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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. - PowerPoint PPT Presentation
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Restaurant Operations Management: Principles and Practices © 2006 Pearson Education, Inc. Ninemeier/Hayes Upper Saddle River, NJ 07458
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/Hayes Upper Saddle River, NJ 07458
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/Hayes Upper Saddle River, NJ 07458
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/Hayes Upper Saddle River, NJ 07458
Calculation of Lunch and Dinner Labor Cost Percentages
OH – 14.4
Meal Period Cost of Labor Revenue Labor Cost %
Lunch $2,500.00 $5,000.00 50.0%
Dinner $4,000.00 $12,000.00 33.3%
Total $6,500.00 $17,000.00 38.2%
Restaurant Operations Management: Principles and Practices © 2006 Pearson Education, Inc. Ninemeier/Hayes Upper Saddle River, NJ 07458
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/Hayes Upper Saddle River, NJ 07458
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/Hayes Upper Saddle River, NJ 07458
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/Hayes Upper Saddle River, NJ 07458
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/Hayes Upper Saddle River, NJ 07458
Guests Served Per Labor Hour:Example by Functional Area
OH – 14.9
Functional Area Labor Hours Computation Productivity Ratio
Servers 100 1,000 ÷ 100 10 guests per hour
Bartenders 40 1,000 ÷ 40 25 guests per hour
Cooks 80 1,000 ÷ 80 12.5 guests per hour
Dishwashers 30 1,000 ÷ 30 33.3 guests per hour
Total Hours 250
Restaurant Operations Management: Principles and Practices © 2006 Pearson Education, Inc. Ninemeier/Hayes Upper Saddle River, NJ 07458
Productivity Measurement Comparison
OH – 14.10
Measure of Productivity (Ratio)
Advantage Disadvantage
Labor Cost Percentage Most widely used Varies with the price paid for labor,changes in menu selling prices andtotal revenues
Revenue per Labor Hour Easy to compute Varies with changes in menu sellingprices and total revenues
Labor Dollars per Guest Served Easy to compute Varies with changes in labor costs
Guests Served per Labor Hour Does 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/Hayes Upper Saddle River, NJ 07458
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/Hayes Upper Saddle River, NJ 07458
LaToya’s Restaurant: Weekly Revenue Forecast
OH – 14.12
Day Food Revenues Beverage Revenues Total 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:
$36,850 x .30 = $11,055 labor to generate revenues
$13,150 x .25 = $3,287.50 to generate beverage revenues
Restaurant Operations Management: Principles and Practices © 2006 Pearson Education, Inc. Ninemeier/Hayes Upper Saddle River, NJ 07458
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/Hayes Upper Saddle River, NJ 07458
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/Hayes Upper Saddle River, NJ 07458
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/Hayes Upper Saddle River, NJ 07458
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/Hayes Upper Saddle River, NJ 07458
Employee Scheduling Principles
OH – 14.17
1. 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/Hayes Upper Saddle River, NJ 07458
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/Hayes Upper Saddle River, NJ 07458
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 – 14.19
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/Hayes Upper Saddle River, NJ 07458
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 – 14.20
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/Hayes Upper Saddle River, NJ 07458
Estimated Total Payroll Cost Per Shift (Meal Period)
OH – 14.21
Restaurant Operations Management: Principles and Practices © 2006 Pearson Education, Inc. Ninemeier/Hayes Upper Saddle River, NJ 07458
Outcome Summary Chart
OH – 14.22
Review each of the four outcomes below. Pay attention to the future strategies which apply to the outcome which best represents your operation.
Outcome 1 Goals Met?Financial Goals Met YesService Goals Met YesFuture Strategy: Congratulations! Continue to monitor your results. Celebrate your success with staff members to let them know how well they are doing.
Outcome 2 Goals Met?Financial Goals Met YesService Goals Met NoFuture 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 NoService Goals Met YesFuture 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 4 Goals Met?Financial Goals Met NoService Goals Met NoFuture 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/Hayes Upper Saddle River, NJ 07458
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/Hayes Upper Saddle River, NJ 07458
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/Hayes Upper Saddle River, NJ 07458
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/Hayes Upper Saddle River, NJ 07458
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/Hayes Upper Saddle River, NJ 07458
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
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