There may definitely be some places where labor costs can be reduced, such as cutting back employee hours or eliminating underperforming staff. All businesses look to their human resources department for cost cuts in tough times. But be careful here, because cutting labor is a task best left to a scalpel rather than an axe.

That’s because the one thing you need now more than anything else is good customer service. Actually, you need stellar customer service. When consumers start cutting back, their expectations of service go up, and the only way to get them to spend at all is to take care of them in every way possible.

Your staff is the best tool you have to make sure every hungry customer that walks through your doors leaves satisfied and full. If you start cutting back on staff to save money, you could start hurting your chances at increasing future revenue. Overall morale goes down when people are let go because of hard times rather than performance. And no matter what, customer service will suffer when you lose experienced staff.

Now is the time to focus on fulfilling the needs of your customers even better than before. If some staff have been a drag on your operation, by all means cut them now. But look for other ways to reduce costs before you start cutting quality staff. Your best customers will appreciate the attention, and hopefully maintain their regular visits to your restaurant. And new customers will be blown away by your commitment to quality service and hopefully come back, even if times are hard.

While Circuit City isn’t in the food service industry, a lesson can be drawn from their experience. When sales started declining, Circuit City decided to cut staff as a way to reduce costs and boost profits. It worked for a while. But then customers stopped coming in altogether. Circuit City’s rival Best Buy refused to cut back on customer service, and soon customers were flocking to their stores, not because Best Buy’s prices are better or because they have a better selection, but because Best Buy staff were always there to help.

Circuit City has since declared bankruptcy. Best Buy may not be breaking any profit records, but they’re still in business, and their customers are happy. Things could be a lot worse.

What do you think about this issue? Leave a comment below!

Tags: costs, payroll, reduce, wages

Views: 99

Reply to This

Replies to This Discussion

This is an excellent post and great timing. I would just like to comment on the idea of using the scalpel rather than the sword when it comes to cutting back. One of the techniques we use at Ted's to trim labor is to schedule on 15 minute intervals vs the standard half/hour / hour start time methods. In other words, we look at our daily sales and guest counts in 15 minute intervals and schedule staff accordingly. So shift start times are :15 :30 :45 or on the hour. So for instance, if we look at lunch and we see that between 11:00 and 11:15 when we open we see an average of 3 - 5 guests, we only really need 1 - 2 servers to start at 11:00, then at 11:16 to 11:30 we see an additional 3 - 5 guests, we add a server, and this continues until we see a rush at noon where we need the full staff on and so we might bring them in at 11:45 (You do want them in place and ready for the rush). And on the other end of the shift we evaluate the same :15 clockout intervals to save time at both ends of the shift. Now it may not seem like much but saving these 15 minutes here and there adds up over 2 shifts a day 365 days a year across 56 restaurants. So rather than cut staff, we look at right sizing and right timing the staff each day based on appropriate sales and guest count forecasts. One note, doing this for FOH is easier and simpler to implement than HOH. With HOH staff it all depends on your prep requirements, but you can filter folks in for the rush in the kitchen as well depending on your operation.
"Staff is always there to help" I dont think cutting staff is the key, boasting advertisement might be were its at. I know that it might cost more money, but it will pay off. Twofers, couple specials, children eat free on certian night and add dinner specials for adults, coupons,etc, etc. The list goes on. Open mike nite. At lot of brain storming, Managment might have to start bussing some tables and taking orders. Hence" working manger :)" Please keep staff on because in the end customers suffer and they know it as soon as they walk in the door.
In tough times, you can't help scrutinizing one of your biggest expense. However, I believe there's no need to layoff -- we just need to have our staff get more involved in our business. For example, encouraging their participation in cost cutting -- take unpaid leaves, reducing hours etc.

Losing highly skilled workers can inflict long-term damage on a business, making it hard to bounce back.
I really feel in the end as a business owner, if you're not paying your staff what they deserve it's only a matter of time before they wise up and move on - which increases costs.. interviews, training, HR setup, form i9, payroll processing, etc.

I was pretty impressed at Circuit city's downfall.. under trained staff ignoring customers (I went there often, and for the most part was completely ignored by sales people even when I sought one out). In my experience, paying a well trained employee what they deserve gives them a sense of pride in ownership, even though they don't own... respect can go a long way towards trust, and those happy employees generally work their way towards upper level jobs in the company.

I'm amazed when companies withhold money from their vendors/employees or hold it over their head like some sort of reward - it's a transaction and they deserve their payment, just like you deserve the quality service or product. When both parties put in a positive effort it's more difficult to screw up unless you're simply overpaying for the position/service.
I have spent a number of years assisting companies (in and out of the restaurant industry) controlling costs. Even though I am an accountant (by education) I hate cost cutting. To me cutting costs that a company was stupid before they decided to reduce their labor costs, or stupid afterwords.

