Estimating sales and staffing are two of the most difficult pieces in a restaurant business plan. I think it’s more difficult than estimating build-out costs, pricing POS systems, or even estimating financing. In this post I will walk through a restaurant staffing example for a mid- to high-end dining establishment.
This analysis works across multiple restaurant categories. Staffing considerations are similar whether opening an Indian restaurant or a steakhouse. That said, please account for your unique situation. Two examples: A family-operated restaurant might have very different labor costs. A food cart will have less employees providing table service.
Restaurant Staffing Costs
I built a restaurant business model to to analyze how a successful restaurant might operate. Staffing is one of the highest costs a restaurant owner faces. In most of the scenarios I analyze labor is approximately 50% of sales. It’s interesting to compare this against other numbers out on the web:
- This ChefTalk thread has employees bonused on labor costs sounding out reasonable industry assumptions based off turns
- The National Restaurant Association sells a report showing labor costs closer to 1/3 of sales. This 2010 report covers roughly 600 restaurants
Difficult Staffing Choices
Staffing immediately creates a tough choice. If you opt for a “soft launch” you might be in a better position to scale staffing to demand. However, understaffing could harm your business before it’s even off the ground. During the startup phase your new staff is likely to be inefficient and/or underutilized. Some examples:
- “Crashing the kitchen” until the menu is perfected
- In-fighting among the wait staff as they compete for tips among limited tables
- An idle staff refolds silverware on a slow day
Restaurant Staffing Example – Walk Through
One issue I address in the restaurant business model is ratios of employees and sales. In one plan for a very successful restaurant you might estimate $1.3M in sales in your first year. If your average sale is $40 you will be doing 744 sales per week (for around $30k sales / week).
Sounds easy enough.
The problem is that the demand is likely to be heavily concentrated in certain days or times. Perhaps the weekend dinner, or a daily brunch, or a lunch special…whatever your niche is.
The first thing I do in the model is break the $30k in sales down to day of week. For example, say 30% of sales are on Saturday night. Perhaps the average ticket is higher on Saturday night due to alcohol sales, so the average bill is $100. How many tickets have to be supported? Answer is 90 tickets — $100 each provides $9k in sales for Saturday night, which is 30% of the weekly business. If we turn over each table 3 times, that’s 30 tables. Does that sound reasonable given your restaurant’s business model?
Now that we have 30 tables to support, let’s figure out staffing levels. For our closing shift let’s say we have 3 waiters, 1 bartender, 1 chef, 3 line cooks, 1 hostess, and 1 general manager. 10 tables per waiter — is that possible? How about 4 people in the kitchen preparing $100 in meals for 90 tickets over a Saturday? If a significant piece is alcohol sales, do we sell wine (lower labor input) or mixed drinks? If mixed drinks we will need more than 1 bartender — perhaps several more. In this example 50% of staff is providing service and 50% of the staff is preparing food or mixing drinks. Does your establishment require a different mix?
Now let’s assign everyone a cost per hour. Using the Excel model I’ve estimated a cost for a waiter, cook, bus boy, etc. I put how many of each type of staff are needed for Open, Lunch, and Close shifts. The total labor in my example is $2,100 in staff for the day. Not bad given $9k in sales.
I’ve just introduced another problem though. There are 32 total shifts to be worked that Saturday in my example. Do I have 32 employees? Perhaps I’ll have some of the staff work a double on Saturday. You may notice the next staffing problem I have — guaranteeing hours for my employees. The waiters will love making that much in tips on a Saturday night. But how do I staff my slow days?
To handle staffing slow days I split staffing into two groups — slow days (Sunday through Wednesday) and fast days (Thursday through Saturday). I have to balance the number of shifts across all my employees, and make sure I have enough employees to cover the fast days (even if some employees work doubles on the weekends).
Thanks For Reading
I hope this has been helpful for those entrepreneurs considering (or already operating) a restaurant. Please leave any questions or comments below.