last component of prime costs is payroll. Payroll is mostly a fixed cost
because the restaurant has a certain number of people working a night
no matter how busy it is. Knowing what the industry wage is per position
will help an operator know what he or she should be paying. The following
are some helpful suggestions to help control payroll:
Ask yourself, are sales high enough? (Remember
you must have a minimal number of staff working, regardless of how
full the seats are).
Look at wages per category. Are the current salaries
in line with industry wages?
Keep overtime to a minimum. Consider hiring people based
on a forty-five to fifty hour work week.
Is the meal credit being charged?
Set up incentive-based pay for key employees.
in some states, restaurants can charge employees a nominal amount for
staff meals regardless if the employees eat. In each state, the charge
can vary. In San Francisco, the meal credit for breakfast, lunch and dinner
is $1.66, $2.25 and $3.50 per employee respectively. In Boston, the meal
credit for breakfast is $1.00 and $1.75 for both lunch and dinner. In
New York, the meal credit is $1.45 per shift. A restaurant with one hundred
employees, open seven days a week, would save as much as $50,000 annually
(100 employees x $1.45 x
7 days x 50 weeks). Staff meals can be deducted and pre-taxed so the restaurant
saves the FICA (7.65%). In the above example, the FICA is another $3,800.
Finally, the meal credit is subject to sales tax. It cannot be deducted
from the payroll, so it will have to be paid when the sales tax return
incentive pay is another useful tool for motivating staff and controlling
payroll. If someone is making a top salary and sales are declining, a
raise is not necessarily the answer. Rather then risk losing the employee,
set up an incentive plan. Look at areas where the restaurant is suffering
and link that individualís pay to improving the performance in that area.
For a chef, tie the bonus to areas like food cost, kitchen labor, total
food sales, reviews and guide book ratings. A similar program can be set
up for the general manager. An operator can link the general managerís
pay to covers, average check, total labor and service reviews.
While there seems to be a lot to focus on the financial end, prime
costs leave the most room for improvements. Other areas such as controllable,
general and administrative, and occupancy costs are basically fixed costs
and limited flexibility exists within these areas to save money. Think
about it, how much can one honestly save by reducing the cost of linen
as compared to prime costs? Not much.
Group produces an annual survey that highlights prime costs by restaurant
type as well as wages by position. This survey can become a valuable management
tool for evaluating your restaurantís potential success.