In the article "Sales up or costs down" we showed how you can calculate the effect of an increase in sales compared to a reduction in costs. Our advice was that you first increase turnover with our 5-Top-Tips. But to prepare for further crises, you might also reduce costs as much as possible. This will ultimately increase your profit.
In the individual evaluation of the 10 percent measures you could already see the effects on your operating result. You could work on several cost reduction measures at the same time. Here the focus is on "personnel costs" and "operating costs". However, an increase in turnover does not always have to go hand in hand with an increase in personnel costs.
How to reduce personnel costs despite higher turnover
The key to an effective cost-cutting strategy lies in daily margins. What is happening in the off-peak hours? These are the first and last hours within the opening times of your restaurant. These hours are usually used for preparation and follow-up work. Ultimately, these hours influence the productivity of your business. Although the activities are necessary, you generate almost no turnover.
Example (preparation and follow-up work):
- 1 cook from 10:00 - 12:00 = 2 working hours preparation
- 1 waiter from 10:30 - 12:00 = 1,5 working hours preparation
- 1 cook from 21:30 - 22:30 = 1 working hour of follow-up
- 2 waiters from 21:30 - 23:30 = 4 working hours follow-up
This results in 8 employee off-peak working hours per day. With a gross wage costing €14 per employee an hour, off-peak work results in costs of €112. Multiply this by the number of your opening days and you will get your monthly value.
Example: 25 opening days x €112 = €2,800 gross wage costs of the employee's off-peak working hours.
If you have budgeted a personnel cost key of 32% as in our examples, you would have to generate a gross additional turnover outside off-peak of at least €8,600€ per month. You could also reduce or eliminate this work and let your employees do this in the more productive phases of the day.
You are not alone with these thoughts. Many of your colleagues are busy calculating how and what they can do to deal with costly off-peak work without compromising quality and spirit of the team.
The recipe for success: increase turnover by 10 percent, reduce work in off-peak hours
If you proceed according to the following formula for success, you will be successful again quickly after the corona crisis:
- Achieve an increase in turnover of at least 10% with targeted measures.
- Reduce employee hours in marginal hours.
Tweak these crucial aspects to improve your liquidity. We wish you success and will go into further optimisation measures in the next articles.
Jens Ertel, after 20 years of a classic hotel and restaurant career, has been working as an independent gastronomy coach/trainer and consultant for 15 years and has owned a hotel and restaurant in the meantime. He has specialised in the topic "active selling" and "turnover growth" in the gastronomy business.