Labor Optimization Without Compromise: Boost Efficiency and Profits in Hospitality

Operators face the challenge of predicting customer demand accurately to avoid both overstaffing and understaffing. They also need to manage employee workload to prevent burnout while maintaining high service standards. Providing continuous, tailored training without disrupting operations adds to this balancing act, all while contending with rising food and labor costs.

Leverage Key Metrics: Sales Per Labor Hour (SPLH) and Covers Per Labor Hour (CPLH)

Operators need robust data to optimize labor effectively. Detailed metrics on customer demand, employee performance, and shift efficiency enable precise scheduling and workload management. 

One key metric is Sales Per Labor Hour (SPLH), calculated by dividing total sales revenue by total labor hours worked. 

Sales per labor hour (SPLH) = Total sales revenue/total labor hours worked

A higher SPLH indicates better efficiency in labor use, leading to higher profits. For example, a bakery generating $2,000 in sales with four staff working a combined total of 16 hours results in a SPLH of $125. In contrast, a lower SPLH during less busy periods, highlights the need for strategic scheduling. Forecasting SPLH helps businesses plan staffing around peak periods, using projected sales data to maximize efficiency and profitability.

Improving SPLH involves several factors, including optimizing staffing levels, training employees on sales techniques, focusing on high-margin products, and leveraging technology for efficiency. 

For hospitality businesses, an alternative metric, Covers Per Labor Hour (CPLH), measures the number of customers served per labor hour, providing a more accurate productivity assessment given the variability in sales. This is calculated similarly to SPLH, but uses the number of covers instead of sales revenue.

Covers per labor hour = Covers (a cover being one customer served)/total labor hours

Both metrics are essential for understanding and enhancing labor productivity, ultimately contributing to better financial performance and customer satisfaction.

Jim Taylor, Founder of Benchmark Sixty, shared his transformative experience with using CPLH on the Restaurant Growth Show Podcast: “It changed my entire career after 20 years of running restaurants the same way. If I know how many covers per labor hour my restaurant is going to serve, and we can do that consistently, it means my guest experience is more consistent than it was,” Jim explained. “If things are up and down, my employees have a more consistent experience. I can protect the workload because if it goes too high, I know that’s damaging for the team.”

Jim further illustrated this with a practical example, explaining that aiming to serve five customers per hour on average ensures efficiency. Serving six customers per hour can overwhelm the team, while serving only four means not maximizing potential revenue. If labor costs remain high despite hitting the target, it could indicate lower-than-expected customer spending or increased wages due to training or overtime. This clarity helps pinpoint where adjustments are needed.