Managing labor costs is a crucial aspect of running a successful restaurant business. One effective way to manage labor costs is by using SPLH (Sales Per Labor Hour) or CPLH (Customers Per Labor Hour) metrics. These metrics provide valuable insight into your restaurant’s labor performance. They can also help you make informed decisions to reduce costs and improve your bottom line.
What is SPLH or CPLH?
SPLH is a metric that measures the amount of sales generated per hour of labor. It is calculated by dividing total sales by total labor hours for a given period of time. CPLH is a metric that measures the cost of labor as a percentage of total customers served for a given period of time. It is calculated by dividing total labor costs by customers served for a given period of time.
Both metrics provide a clearer picture of how much of your revenue is being spent on labor. They also help you identify areas where you can improve efficiency and reduce costs. Which you use may depend on your business format as well as the ease or difficulty of measuring a “customer” in any given time period.
Why are SPLH or CPLH important for restaurants?
SPLH or CPLH provides valuable insight into the performance of your restaurant’s labor. They help you make informed decisions to reduce costs and improve your bottom line. By regularly tracking these metrics, you can identify trends and patterns in your restaurant’s labor performance and adjust accordingly.
For example, if you notice that SPLH is consistently low during a particular time of day or week, you can investigate the cause and make changes to improve productivity and reduce labor costs. Similarly, if you notice that CPLH is consistently high, you can investigate ways to reduce labor costs. This could look like cross-training employees, offering flexible scheduling, or implementing a menu pricing strategy.
How to use SPLH or CPLH to manage labor costs in a restaurant?
- Track your SPLH or CPLH regularly. Regularly tracking SPLH or CPLH will give you a clear picture of your restaurant’s labor performance. It will help you identify areas where you can reduce costs.
- Set goals and targets. Setting goals and targets for SPLH or CPLH will help you focus your efforts. It will also support you in making informed decisions to reduce costs and improve your bottom line.
- Analyze the data. Analyze the data you collect from SPLH or CPLH to identify trends and patterns in your restaurant’s labor performance. Use this information to make informed decisions about staffing levels, scheduling, and menu pricing.
- Make adjustments. Based on the data you collect from SPLH or CPLH, adjust your staffing levels, scheduling, and menu pricing to reduce costs and improve your bottom line.
Putting SPLH or CPLH into action as a Restaurant Manager
Restaurant Managers support controlling labor costs by using available labor hours as efficiently as possible to drive sales. Managing labor is not just about cutting hours to as low as possible! Managing labor is about using every available labor hour as effectively as possible to take care of customers and drive sales. It’s important to avoid cutting labor so much that you miss future sales by not effectively taking care of customers.
We’ve covered the what and why of SPLH or CPLH above. Here are a few tips for operationalizing SPLH or CPLH:
- It’s important to note that labor hours spent on meetings, training or outside of restaurant tasks should be excluded in your labor hour evaluations — to that extent, it can help to track those types of labor hours separately.
- The higher your SPLH or CPLH, the more efficient your labor is running. You can, however, run an SPLH or CPLH that is too high since you have to balance efficiency with honoring the promises of service and quality food to customers. A very high SPLH or CPLH can also mean your restaurant was understaffed for a high sales volume period.
- Since SPLH or CPLH targets can be too high or too low, it’s important to have internal discussions to get a sense of what target seems to work best for the unit economics of your restaurant. You can do this by discussing labor efficiency with a multi-unit manager or comparing your SPLH or CPLH to other restaurants in your system or like your restaurant.
Manager on Duty Role:
Each Manager on Duty should be responsible for managing the labor hours of their shift. You need to know your SPLH or CPLH to measure it. Look at the system where your hourly team clocks in and look for a report that shows your sales divided by your labor hours or customers divided by labor hours. You might have to manually calculate this — but most point-of-sale systems have a report that shows this number. Keep in mind:
- The right SPLH or CPLH really depends on a few different factors. Ultimately, your goal is to get your overall labor percentage aligned with or better than industry benchmarks without sacrificing quality or customer experience.
- SPLH or CPLH will generally be the lowest in the morning and will improve as you generate sales. Check your SPLH or CPLH frequently throughout the shift so you can adjust staffing based on your sales/customer level. Regularly checking SPLH or CPLH during a shift also helps you better write future schedules based on the ebbs and flow of your restaurant shift-by-shift and day-by-day.
- Management should manage labor shift by shift — not day-by-day or week-by-week. Avoid trying to “make up” labor on later shifts. Our weeks typically run Monday to Sunday – but accounting weeks vary. It’s more likely you’ll “miss” labor on a slow day like Monday or Tuesday. If you try to “make up” labor later in the week, you’ll likely be sacrificing the customer experience (service, quality and/or speed) at the expense of future sales.
By using SPLH or CPLH to manage labor costs in your restaurant, you can make informed decisions to reduce costs and improve your bottom line. These metrics provide valuable insight into your restaurant’s labor performance. In addition, they can help you make changes to increase productivity, reduce costs, and achieve your goals.
In conclusion, SPLH or CPLH are important metrics for managing labor costs in a restaurant. By regularly tracking these metrics, analyzing the data, and making adjustments based on the results, you can reduce costs and improve your bottom line.
Looking for more help with improving your bottom line?
You might like:
- Restaurant Financial Benchmarks: How Do You Compare
- How to Manage Sales & Profits in Seasonal Sales Transitions
- The Key to a Successful Restaurant: Staffing for Success
How Consult to Grow® can help your business:
Consult to Grow® provides various tools and services to help you improve your operational performance as you scale and grow your business. We can expertly assess your scalability, develop tactical plans, facilitate planning, and more. Ready to get started?