Post NRA Thoughts: My Labor Costs are Killing Me! What Can I do About It?

The National Restaurant Association’s annual trade show has come and gone to much fanfare. From what I saw and read, the participation was phenomenal. We were able to bring our full consulting team from all of our offices and even made time to break some bread together.  This year, I also participated in a panel discussion that explored unit economics  and was moderated by Steve Romaniello, managing director of Roark Capital.

This topic remains near and dear to my heart since, in my opinion, unit economics represents the most important metric for any thriving restaurant business. Some people think of unit economics as simply reducing cost. But a great part of unit economics has to do with driving sales and doing so efficiently.

Within the area of unit economics, labor represents a big factor that’s presently surrounded by a ton of commotion and concern. No matter how you feel about the issues surrounding it, we can all agree on one thing: labor costs are not going down any time soon. Alongside this area of increased operating costs, real estate and construction-related expenses are not getting any cheaper, either. Increases in capital and operating costs go contrary to driving better unit economics.

While roaming the aisles of the National Restaurant Association show, I was on the lookout for foodservice equipment and technology that could help reduce labor costs. As luck would have it, several pieces of equipment caught my eye. Some items were a bit on the conceptual side. One such example was an automated fryer loading and unloading product, which, in my opinion, could be market ready sooner rather than later. Other equipment items were already in mainstream use, such as automated Shawarma slicers.

Prior to traveling to the show, I came across a report of an automated (wok) cooker developed by a group of students at MIT. The machine was being used in one of the campus cafeterias. The device would load products into a basket that moves in a track that would then deposit the components into what I would call a “cylindrical wok” that, through rotation, would cook the product and then unload it onto a plate. Quite innovative, I say.

While thinking about automation, perhaps we should expand its definition to one that includes any activities that would reduce the amount of labor a restaurant requires to operate. This can happen with back of the house equipment, customer-facing technology or any other means you deem appropriate to reduce the employees’ work content to deliver on the brand promise.

The reason for doing this is simple: the less labor a restaurant requires the more likely the unit is operating efficiently. So what are some examples that can result in labor savings?

  • Develop work smart programs for prep and guest service. Do what you do manually in a more efficient manner, resulting in allocating fewer staff hours to get the task done.
  • Consider using “value added” products from suppliers. These products can help reduce or eliminate prep, as well as other capital costs of the equipment required to do the food prep.  I realize that this could add incoming food cost, but the savings on the other side, may be worth it, especially as we head towards $15/hr.
  • Use equipment that does the cooking for you. Examples: conveyors and rapid cooking ovens, that enable the user to load the product and when it comes out of the cooking cycle, it is done, often replacing several steps.
  • Apply order taking technology to reduce or eliminate the order taking time. This area would include not only kiosks at the store level, but also remote ordering, since in both cases the guest does the work that an employee would need to do. By the way, with the right technology, the experience can (and should) be a good one.

By extending the definition of automation to those applications that enable the concept to take labor out of the restaurant, many opportunities come up. I am sure that you can think of others.

For those operations that need to get a better handle on labor, I invite you to release your old paradigms and in doing so don’t get stuck only on the typical definition of automation. There’s more to it than simply deploying a physical machine or robot that has many moving parts. Considering where costs are headed, both capital and operating, you really have no choice but to take action, so that your labor costs do not indeed kill the “unit economics” of the concept, challenging brand growth. 

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