Rest Increase Min Wage

How to Handle Minimum Wage Hikes Without Bottoming Out

October 10, 2019
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To keep your business profitable, managing cash flow is a key ingredient. But in the restaurant business, overhead costs are high, and managing the money that’s coming in and out is easier said than done. To add to the challenge, labor costs — one of the highest overhead costs for restaurants — could increase with the 2019 Raise the Wage Act. While the senate needs to vote on the bill, if it passes, it would gradually raise the federal minimum wage to $15 per hour by 2026. 


Understandably, restaurant owners are worried about how a potential minimum wage hike could impact their bottom line. To make sure your business is prepared, take the following steps so you can absorb wage hikes while keeping a healthy profit margin. 


Reevaluate your staffing levels. 

As you know, labor costs can take the cake when it comes to budget allocation. But, there may be ways to streamline those costs. To figure out if you’re allocating the appropriate amount of your budget toward labor costs, revisit your staffing plan. Review your monthly sales and overhead costs to see if your staffing levels are reasonable. While labor costs can vary depending on your restaurant type, as a rule of thumb, your labor costs shouldn’t exceed 30% of your budget. 


Considering this, determine if you need to make adjustments to your staffing plan to make it more cost-effective. For example, if you have a seasonal business or a slower season, consider hiring contract employees during your busy season. This allows you to reduce labor costs by operating with fewer year-round employees. 


Find and keep the right people. 

The high cost associated with hiring is no secret. Nor is the outrageous turnover rate restaurants experience. At almost 75%, foodservice has the highest turnover of leading industries. While some of that turnover is out of your control, you can take measures to reduce it. 


Start with a thorough vetting process to find top-rate employees. Look at their work history and references to make sure they don’t have a history of job-hopping. Once you find the right people, keep them around by keeping them happy. Reward them with low-cost employee perks such as free meals and transportation stipends. Show you’re invested in them by offering professional development opportunities and increased responsibilities. These efforts go a long way, and can help ensure employees are around to stay.


Upgrade your equipment. 

If you’re using outdated equipment, you could be leaving money on the table — without even realizing it. Nowadays, one piece of innovative equipment can do the job of multiple employees. By updating your equipment to a more advanced model, you can save big on labor costs. With automation features like programmable cook settings and auto-load functionality, you can cut back on time-consuming, labor-intensive tasks. And with some equipment, the cost-saving benefits can be two, or even three-fold or more. With precision-cooking equipment like the Ovention Shuttle® 2000, for example, you can save on labor costs, expedite cooking, cut energy use and reduce food waste — all at the same time. 


Stay up-to-date. 

If you’re not already taking advantage of time and cost-saving equipment, we’re here to help. At Ovention, we’re passionate about keeping tabs on the latest and greatest innovations in the restaurant world (we even have a few of our own!). We’ll keep an ear to the ground so you can stay up to speed on ways to improve your restaurant operations — and save big. To learn more and keep up with the trends, check out our culinary blog!

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