How to increase productivity and lower labour cost in a food business?
The pandemic has adversely affected the global economy and tourism, hampering the hospitality industry. It has resulted in the fall of productivity as labour costs fall out of balance and undermine profitability. In simple words, businesses can profit only when their labour costs are in proportion to their sales. This article aims to offer highlights on how you can improve productivity (achieving better outputs with less labour) to help your business grow.
What is business productivity?
Productivity measures how efficiently labour and capital are being used in your business to fulfil required demand.
For example, the staff needed (labour) to run the restaurant (your business) efficiently.
In hospitality, the two main areas that improve productivity are
- Labour: Labour is the cost of all your human inputs in a given period.
Cost of Goods: The cost of goods is to sell what you have spent on ingredients to make what you have sold in a given period.
Many firms have productivity blocks, and these can be resolved by focused improvement in key areas?
Some reasons for productivity leaks:
- Lack of control of how a product is made and the portion size being sold.
Really good recipes are critical to consistently produce your unique version of a dish. But if you are unaware of the ingredient and labour costs required in preparing and serving, you will not know what you need to charge to have a sustainable business.
- Lack of staff engagement
In small businesses, everyone has a role to play and need to be efficient and aligned to the business goals. Businesses are needing to constantly adapt and improve so everyone needs to be on board with the changes being made whilst maintaining a positive customer experience to take the business forward.
Reworking anything is a double labour cost. Suppose you deliver the wrong meal to the wrong customer. As soon as the person starts the meal, it cant be exchanged so you have to replace the meal and will lose the cost of labour and ingredients, but even if you can swap the meals before they are started you have a double service time cost. These are all considered rework costs.
Efficient and clear operating systems, experienced and well-trained staff and a “do it once get it right” work ethos is an essential start point in eliminating rework.