restaurant labor costs represented by chef preparing a meal

4 Ways to Reduce Labor Costs in Your Restaurant

Featured image by Pexels from Pixabay 

Running a restaurant is more expensive than you might think. Its hospitality services make a restaurant customer-friendly and favored by many people. However, hiring amiable, hospitable workers accounts for the majority of the expenses in a running restaurant. In a word, labor costs for a restaurant can be exorbitant.

Recent statistics reveal that restaurant labor management and the percentage of labor cost-to-sale ratio hovers around 20-40%. However, it can be as high as 75% in extreme cases. Considering the massive capital investment and labor costs of running a restaurant, it is imperative to develop innovative ideas to reduce labor costs and generate your desired profit margin revenue.

If you are looking for insightful ways to significantly reduce labor costs in your restaurant, you’ve landed on the right page. Here is a list of a few conscientious ways you can use to manage your labor costs.

Consistently Review Your Labor Reports with an Eye to Costs

In simplest terms, labor reports are detailed documentation of an employee’s working hours, earnings made, and the additional benefits the employee has acquired over time. It is wise to install a labor report system in your restaurant to check the employees’ efficiency regularly.

Reviewing labor reports proactively aids you in scheduling the exact amount of staff you need at different times. You can take the help of automation software to efficiently analyze the reports and suggest appropriate measures and strategies to reduce labor costs.

For instance, your labor report might help you see that you can keep costs down. For example, you might not need a full staff around 5 pm every day when there’s hardly a crowd and those people only order pre-dinner drinks. On the other hand, you probably do need to schedule more staff members on holidays and other occasions when the entire restaurant is flooded with hungry customers.


Provide Cross Training to Your Staff Members

Cross-training is the key to managing costs as well as other aspects of restaurant labor management. Having an employee who can efficiently interact with customers, take orders, clean tables, manage the crowd, attend to online bookings, and waitress simultaneously is good. However, having only one such employee can cost you more than you might imagine.

In addition to extra payment and scheduling the same employee on most shifts, having only one skilled employee makes the entire restaurant dependent on one person. But cross-training your employees aids in improving every staff member’s skills and reduces dependence on a specific group of staff. Basically, cross-training your employees will help you keep your labor costs down.

Introduce Performance-Based Incentives

Introducing a commission/incentive-based salary structure is another lucrative way to manage labor costs. In addition, this salary structure is an excellent motivator for employees. It encourages them to give their best.

Based on labor reports, you can easily determine which employees have been giving outstanding performance and reward them appropriately. This also helps eliminate the extra cost that might be taking place that makes your spending above the industry average.

Additionally, satistics reveal that about 80% of owners utilize advanced-level technology to run their businesses efficiently. Such high-tech automation services are a quick and easy method to run your operational and marketing sections. Such apps efficiently handle payment processing, order management, checking on the availability of tables, and so on. Moreover, a greater reliance on useful technologies can help you keep your labor costs and other expenditures down.

However, such a step must be taken after a careful discussion with the employees that can be affected by the decision. Otherwise, it might create an unwanted inconvenience among the staff and the owner.

Invest in a Hiring Team to Help You Keep Your Labor Costs Down

Hiring the right candidate is essential to maintaining the restaurant’s reputation and day-to-day operations. When you are paying an employee, you are paying for the effort they put into the work. Therefore, you must carefully analyze the previous working history of any candidate. Be sure to get a better knowledge of their skills and expertise before hiring them.

It is important to remember that the wrong person for the job will only add more to your restaurant’s labor expenditures, as it will cost more to train such a person and your recruitment costs will have been wasted.



The cost of labor is one of the major factors that lead to excessive spending in a restaurant. In order to generate profit margins while maintaining a good level of customer satisfaction, it is imperative to consider the above-mentioned tactics to deal with labor costs. One can use practical ways to some extent. However, using management software can significantly aid in quickly and effectively managing personnel costs.