How to Calculate Restaurant Productivity
Managing restaurant productivity is a challenging endeavor. If you focus only on the numbers, only on the bottom line, then you may win the battle but lose the war. Productivity in each restaurant has its own ecosystem and you need to see the whole picture in order to build a successful business model.
If you are over staffed then you are paying too much to run your business. But if you cut labor too much then customer service and/or speed of service will suffer and you will lose customers. You will also add undue stress to your team and turn-over may increase, resulting in more inconsistency of service and additional hiring/training costs.
Before you begin the process of determining your productivity budget numbers and targets, you first need to answer these more important questions:
- How do you determine/measure the efficiency/inefficiency of your staff and procedures?
- What level of customer service do you want to provide?
- How important is the morale of your staff?
- If you make changes in your productivity expectations, what processes do you have in place to track its impact on productivity, customer service, and team morale?
It’s important to keep in mind that the purpose of improving your productivity numbers is to improve productivity (work habits, scheduling, etc) by weeding out inefficiencies which do not result in a negative impact on customer service or team morale.
Common Practices for Tracking Restaurant Productivity
- At the minimum, track FOH, HOH, and Support Staff (dishwashers, cleaners, janitors) separately
- Smaller operations include dishwashers in HOH, larger operations keep them separate
- Better yet, track each position separately to give you detailed analysis of each position
- Prep cooks
- Dishwashers (Stewards)
- Also have a summary of all staff combined
- Track each shift separately
- Base scheduling around an accurate forecast of business
- Review productivity actuals on a regular basis
- Review scheduling changes to productivity to evaluate its impact on service and guest satisfaction
- Do not include salaried positions – you cannot control their pay or hours like hourly staff
- Some operations prefer to include salaried positions. But be careful, some of these companies expect salaried positions to work 60+ hours on a regular basis in order to keep their productivity numbers low. If your company consistently expects excessive hours from you (assuming that you’re managing your time/crew right!) then it may be time to look for other opportunities.
Productivity Evaluation Benchmarks
There are a number of different calculations which can be used to evaluate and set benchmarks for your operation. Productivity is generally calculated by four different methods:
- Covers per Labor Hour (total covers/total labor hours)
- Labor Cost per Cover (total labor $/total covers)
- Labor Hours per Cover (total labor hours/total covers)
- Labor Cost per Labor Hour (total labor $/total labor hours)
It’s important to understand how these calculations work and what uncontrollable factors can impact them for the better or worse.
Covers per Labor Hour
formula: total covers/total labor hours = covers per labor hour
This is one of the fundamental evaluations to use for managing restaurant productivity. It is the most neutral benchmark because it is unaffected by fluctuations such as big spenders, good/poor upselling, menu pricing changes, etc.
Covers per Labor Hour are calculated by dividing total covers by total labor hours. This includes all hours i.e. regular and OT hours (since no dollar value is evaluated in this calculation 1 OT hour is the same as 1 regular hour so if a team member works 50 hours it is just counted as 50 hours.)
Example: If you served 3,000 covers for the period:
- And HOH labor was 1,900 total hours
- Then covers/hour for the HOH = 1.58 covers per labor hour
- And FOH labor was 1,400 total hours
- Then covers/hour for FOH = 2.14 covers per labor hour
- Total covers/labor hour (1,900 + 1,400)/3,000 = .91 covers per labor hour
Covers can either be counted as all persons who purchase food, or just those who purchase entrees. The latter would mean that if someone only purchases appetizers but no entrees then they don’t count as a cover. The advantage of counting only entrees is that it is easier to tie productivity to average check of those guests who have an entire meal. But I think that since the goal is to track productivity that you should track all covers sold (who buy food). It still takes labor to produce those appetizers even if they don’t buy an entrée.
At the very least, if you decide to base productivity only on entrée count then you should also track what percentage of patrons only order appetizers each month because a 2 point swing can directly impact your percentages.
Also, realize that if you only track entrees then your productivity number by definition (necessity) should be a lower (in the sense of “worse”) number. For instance, if your budgeted productivity is 1.35 for all covers then for entrée covers only your budgeted restaurant labor productivity may be only 1.05 covers per labor hour.
Increased covers or decreased labor hours help improve this productivity evaluation.
To my knowledge there are no industry standards for Covers per Labor Hour productivity numbers because every operation is unique. Even the same franchise will have different numbers in different locations due to the flow of business.
Having said that, here is what I could find on ranges of Covers per Labor Hour by industry sector/type:
Labor Cost per Cover
formula: total labor dollars/total covers = labor cost per cover
Another important benchmark is knowing how much labor it costs to serve each cover. Total labor dollars includes regular and over-time hours. It may or may not include salaried staff (see note above). Since over-time labor is more expensive than regular-time labor it has a direct negative impact upon this calculation.
When reviewing your P&L numbers this benchmark can help identify these possible issues:
- Over-staffing/Under-staffing per cover
- Excessive over-time
- Increase/Decrease in forecasted covers
What is your “skeleton crew” size?
The skeleton crew is the minimum number of staff needed to serve the anticipated number of covers. If it takes 3 cooks, 3 servers, 1 busser and a host to successfully run a shift on a slow day then this is your skeleton crew. Perhaps they consistently handle 90 to 120 covers successfully, but if you only do 80 then cutting staff to improve your productivity may have a negative impact on your customer service and therefore on your business. Most operations will have several skeleton crew scenarios, such as minimum staff needed for a slow shift, and minimum needed for a busy shift.
In a nutshell, all productivity numbers directly relate to either total covers or total sales. Increasing covers or sales will immediately improve your productivity numbers (assuming that you used the same amount of labor). Adding additional covers is difficult. But increasing the total sales is manageable simply by good menu engineering and having the servers upsell. And if they upsell on the menu items with the best margin then you beat the productivity game while simultaneously adding increased revenue to the bottom line.
Tell me your thoughts! There is a ton of info which can be added to this topic.
- What numbers does your operation target?
- What did I miss?
- How do you evaluate productivity?