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Interest in labor management solutions for the restaurant back office are at an all-time high. With labor accounting for up to one third or more of the average restaurant’s cost of sales, trying to get the perfect number of employee’s on-the-clock at any given moment is critical to keeping stores profitable.
Many restaurant chains only measure how well their managers are at executing schedules based on sales forecasts. But what if a restaurant’s actual sales didn’t match its forecasted expectations? If that were the case, a restaurant would either have too many employees working or potentially too few employees working…and that can spell trouble for guest experience and profitability.
Enter an important labor performance concept CrunchTime calls “Earned Hours.” Earned Hours indicates how many hours your employees should have worked based on actual sales.
Why are Earned Hours important?
Real time performance metrics (available in-store and on a mobile platform) for sales and labor will help your restaurant managers interpret store performance and provide meaningful information to course correct. The Earned Hours metric takes ideal hours and recasts it to show how much labor you should have based on actual sales/guests, etc. For labor, this is roughly analogous to actual to theoretical food cost analysis. It is a metric that shows how responsive your team is to the variances between forecasts and actual sales...and this feedback is provided every 15 minutes throughout the day. What’s more, a manager’s Earned Hours can be used as a feedback device to drive better schedule planning, execution, and reaction in the future.
Calculating Earned Hours
Quality labor management solutions measure schedule performance by looking at their Actual Hours-to-Earned Hours Variance. The (+/-) variance is derived from calculating Actual Hours (how many hours the employees worked) – minus – Earned Hours (how many hours they should have worked given the actual sales performance). The resulting (+/-) variance indicates how well or poorly a manager reacted to real-time restaurant sales performance against the implemented employee schedule plan.
For example: The Beanpot Grill
Based on her weekly sales forecast and staffing templates, the new manager at the Beanpot Grill believed she needed 6 “ideal” hours per day for a line cook position. However, so far this week, based on her actual sales, her “earned hours” indicates she only needs 4 hours per day for a line cook. This +2 hour per day variance (6 ideal minus 4 earned) indicates that to make labor performance targets, the Beanpot Grill’s manager will need to be more responsive to slower sales conditions and adjust her employees’ hours accordingly.
If a managers Actual-to-Earned Hours Variance is close to zero, they are doing a good job calling in extra people or sending people home during busy or slow days, respectively. If their variance is too high or too low from zero, they might be too slow to react during sales conditions that require staffing level adjustments. These managers should be coached by an experienced supervisor about how to be more responsive to current sales conditions.
To learn more about Earned Hours and how the CrunchTime Back Office Solution can help your restaurants can optimize your labor costs, visit us at CrunchTime.com.