How to Know When It's Time to Hire More Restaurant Staff
Finding the right staffing balance for your restaurant feels like a constant juggling act.
When you’re understaffed, customers frown at your slow service and employees complain of being overworked.
On the flip side, being overstaffed can eat into your profits, with employees standing around during slower shifts and wages cutting into your bottom line.
So, how do you know it’s time to hire more restaurant staff without overcommitting or running too lean?
Let’s look at a few key indicators.
#1 Your Employees Are Saying They’re Overworked
One of the clearest signs that you need more staff is when your current employees are feeling overwhelmed. However, employees might not always openly say they’re overworked.
You need to read between the lines and ask questions like:
“Are your current tasks manageable?”
“Are there specific times that feel particularly overwhelming?”
“Is there anything taking up more of your time than expected?”
Watch for signs like frequent mistakes, excessive overtime, or decreased enthusiasm, which can indicate that your team is stretched too thin.
#2 Labor Productivity Metrics Are Inconsistent
Tracking labor productivity is key to knowing when you’re understaffed or overstaffed.
Here are three metrics you can use:
Sales-Based Labor Cost Percentage looks into the efficiency of your labor costs in terms of sales or revenue. It is calculated by dividing your total labor costs by your total sales and multiplying it by 100.
For example, let’s say your total labor costs (composed of staff’s salaries, taxes, and benefits like insurance) for a certain month amounted to $30,000 and total sales reached $100,000. The calculation would simply look like this:
Sales-Based Labor Cost = Total Labor Costs / Total Sale
= ($30,000 / $100,000) x 100%
= 30%
Here at U-Nique Accounting, we recommend staying around the 30% mark to keep labor costs balanced while maintaining service quality.
Note: This is an average and may vary depending on your restaurant type. Quick-service restaurants typically have lower labor costs, while fine dining establishments tend to have higher ones.
Direct Labor Efficiency Ratio evaluates how much of your gross margin before labor is absorbed by your labor costs. To calculate, you simply divide your gross margin before labor (Sales less your food and beverage costs) by your total labor costs.
Using the first example, your direct labor efficiency ratio is:
Direct Labor Efficiency Ratio = Gross Margin Before Labor / Total Labor Costs
= $100,000 / $40,000
= $2.50
We recommend that for every $1 spent on labor, your business should generate at least $2 in revenue.
This means that when your revenue per dollar spent on labor is below $2, it could mean that you’re either overstaffed or that your current team is not as efficient to deliver the level of service needed to drive higher sales.
If it’s higher than $2, it means your team is contributing effectively to the revenue, but can also mean your team is overworked.
Revenue Per Employee, which is the result of dividing total revenue by the number of employees, measures the revenue each employee generates for your business.
As an example, if your total monthly revenue is $100,000 and you have 10 employees, the calculation would simply be:
Revenue per Employee = Total Revenue / Total # of Employees
= $100,000 / 10
= $10,000
To effectively gauge revenue per employee, don’t just compare with industry benchmarks, but also take into account the dynamics of your own business– your unique location, menu offerings, and target customers.
Look into the historical data of your revenue per employee to clearly track your restaurant’s trend. Any sudden changes that occur, whether an increase or decrease, could signal underlying issues with staffing levels.
Recap: Key Metrics to Know When Hiring More Staff
#3 You’re Expanding or Adding New Offerings
Growth is great, but it comes with added workload. Whether you’re expanding to a new location or adding new menu items, more responsibilities require more staff. Make sure to plan ahead so your team can handle the increased demand.
#4 Customer Satisfaction Is Dropping
Happy customers are your restaurant’s most effective advertisers. On the other hand, unhappy customers are the quickest way to damage your reputation.
Keep an eye on how your reviews are trending–whether online or through direct feedback. If you’re getting more complaints from customers, it’s a huge indicator that something’s off.
It could be that service is slow, tables are unclean, or staff are inattentive– all because they’re stretched too thin.
Often, it’s not the quality of your food or drinks—it’s the service that’s lacking.
Plan for Growth With Your Experienced Accountant
Busyness that comes because of growth is a great problem to have. However, managing that growth requires the right systems and support in place.
That’s where we come in!
From tracking labor productivity to helping you scale efficiently, we take the pressure off, so you can focus more on leading your business.
Reach out to us to see how we can help.
Until next time!
By MATT CIANCIARULO
