Right behind food cost is your second most expensive controllable expense: labor. Labor cost, or L/C, is usually referred to as a percentage of gross sales. I stayed on top of hourly labor like a hawk. My point of sale system served as my time clock and provided real time labor amounts in dollars as well as percentage of gross. My manager’s pay was a combination of salary and bonus based on performance. The biggest area he was in charge of was achieving an ideal prime cost. Prime cost, or P/C, is defi ned as the combination of total food cost (F/C) and labor cost. Every operation varies somewhat because of service style and prevailing wages. At Big Dave’s Pizza, the prime cost was 55 percent. We ran about a 30-percent F/C and a 25 percent L/C. These percentages could move just as long as the P/C stayed at 55 percent.
Most operations I work with hover around 60-percent prime. To accurately state the correct labor percentage one must take into account several areas. The fi rst is salaries and wages, both management and hourly. In addition, one must add in payroll taxes (FICA-Medicare) worker’s comp insurance, any medical insurance and other benefi ts. These expense categories should be grouped together under payroll on your profi t and loss statement.
The snapshot that you get from your POS labor screen usually doesn’t refl ect anything but labor that is on the clock. The above soft costs usually will add 5 to 6 percent of additional costs to the real number that will be refl ected on your fi nancials.
The steps we implemented to achieve a terrifi c labor cost were written in stone. Every week my manager and scheduler projected the next week’s sales based on prior weeks’ same-sales. Once that dollar amount was determined we knew how much money we had in the budget to spend on labor. Hypothetically, if a store had weekly gross (less sales tax) sales of $10,000 and their ideal labor cost percentage is 30 percent, you’ll have $2,500 to spend on wages and salary. The soft costs will add another 5 percent, so you’ll hit 30 percent when the week is said and done. The fi rst days we scheduled were Friday and Saturday. I wanted to have those two very busy days covered with my most productive, trained staff. I call it “put your aces in their places.” I slotted my fastest pizza-makers, drivers and counter crew in their most productive slots for the shift. These days were normally two or three times as busy as weekdays. During peak sales shifts my productivity increased. Everyone on staff was working full speed. I often recorded 12 and 13 percent labor hours. These highly productive sales bursts helped shore up high labor days when sales were low. It still takes a minimum amount of staff to deliver great service and food. During slow weekdays, I couldn’t help but run higher than average ideal labor. The trick is to have the week or payroll cycle balance out.
Consistent numbers are almost impossible to achieve unless your staff is highly trained. One highly trained cook or driver can out-produce two or three under-trained employees. One of my fastest pizza-makers was Mark H. This guy could hand stretch, spin, sauce and cheese a 14-inch pizza and put it in the oven in 19 seconds. His only request: “Don’t let my table run out of ingredients and stay out of my space.” Mark was trained and mentored by Cookin’ Correlle. Sarah F. could take a phone order, repeat it back and suggestively upsell extra cheese or breadsticks in 48 seconds. The customer never felt rushed. Sarah was trained by my manager, G.I. Joe. I was the slowest order taker at 63 seconds. My head prep cook, David J., could mix, weigh out, roll and refrigerate a 75-pound batch of dough singlehandedly in 21 minutes. I trained David J. He was a nut case and required gentle handling. These folks had one thing in common: they shared a fundamental principal of Big Dave’s a high sense of urgency. They also had time expectations they shot for. We timed every operation in the store and knew how long it took to complete almost any task. Tasks that are measured improve. If you don’t have the bar set, times will vary.
Every one of my superstar eagles started out on the bottom of the schedule when they were a probationary newbie. Ninety-percent of all new hires were sponsored by an existing eagle. After you worked for me for six months, you could sponsor a new hire. After a deep and through background check and a group interview, the newbie was brought into the family. The newbie’s sponsor took on the responsibility of transforming their friend into an awesome, competent, quick and smiling customerpleasing crew person. Every sponsor entered into a handshake contract with me at the time we hired in their friend. If their friend was doing well at the end of 10 weeks I gave the sponsor a $100 bill from my wallet. If for any reason the newbie wasn’t with us at 10 weeks, the sponsor gave me $50. I never got any half-hearted endorsements. These folks put their money where their mouth was. If no one would sponsor a potential new hire I assumed there was a good reason … and passed on the hire. ?
Cross-Training is Key
When the majority of your staff is cross trained so they can perform tasks and duties outside of their normal job, you’ll never fear being understaffed for any rush. Although you are paying more, the pure productivity of this kind of crew will cost much less than staffi ng with average people. This is how we held our labor percentage very close to 25 percent. This intensive training costs money. You have to decide if you want to invest the time and money into new hires. You may think, “What if I get them all trained up and they quit?” I say, “What if you don’t and they stay?”
Big Dave Ostrander owned a highly successful independent pizzeria before becoming a consultant, speaker and internationally sought-after trainer. He is a monthly contributor to Pizza Today and leads seminars on operational topics for the family of Pizza Expo tradeshows.