Cutting Labor Costs with Holistic Systems

Eric StoberOperations & Management, Restaurants

This week’s post comes courtesy of our friends at 7shifts. Learn about how Bypass and 7shifts are partnering to increase flexibility and controls in restaurant management.

In the restaurant industry, costs can easily add up and take a heavy toll on profits, especially labor costs, and especially when managing multiple locations. From paying unnecessary overtime to overstaffing to improperly logged hours, there are many ways to potentially lose your business money.

According to a recent survey by the U.S. Bureau of Labor Statistics, 39 percent of respondents said that profit and revenue growth was their top business challenge, with 43 percent saying that they don’t feel in control of their profit margins.

While the challenges for multi-unit operators may seem insurmountable, there are many easy solutions to cut your costs and increase profits, namely by eliminating inefficiencies. Here are six opportunities for savvy restaurateurs looking to optimize their operations and get themselves up for long-term profitability:

Prevent unneeded overtime

One major burden on restaurant profitability is overtime—having to pay a worker time and a half (or more) when they work over 40 hours in a week. With a rising minimum wage, this cost can add up, and fast.

But with software, simple solutions to prevent overtime do exist. 7shifts scheduling platform, for example offers Overtime Alerts. Overtime Alerts are push notifications sent through the 7shifts app that alert managers when an employee is about to go to overtime or has logged overtime hours. Managers can customize the “alert buffer” to give earlier notice before an employee goes overtime.

Schedule only what you need

Knowing how to schedule optimally is half the battle in terms of cutting labor costs and driving revenue in a multi-unit operation.

One way to make smart, data-driven schedules is to use your past sales—found in your POS—to forecast future demand to make sure that you’re properly staffed, rather than over or understaffed. Having a schedule with ‘optimal labor’ provides the best mix of staffing and efficiency that maintains service levels and keeps costs down.

A smart restaurant scheduling platform can do the legwork for you by automatically creating schedules based on your sales forecast derived from your POS, with up to 95% accuracy in its forecasting.

Forecasting your sales is as simple as connecting your POS to your restaurant scheduling software. Then, the software’s scheduling algorithm will analyze your sales data and weather trends, along with other factors you choose like employee availability, to predict your upcoming staffing requirements.

Make sure hours are correct

While everyone strives to hire loyal and honest employees, sometimes hours logged are not completely synced with the hours actually worked—either accidentally or on purpose – meaning paid wages for nothing. A recent survey, for example, shows that “buddy punching” (when one worker punches in for another) has cost business owners $373 million each year.

In order to avoid this, consider implementing an electronic time-tracking app. Using an app, you can accurately track the time your employees clocked in and out, including breaks, as well as geo-tracking, fingerprint scanning or facial detection to avoid early clock-ins or coworkers punching in for someone who is late.

Timesheets can then be instantly synced to your payroll provider to save on administration time and costs.

Automated ordering

Using technology in a smart way can help eliminate inefficiencies and increase your profit margin. One way to create a more efficient system is to consider adopting self-service kiosks for customers to order from.

By giving the power of ordering to your customers, you can reduce the labor needed to take the orders. Customers also like kiosks because they shorten lines during peak periods and give them complete power to customize their orders. Order accuracy can also be improved, eliminating food waste when an order was input incorrectly.


With food ordering kiosks, you’ll need less employees to take orders, but simply to greet customers and help with the terminals if need be. Other industries have hungrily adopted kiosks, such as grocery stores and airports, and the restaurant industry is just awakening to their cost-saving potential.

Manage inventory

Aside from scheduling, managing inventory is another “must-do” restaurant task that can reduce labor costs, but with regard to management.

Hospitality-focused inventory systems such as Orderly or SimpleOrder allow you to set automatic low inventory alerts, so once your stock drops below the level you’ve set, the system will automatically refill your order and even send a purchase receipt.

This automation in turn reduces the time-cost associated with restaurant managers having to manually conduct inventory and fill purchase orders.

Cross train employees

Cross training your employees can save on labor costs because they can jump in to fill roles when demand is not too high, allowing you to schedule less staff while meeting your service standards. For example, a host could fill in server duties when need be, or a server could go behind the bar if you’re not busy.

Strategically implementing cross-training programs has other benefits—it’s been found to decrease turnover and increase job satisfaction.

Technology can help play a central role in cross-training your employees by providing an easily accessible medium for hosted and disseminating training materials. For example, you could create a playlist of private YouTube videos that help train staff, or setup a restaurant LMS – learning management system – that would allow you to structure your training materials and test staff to ensure compliance.

With restaurant profitability on the decline, restaurateurs are becoming increasingly adept and creative in the ways they can edge out a profit for their businesses. This adaption has also spurred on a generation of services which can help restaurants thrive and evolve in the changing business landscape. While we’ve listed six ideas, there’s a universe of other possibilities—what new strategies has your restaurant enacted?