUpper Saddle River, NJ Still More Information for an Employee Schedule Total schedule period hours to be worked (exclude scheduled meal periods from totals) Requested vacation or personal days off On/Off days for salaried personnel The date the schedule was prepared The individual who has prepared/approved the schedule OH – 14.16

Restaurant Operations Management: Principles and Practices© 2006 Pearson Education, Inc. Ninemeier/HayesUpper Saddle River, NJ Employee Scheduling Principles OH – Begin with forecasted revenue. 2.Develop a productivity target and schedule to meet it. 3.Schedule for the needs of guests first and of employees second. 4.Avoid scheduling overtime whenever possible. 5.Utilize part-time employees for peak-volume periods. 6.Minimize split-shifts. 7.Consider and grant employee schedule requests whenever possible. 8.Be fair when scheduling preferred time periods. 9.Comply with all applicable laws and company policies. 10.Communicate scheduling decisions in a timely manner.

Restaurant Operations Management: Principles and Practices© 2006 Pearson Education, Inc. Ninemeier/HayesUpper Saddle River, NJ Possible Reasons to Modify Employee Schedule Significant increases/decreases in forecasted business volumes Unanticipated voluntary and involuntary employee separations Employee call-ins or no-shows Unanticipated changes in operating hours or work assignments OH – 14.18

Restaurant Operations Management: Principles and Practices© 2006 Pearson Education, Inc. Ninemeier/HayesUpper Saddle River, NJ Calculation of Negative Labor Cost Variance Dollar Variance: $20,000 actual cost (-) $15,000 targeted costs = $5,000 negative variance Percent Variance: 40% actual labor cost % (-) 30% targeted labor cost % = 10 percent negative variance OH – LaToya forecasts $50,000 in revenue with a target of a 30% labor cost: $15,000 ($50,000 x.30 = $15,000). She has generated $50,000 in revenue but spent $20,000 on labor ($20,000 ÷ $50,000 = 40 % labor cost).

Restaurant Operations Management: Principles and Practices© 2006 Pearson Education, Inc. Ninemeier/HayesUpper Saddle River, NJ Calculation of Positive Labor Cost Variance Dollar Variance: $15,000 targeted cost - $13,000 actual cost = $2,000 positive variance Percent Variance: Planned cost: $15,000 labor cost = 30% targeted labor cost % $50,000 revenue Actual cost: $13,000 labor cost = 26% actual labor cost $50,000 revenue (30% - 26% = 4% positive variance) OH – Another manager anticipates $50,000 in revenue and a $15,000 labor cost. The revenue goal is attained, but actual labor costs are only $13,000.

Restaurant Operations Management: Principles and Practices© 2006 Pearson Education, Inc. Ninemeier/HayesUpper Saddle River, NJ Estimated Total Payroll Cost Per Shift (Meal Period) OH – 14.21

Restaurant Operations Management: Principles and Practices© 2006 Pearson Education, Inc. Ninemeier/HayesUpper Saddle River, NJ Outcome Summary Chart OH – Review each of the four outcomes below. Pay attention to the future strategies which apply to the outcome which best represents your operation. Outcome 1Goals Met? Financial Goals Met  Yes Service Goals Met  Yes Future Strategy: Congratulations! Continue to monitor your results. Celebrate your success with staff members to let them know how well they are doing. Outcome 2Goals Met? Financial Goals Met  Yes Service Goals Met  No Future Strategy: Don’t allow service levels to suffer even though you are meeting your financial goals. Review your staffing patterns to identify “under-staffed” time periods that caused poor service levels. Review your service-related training procedures for weaknesses. Outcome 3 Goals Met? Financial Goals Met  No Service Goals Met  Yes Future Strategy: Overstaffing may ensure that you meet your service goals, but the continued economic viability of the operation is also critical. Study your schedule for areas of overstaffing. Ask your employees for ideas about how to better serve guests. Start now! Outcome 4Goals Met? Financial Goals Met  No Service Goals Met  No Future Strategy: You are not alone. Many managers find themselves in this position when they take over a new or existing operation and/or when financial and/ or service goals are increased. Don’t panic. Build employee schedules that meet your targeted financial goals, and then observe staff carefully to identify service bottlenecks. Intensify your training efforts to help employees meet their service-related goals. Monitor your improvements!

Restaurant Operations Management: Principles and Practices© 2006 Pearson Education, Inc. Ninemeier/HayesUpper Saddle River, NJ Is an Employee Salaried? The employee’s primary duties (at least 60% of the time) must involve managing the business or a department within it. The employee must regularly direct the work of two or more other employees. The employee must have the authority to hire, fire or recommend courses of action. OH – 14.23

Restaurant Operations Management: Principles and Practices© 2006 Pearson Education, Inc. Ninemeier/HayesUpper Saddle River, NJ Technology and the Enhancement of Management Productivity Record Keeping Scheduling Training Report Generation OH – 14.24

Restaurant Operations Management: Principles and Practices© 2006 Pearson Education, Inc. Ninemeier/HayesUpper Saddle River, NJ Technology and Back-of-House Activities Evaluating vendor supply specifications online Scheduling deliveries and placing orders Performing nutrition-related analysis of menu items Creating production schedules based on forecasted revenue and/or guests Developing storage requisition (issue) lists Computing and comparing actual ideal food costs Maintaining inventory records and extending inventory accounts and values OH – 14.25

Restaurant Operations Management: Principles and Practices© 2006 Pearson Education, Inc. Ninemeier/HayesUpper Saddle River, NJ Technology and Front-of-House Activities Helping to monitor individual server and cashier banks Simplifying and displaying table assignments Allowing servers to separate guest checks at any time in the guest order process Sending orders to the kitchen by use of wired or wireless technology Starting orders by touching a picture of the table or by entering table number Allowing for daily (or more frequent) changes of menu special prices Simplifying debit or credit card processing at the POS station OH – 14.26

Restaurant Operations Management: Principles and Practices© 2006 Pearson Education, Inc. Ninemeier/HayesUpper Saddle River, NJ Technology and Bartenders’ Activities Identify cash, credit and house account patrons Track contribution margins of items sold Manage (track) beverage products and supplies and generate purchase orders Evaluate revenue and labor hours expended Monitor product usage for actual and targeted pour percentages Record product transfers to and from the kitchen Schedule beverage employees based on forecasted revenue levels Create and print wine lists and other beverage specials menus Maintain drink recipe files OH – 14.27