Costs must be controlled, not cut. You need to identify what your optimal cost structure is to meet the quality of service you are marketing. Most large companies have cut their labor costs to the detrement of their longevity and or revenue. I saw that with Ritz Carlton. Many of their hotels were built in the late 80's/early 90's and designed to operate at a $350-$400 ADR. Unfortunately they were selling the rooms at less than $100 and the quality of their service suffered. They subsequently sold out to Marriott.

Remember optimize your variable cost structure, don't cut it.

Regards,

Richard Allen

RSS

Advertisments

 

DEPARTMENTS

Social Wine Club for Craft Wineries

Smartbrief

Taco Bell takes on fast casual with U.S. Taco Co.

Taco Bell will test a new fast-casual concept called U.S. Taco Co.  -More

Avocados From Mexico: All New Recipe Brochure
Looking for the sweet spot between indulgence and fresh appeal? Say yes to fresh Avocados from Mexico, all year long. So rich and creamy, use them as a substitute for mayo to create a craveable crab salad sandwich that will make others green with envy. Discover more culinary inspirations and recipes here!

Ronald McDonald gets a makeover for social media debut

Ronald McDonald is giving off less of a clown vibe with a makeover that keeps the color scheme but adds a blazer, a yellow ve -More

Animal fats ramp up flavor

Chicago hot spots are serving up savory dishes flavored with animal fats such as Stephanie Izard's confit goat belly at Girl  -More

JOBS & CAREERS

Posting a job or finding a job starts here at FohBoh. Call us about special $25 posting packages to syndicate across all major jobs boards.

National News

Border Holdings, LLC to Acquire On The Border Mexican Grill & Cantina from Golden Gate Capital

Terms of the transaction were not disclosed. Border Holdings, LLC is an affiliate of Argonne Capital Group who is partnering with an affiliate of Fortress Investment Group, LLC on this transaction.

The Cheesecake Factory Reports Results for First Quarter of Fiscal 2014

Total revenues were $481.4 million in the first quarter of fiscal 2014 as compared to $463.0 million in the prior year first quarter. Net income and diluted net income per share were $22.5 million and $0.43, respectively, in the first quarter of fiscal 2014. T

National Restaurant Association Offers Training DVDs on Harassment Prevention, Social Media Use, and Customer Service

The National Restaurant Association has released three new DVDs that offer best practices in dealing with harassment and discrimination, customer service training, and the first of its kind video guide on the use of social media.

Yum! Brands Reports First-Quarter EPS Growth of 24% Excluding Special Items

China Division System Sales Increased 17% with Operating Profit Growth of 80%; Yum! Reaffirms Full-Year Guidance of at Lea

Souplantation & Sweet Tomatoes Certified As Nation's Largest 'Green' Restaurant Chain

National Group Salutes Country's Only Large Restaurant Group to be 'Certified Green Restaurants®'

CROWD FUNDING

If you are looking for capital to start or grow your restaurant, create the next 501c3, develop and launch the next app for the restaurant industry,or want to help your peers in some meaningful way, we want to know about it.

TED TALKS VIDEO

TED: Hamish Jolly: A shark-deterrent wetsuit (and it's not what you think) - Hamish Jolly (2013)

Hamish Jolly, an ocean swimmer in Australia, wanted a wetsuit that would deter a curious shark from mistaking him for a potential source of nourishment. (Which, statistically, is rare, but certainly a fate worth avoiding.) Working with a team of scientists, he and his friends came up with a fresh approach — not a shark cage, not a suit of chain-mail, but a sleek suit that taps our growing understanding of shark vision.

TED: Michel Laberge: How synchronized hammer strikes could generate nuclear fusion - Michel Laberge (2014)

Our energy future depends on nuclear fusion, says Michel Laberge. The plasma physicist runs a small company with a big idea for a new type of nuclear reactor that could produce clean, cheap energy. His secret recipe? High speeds, scorching temperatures and crushing pressure. In this hopeful talk, he explains how nuclear fusion might be just around the corner.

TED: Sarah Lewis: Embrace the near win - Sarah Lewis (2014)

At her first museum job, art historian Sarah Lewis noticed something important about an artist she was studying: Not every artwork was a total masterpiece. She asks us to consider the role of the almost-failure, the near win, in our own lives. In our pursuit of success and mastery, is it actually our near wins that push us forward?

TED: Matthew Carter: My life in typefaces - Matthew Carter (2014)

Pick up a book, magazine or screen, and more than likely you'll come across some typography designed by Matthew Carter. In this charming talk, the man behind typefaces such as Verdana, Georgia and Bell Centennial (designed just for phone books -- remember them?), takes us on a spin through a career focused on the very last pixel of each letter of a font.

© 2014   Created by FohBoh.

Badges  |  Report an Issue  |  Terms of Service