The question: what inefficiencies cannot be determined through overall labor, food and beverage cost ratios?
The answer? All of them!
Your overall labor cost is a wide-angle, aggregate view of all labor. It cannot tell you where the problems lie because it is too general in nature. Secondly, they are historical and after-the-fact. Finally, they are distorted by increases and decrease in sales. For better control you need more focused metrics such as covers per labor hour, labor cost per hour and labor cost per cover.
Labor should also be broken down into more than BOH and FOH. It should be by each area of production. In the BOH it should reflect your operational design - prep, line, steward, dish, etc…and by each daypart! FOH can be broken down by position – Host, Server, Bus, bar, bar back, etc…and per daypart.
As for sales per labor hour, there are several things to consider when using it to analyze productivity.
- Menu price increases can affect it greatly.
- Fast-food drive through windows can skew the effect as well.
- Different average check amounts per daypart.
- This ratio is used to schedule to sales revenue when you should actually schedule to anticipated transaction volumes.
- Late night and early morning operations.
- Experience levels of staff.
For food and beverage costs, there are four metrics that should be utilized: maximum allowable, actual, potential and standard and you need to break them out in categories like produce, dairy, meat, beer, liquor, wine, etc…even further if you have larger volumes.
Cost controls are first and foremost proactive means of preventing losses and maintaining control, not reactive or corrective. Only by categorizing your COGS and utilizing focused metrics in each, can you truly understand where the opportunities lie.
Have Fun Today!
Jeffrey Summers
