*The following is an excerpt from the guide, Driving Operational Excellence. Click here to download this free publication.
Labor costs are the No. 1 cost center facing any quick-service restaurant.
And labor costs aren't likely to be going down anytime soon, either, according to Joni Doolin, founder and CEO of People Report, a Dallas, Texas-based research and consulting firm specializing in restaurant labor-force trends.
"Fundamentally, it's only going to get more expensive to staff these businesses, and there's just no getting around it," Doolin said.
The first and most obvious impulse to control labor costs, though, is not always the right one. Simply cutting the number of employees may add a direct savings to the bottom line, but having fewer people on hand also can potentially lead to lower revenues.
Instead of cutting the number of shift workers, some QSRs choose to cut from the middle, which may have a net positive effect. One major international chain chose recently to make a small cut in the average number of managers it employed at each location, hoping to reduce costs and also, at least theoretically, improve efficiency by reducing confusing divisions in managers' area of responsibility.
But there are other, less drastic — and perhaps less obvious — ways to make labor more efficient and therefore less costly.
Just like in the automobile industry, automation can save time and money in the QSR business. According to Kara Barker, director of vertical marketing for retail and hospitality for Kronos, a workforce management company headquartered in Chelmsford, Mass., an effective steps in streamlining QSR operations is finding an efficient automated scheduling solution.
Automated scheduling applications can allow operators to forecast their anticipated labor needs using varied factors ranging from POS data to the dates of upcoming special events at the store.
The number of sources a manager can use in building a forecast is effectively limitless, Barker says, allowing them to build the most effective labor needs forecast and schedule accordingly.
"Many QSR managers schedule according to 'feel' or intuition, which is sometimes accurate but oftentimes not," Barker said. "And that approach regularly leads to overstaffing, which in turn results in wasted money.
"By accurately building a labor forecast and then scheduling according to that labor forecast, you can reduce overscheduling, so there's another direct labor savings," she said.
More intense industry focus
While using better scheduling is not a new concept in the restaurant business, the tools for accomplishing those tasks are becoming more sophisticated — and more important — all the time.
"QSRs have always done this in some way or other," with either franchise scheduling guidelines or scheduling software, said Mark Godward, president of WD SRE (Strategic Restaurant Engineering), a third-party industrial engineering firm that works with QSRs to implement workforce management systems. "I would say there's more than a new interest in this; I would say there's a more intense interest in these areas."
Rising technological capabilities, particularly with respect to the Internet, are facilitating the implementation of these systems, especially on the Web with online scheduling applications that allow employees to check their schedules and send input about their schedules from anywhere.
Something Godward said his company still comes across with dismaying regularity, though, is chains making their schedules with few clear guidelines or with simply ineffective ones. Analysts with WD SRE will find widely variant employee deployments for similar volume conditions in a single chain, for example, and often in restaurants within close geographic proximity to one another.
"If you don't have a good guideline of how labor has to be deployed, how much has to be deployed and when it has to be deployed, you see things being deployed all over the place," he said. "You see the variations that happened because of lack of guidelines, or there may be a total guideline, but it may not be broken down to an hourly basis."