 Labor is one of the biggest three costs of running your restaurant. With proper management, you can turn that business that is struggling into a major cash cow. And in today's video, we're gonna be talking about the five ways to reduce your labor costs so then that way you can change that business that's struggling, that's not profiting you as much as they should, into something that is efficient, something that is becoming a cash cow, something that gives you location and financial freedom. A business that works for you. Hey guys, it's Wilson here, serial entrepreneur and owner of multiple seven figure business. Make sure you subscribe to my YouTube channel so then that way you get the latest updates on business strategies, small business strategies, restaurant strategies, all these type of strategies and my experience running businesses for the last 10 years. So what is labor costs? Labor costs is way more than that hourly wage that you pay your staff. Includes bonuses, incentives, insurance, health benefits, all these crazy things add up to your labor costs. It goes way beyond that hourly wage. Now why is it super important for us to identify how much we're paying in labor? It is so then that way we have a clarity of how our business is doing. How much are we actually spending on labor? By us identifying it, we can now understand where we can shave off the excess fat in order for us to become more profitable. Getting clarity on the labor costs allows us to have more profitability. Now to calculate labor costs, we talk about it in this video in a lot of detail. We talk about the two ways of calculating labor costs. So if you want to understand how do you calculate labor costs, check out this video. Now, without further ado, we're gonna dive into how do we reduce labor costs? The number one way to reduce your labor costs is for pod staffing. What does pod staffing mean? Just imagine you're running a restaurant that is servicing 50 different customers at a lunch serving. And during that servicing, you require three different staffing in order for you to service all 50 clients. Now imagine suddenly it's a Saturday and you have a hundred different people coming in. How many staffing would you need to service those hundred people? You would need two pods, six different staff. And that's what pod staffing is all about. It's identifying what is the max capability that one pod can service. And for us to identify that, that allows us to scale up and scale down as our business cycle changes throughout the week. How do we do that? The number one thing is that we need to keep track of the number of people coming in. We need to keep track how many employees that we have on site at one time to allow us to draw the patterns, to see how many people do we need in order for us to fulfill our capacity. And that is super important for us to track. Once you have identified that number, then it becomes so much easier for you to do proper scheduling, to stagger shifting and to make sure that for busy days you have perhaps 1.5 pods or two pods or even three pods to service those busy days. And whereas the raining days, the days that are Mondays, Tuesdays that no one comes or a very minimal amount of people come, then you put your minimal pod for staffing. And this allows you to budget your and schedule your staffing accordingly to the sales. The second way to reduce your labor costs is to pay more. Now, before you shut this video down, hear me out. Paying more does not mean you're actually paying more. It just means that if you were to pay that 50 cents extra to retain that good staff, the turnover that you would save would allow you to save hundreds if not thousands of dollars to train a new staff. If you're able to take care of the staff that works for you to gain the loyalty, they will invest in their job that much more to deliver better service, to save on your spoilage of your items, to prevent the theft that is happening within your restaurant. And that allows you to save more in the future. And that also allows you to build a good culture within your business. So a lot of business owners have this completely on the opposite end. They feel like penny-pinching their staff is the way to save more money. But then yet penny-pinching does not allow you to buy any loyalty whatsoever. So pay the market rate, pay that little bit of a premium, so then that way you can have these loyal staff, talented staff that's gonna stay with you much longer versus someone that is always penny-pitching, always being a bad boss, always cutting costs, and that increases the turnover. And turnover equates to cost. The third way to reduce your labor cost is gamification. What does gamification mean? It means to make your workplace fun. Make your quotas. Let's say for example, if you wanna incentivize your staff to have that extra upsell, to hit that sales goal, then make it fun for them. Don't make it an obligation for them to hit these goals, otherwise they're gonna risk losing their job. That is a negative reinforcement and we don't want that in a workplace. That goes in the same thing as culture, bad culture and rich in turn increases your turnover, which increases your training costs and it just makes all the costs pile up. So gamification in a fun way. Make it engaging, make it fun, make it a positive experience for your employees to pit against each other, to see who can have better sales. But at the end of the day, make sure it's fun, gamify it, so then that way they feel like this is a game that they're doing, that serving customers becomes something of a positive reinforcement. If you guys are getting any value whatsoever from this