Payroll Percentages are a Numbers Game

(Blogger’s Note: This is the first of a three part series on payroll efficiency and how it can make the difference between profit and problems.)


Recently I witnessed the eventual disaster of what was perceived to be a well run restaurant. It didn’t occur on only one visit, but numerous times though out my frequenting this restaurant I saw the inevitable happening. Granted, the owner has other sources of income so the profitability of the operation may not matter to him but when an operator has more staff on the clock than people in his dining room, the end is closer than one thinks.


Payroll percentages are like playing Russian roulette: If you don’t pay close attention to what is going on they could kill you. And, for the most part, they are the one aspect of the business slowly nibbling away at profits.


The payroll percentage game is not one to be taken lightly. Although many operators love to be surrounded by a full staff of waiters, hosts, floor supervisors and bussers, the component to a successful operation is a manager, supervisor, or owner who knows the art of efficient scheduling, has the backbone to cut staff early, and can read an evening or a lunch shift using past performance and trends to evaluate need. The fine line between an efficient staff that can handle a full dining room without a misstep and an overstaffed dining room that cannot seem to get anything right has a lot to do with training and team work. In May restaurants, neither of these exists. Yet, they are important if you look to keep payrolls costs in line.


I personally think customer service is the one asset independent restaurant owners need to continually preach, train and develop if they want to succeed. It holds true that it has nothing to do with the amount of staff you have on the floor or on the payroll. The outcome will always be better with a more qualified, professional group of people who not only look at their jobs as careers, but enjoy what they do for a living.


Of course, finding these individuals is easier said than done. We face two problems in staffing. If we are in a very competitive market, the top ranking restaurants get the cream of the crop because of the volume they create. That leaves the second tier and the third string, or worse to fill other positions available in less than perfect places.


The problem is worse in areas where there I little competition. Because of a lack of population, it is difficult to recruit professionals.


I have always been of the belief that you build your staff around one strong professional who you know you can trust and rely on. This person usually makes a little more than everyone else per hour and has the responsibility to train the others on the staff. The individual is not management material and has no desire to become a manager.  The difference between a great waiter and a great manager is the difference between a Ferrari and a Rolls Royce- both a great vehicles but each serves a different purpose. And, the professional server knows the ropes, how much money they can make and the hours they need to work.


This person, who will eventually become a floor supervisor, will also be able to keep management informed about who should go and who should stay, when to cut and when not to cut.


Remember the restaurant business is built on formulas and percentages. It is a numbers game. Nobody wants their piece of the pie cut into smaller pieces. If there are too many people on the floor nobody makes any money, morale becomes a problem and service declines, customers suffer, tips get smaller and at the same time payroll percentages increase.


There needs to a balance between staff, payroll percentage and the amount of customers in the dining room. I have operated restaurants where my payroll costs had skyrocketed out of control because the manager wasn’t paying attention. Noting is more depressing than seeing your payroll percentage increase to 28% or higher when your goal was 23% or lower.


In fine dining, I always tried to keep my payroll percentage around 25%. However, that is easier to accomplish in a much busier restaurant with more seats doing more volume. I know owners who have there payroll number set at 19 to 22%. And, they consistently make that number.


I have found over the years that instead of watching the number, pay attention to the dining room, training, professionalism and running a very tight organization. If you do that on a regular basis, with ever aspect of the business, you will find that your numbers fall into line. And the bottom line number will be more pleasing than it had been in the past.


Tomorrow: The Back of the House