Are your staff always telling you they are being run off their feet – we need more staff! But your franchisor is saying “Cut Labour”
Where is the middle ground? How do you as a franchisee know what comment is correct? Well let me show you a key performance indicator that will help not only show you how busy your staff are, but will also help you to control labour cost. Sales per Labour Hour (S/LH) it is your bst friend and secret weapon. Learn what is it and how to use it to get more productive staff.
S/LH is an indicator of how busy or productive your staff are. It represents the number of sales each person on shift is responsible for making. So for example, if you did $300 worth of sales in an hour and had three staff on for that hour then your sales per labour hour is 100.
Though what is important to know and understand is the benchmark for sales in your industry, that is, what are the optimum sales per labour hour for your business.
If you are making coffees at $4 each then for that $300 sales per hour, you would have to make 75 coffees. Therefore, each of those three staff members are responsible for making 25 coffees each in that hour. If for example, you were making burgers at $10 each then you would have sold just 30 burgers and each staff member was responsible for making 10 burgers in that hour. So perhaps you’d expect that the sales per labour hour of a coffee shop is different to that of a burger shop, or is it?
So why is understanding your sales per labour hour so powerful?
Well you often get your franchisor telling you to reduce your labour, it’s too high. Typically what everyone does then is either two things – they employ younger staff who cost less or they cut the numbers on shift. But do you know which one is the best for your shop? Obviously, it is a decision you make whilst taking into consideration not only the cost of your staff but also your sales per labour hour – the “busyness” of your staff.
To do this I put myself in their shoes – can I make 25 coffees in an hour or 10 burgers in an hour? Do the sums and see what you think is reasonable for your store. Remember though you have to factor in reasonable preparation, cleaning and opening and closing routines. But really understanding your sales per labour hour allows you to make that really important management decision.
So how did I use it?
Well I have to say that I always found it better for the overall management of my store to have senior and junior staff. However, if I had a team of senior staff only, they had to obtain a higher sales per labour hour than if it were a team of all juniors or a combination of both.
Let me give you an example. Let us imagine we have a carvery where everyone buys a $10 burger. What’s best? A team of juniors only, seniors only or a mixture of both? Well for a $3000 day of eight hours trade we tried for a sales per labour hour of around 90. That means for every hour of trade we are going to make $375. Which is 37.5 burgers.
So how many burgers can you make in an hour? I’d say at least 15 wouldn’t you?
Okay so that means we need 2.5 sales people per hour. Now this is where you make your decision do you have; 2.5 juniors? 2.5 seniors? or 1 senior and 1.5 juniors?
Me? I mostly tried for the later version, one team leader who was responsible for the shift and the 1.5 junior staff.
The only thing left to say about that $3000 day, is that you never make the $375 evenly throughout the day. As we know it starts slow and finishes slow but in the middle over lunchtime – WOW! So that is why with your 2.5 staff per hour you only use say 1.5 – 2 per hour early in the morning and late in the afternoon and bank the other .5 to 1 to use over lunch.
If you are monitoring this KPI every hour throughout your day, do not be scared to see the S/LH to start low at around 40, then go to extremes of 130 over lunch then back to 40 at close. Remember, by the end of the day you are averaging 90 for the day.
Now, how does your day look when you’re working in the store? In the morning are you productive but not really busy? You know, just getting the checklists done. Then over lunch, POW, running everywhere. The store is humming, then it slows down at close time and its back to checking of those lists.
Now, I challenge you. What is your Sales per Labour Hour?
Is it too low? If so; cut the roster, save yourself some money and feel confident that this management decision is one you have made by understanding your figures and your store. If by cutting staff, your team tell you, “they are getting smashed”, you can confidently say: “Are you? Really, that’s only 15 burgers per hour that you are making.”
NOTE: Some franchises call sales per labour hour (S/LH) sales per man hour (S/MH)