video, make sure you smash the like button because that shows me that this is the type of content you want and I'll make much more of it for you in the future. The fourth way to reduce your labor costs is to cross train. A lot of business owners, they don't like cross training because it's just added expense for them to train a new staff that's not playing a crucial role in their operations. Well, cross training is super important because it allows these different staff to gain more skill set that can one day do multiple roles. And give you an example, our cashier, we hired them to come on as a cashier but we also train them on how to make our ice cream. We also train them on how to play the manager's role. So then that way they're so trained throughout the whole process that not only are they able to fill in for other people's shoe and responsibility when the time is needed, they're also able to run a leaner part. And what that means is that one person can fulfill much more responsibility when the time is needed. And at the same time, it becomes a win-win situation where that staff, that cashier to begin with feels that they have much more responsibility, feels that they're learning and feels that they're throwing and in turn they would want to stay with your company that much longer. The fifth and final way to reduce your labor costs is to have a policy guidebook. A lot of restaurant owners, they feel a lot of frustration when they're dealing with their staff, they feel like that they don't understand them, they're not doing what they want. It is because a lot of times they don't have a policy guidebook that sets the right expectation right from the get-go. And what that means is that when you're doing onboarding of new staff, you make sure you identify the way you want them to act, the expectation you set out for them, whether it be the complimentary meal for us at 720 Suites, we give them free ice cream per shift. One free ice cream, not two, not three, but one. We set that up clear right from the get-go. They sign on this policy handbook and they know exactly what is expected of them. So when the timing is right and when the timing comes, they're eating two or three different ice cream, giving theirs away to their friends and family, then we can come down and give them a first warning because we set that right expectation up. It's not frustration. It is just something that happened and we need to react to it. Now that is fair game with your staffing as well. Same thing with clock in and clock out. If you're not clear in how you want your staff to clock in, then they can come in, clock in, and they get changed, they sell all in, they go to the washroom, they brush up, whatever the case may be, that's already 15 minutes into their work time that you're paying for them to get ready. And you as an owner, you get frustrated when you see these things, but then yet what do you do? First of all, you're gonna lash out at them and your staff becomes annoyed and it just becomes a really sour relationship. Second, you as an owner, you eat it up and you feel frustrated throughout the whole time and it's not gonna be a good experience for you, which is the reason why we need to identify everything in our policy guidebook right off the bat. So in that way, it prevents any confusion, any other additional expenses that you need to spend because every 15 minute counts. If you have 10 employees, each person doing the same thing, that's hours that you're spending that is not efficient. So there you go, the five ways to reduce your labor costs. Number one is to have pod staffing. Identify the maximum amount of people that your minimal staff can serve and then now you can scale up, scale down depending on the traffic that is coming in. Second thing is to pay more, pay more for your staff, pay industry average or if not better than industry average. Not only does that make for better culture within your whole organization, but then that also lowers your turnover rates, which in turn lowers your training time and training costs, which in turn allows you to save a ton of money. Third way of reducing your labor costs is gamification. Make it fun for your staff, make it fun so that that way they have this positive reinforcement to want to hit those sales quota for you, not a negative bad environment for them. Number four is to cross train. We don't want to just save on training costs. We want to train all our staff to be able to fulfill all the roles that we have because at certain times we can have them play multiple roles and in addition to that, that also adds to great culture and have a lot more buy-in from your staff. Number five is policy guidebook. Having the right expectation right from the get go is super important because there's no argument. There's either right or either wrong. You can now identify what you think is the best way for your staff to act in order for you to save as much money as possible and not pay for any inefficiency time and what I mean by that is clock in, clock out. That simple policy that is in there allows you to save hours within the year on labor costs. Every single dollar that you save in labor costs is a direct profit into your pockets and in restaurant industry, we're talking about five to 10% margins that we're playing around with. So what does that mean? That one or two or even 3% that you save from labor costs could very well be that vacation that you can have with your family. So make sure you guys download the resources in the link below. Make sure you guys subscribe along the journey because you're gonna have much more videos coming your way. Otherwise, I'll see you guys in the next video.