Rising Labor Costs: How Restaurants Can Take Action

July 12, 2019

Trends & Insights

Today, restaurants are striving to keep up with the demand for speedy service and winning guest experiences. As a result, the rise in labor costs, minimum wage and high-tech advancements put operators in a bind to keep the business profitable.

Our recent Industry Insights Report with Nation’s Restaurant News show three-fourths of respondents are either very concerned or extremely concerned over rising labor costs. Operators can take back control of their business to keep revenue at an incline and margins cost-effective with the right approach.

What’s Causing Labor Costs to Rise in Restaurants?

The rise in labor costs has a direct correlation with the minimum wage increases throughout the country. Research shows that implementing $15 federal minimum wage in 2020 would reduce employment by roughly 2 million jobs. Consequently, this would largely impact the restaurant industry and disproportionately impact entry-level positions where unemployment rates are the highest. 

Necessary Actions Restaurants Should Take

The first step is to determine the costliest areas in your restaurant. Labor costs include all labor-related categories like employee wages, salaries, payroll, overtime, healthcare, bonuses and more. Next calculate your labor cost percentage to determine how much money is spent on labor to produce revenue. 

The target percentage for labor costs is 20-30%. Once you’ve determined if your labor costs are cutting into your revenue, take action.

It’s imperative for businesses to take an approach that makes the biggest impact and consists of more than reducing wages or raising menu prices. The right point of sale system can bring ample labor opportunities to your establishment without cutting corners.

The Correlation Between Your Point of Sale System and Labor Costs

Your point of sale system should keep labor costs stable with robust reporting and analytics, inventory and staff management functions. Additionally, businesses can combat staffing and lengthy staff trainings by investing in a point of sale system offering omnichannel ordering.

Kiosks give guests the option to make orders and process payments on their own, providing operators the ability to cut back on staffing and lengthy staff trainings. Kiosks, POS terminals, handheld devices and more modernized point of sale technologies are designed to make staff training simple and effective, which leads to a leaner workforce. 

As minimum wage continues to rise, labor has become a significant restaurant cost. Moving forward, businesses must look at their operations from all angles to ensure health and success to stay competitive in the ever-changing market.