I think this can help some people as this is one of our biggest expenses. What is everyone’s total expense for labor as a % of sales? Also, how many hours a week do you work?
I’m at 19% and 50 hours a week. I have sales of $34,500 a month.
You are running very good labor numbers.
28-34 for me.
As far as work goes, it depends what you consider work. Is it a shift-actually being scheduled or being at the shops? What about owner duties in the office?
For instance, I am in my office working but I am not at the shop…
I do most of my office duties while running the shift. Say Monday at 3:00 pm when it’s usually on the dead side.
And please exclude any wages you pay yourself.
24% labor cost with 54,000 in sales. Me and my partner working 40 hours each.
While Labor % is a good way to see how productive you are, it’s not the best way. If you truly want to see how well your store runs you can do so by running a labor yield:
Divide Net Sales by Labor Hours.
For example:
We’ll take two scenarios in which one store does $10,000/wk and one store does $3500 a week. The $10,000/wk store runs a 23.4% Labor cost and the $3,500/wk store runs a 27.08% Labor cost. Both stores have owner/operators earning $600/wk and working 50 hours. Both stores have an hourly employee wage of $5.80/hour.
Scenario 1:
Net Sales…$10,000/week
Labor %…23.4%
Labor $…$2,340
(subtract)manager pay…($600)
Crew Labor $…$1,740
divided by $5.80/hr…300 hours
Manager hours…50 hours
Total hours…350 hours
$10,000 / 350 hours = $28.57 Labor Yield ($28.57 in sales per manhour used)
Scenario 2:
Net Sales…$3,500/week
Labor %…27.8%
Labor $…$948
(subtract)manager pay…($600)
Crew Labor $…$348
divided by $5.80/hr…60 hours
Manager hours…50 hours
Total hours…110 hours
$3,500 / 110 hours = $31.81 Labor Yield ($31.81 in sales per manhour used)
Although the Scenario #1 store runs a better labor percentage, the Scenario #2 store is more efficient in that they produce more sales per manhour than the other store. This, my friends, is the way to figure out your efficiency in your stores.
The goal: $30 per manhour.
-J_r0kk
Granted, we have one owner not taking any pay right now, but the rest of payroll is running at an average of 32.38 per paid manhour over the year. It ain’t perfect, but it is sure up from last year when both owners were taking no pay. This year we are there with one paid owner, this year . . . we both may get paid something 
Our numbers are scarily similar to what you listed above for a smaller income place! Did you lift that from one of my posts? And we pay closer to an average of $7.50 for hourly.
I’m too tired to work it out and find the right words but you also have to look at volume of sales over a given period of time.
Don’t get too tied up with accounting procedures or to reliant upon them to find out if you’re running a tight ship or not.
We used to go over this with franchisees.
There comes a point in time based upon volume that you need, say a third employee in the store to keep things running smoothly.
At the beginning of said level of volume that employee kills your payroll and doesn’t seem justified to a pencil pusher until half way through that volume level. Near the end of that volume level ( right before the need for a 4th employee) the accountant once again pats you on the back.
I’ve found it also very hard to obtain an employee that will just work for 2-3 hours a day so you usually end up with them for about 4-6 hours a day.
While you try to use them for additional prep work and cleaning it sure doesn’t look good to the pencil pushers.
Most of that “accounting stuff” should be used for checks and balances and/or rules of thumb.
Look around your store and if you have too many employees leaning and not cleaning it’s time to cut payroll :lol:
Well said. The need for another man to meet the service needs of the next level of voume is true at the same time as the $30 per manhour rule of thumb does speak to efficiency. The need for the next employee makes the operation less efficient for a period of time, and identifies a need to improve efficiency by driving the business through that volume level by increasing sales.
It all does work hand in glove. One has to employ a brain to interpret the results of the analysis and decide on a competent course of action. It is this portion of the program that separates success from failure . . . and all the different gradients in between.
Statistical analysis of any kind . . .be it scientific research or accounting . . . is mot mystical, magical or anything left only to the scared experts. Anyone can learn to do the math. The talent comes in knowing what the numbers suggest or describe, and how to develop the course of action.
I like that method for my own store, however when comparing stores it is inherently flawed.
I have to agree with DFW, those comparisons are completely wrong for one reason.
The store with less volume is paying the manager the same as the store with higher volume.
That 600 bucks a week is going to weigh heavier on the labor yield since it is spread across lesser sales.
If I had two stores, both paying a manager 600 a week (which is cheap actually) I would expect the manager at the lower volume store to run a LOWER labor percent since they are soaking up a higher percentage of the total labor “pool” per sales.
For a store doing 600 bucks a day or less, that would allow 1 manager and one crew for MOST of the day outside peak period…so yeah I would expect a lower overall labor percent which would even out the yield equation.
$600 is cheap? I better keep you away from my Manager, he gets $500.00.
DFW,
You pay someone 500 bucks a week which is less than 30k to represent your establishment and safe keep your assets while you are away?
How can anyone with any kind of education, experience or background take a MANAGER position for 500 bucks a week? Thats 10 bucks an hour or LESS. Around here, people with no education or experience can make 9 per hour at In and Out burger and you are paying your TOP employee a few bucks over average wages to control your store and you trust they are motivated and inclined to treat customers with enthusiasm and not allow theft and loss?
I dont get it…congrats on underpaying the TOP person in your organization, I can tell you that over time if you fail to pay every employee, but especially the general manager a wage in which they can live and provide for themselves and their family, you will have high turnover and plenty of headache.
JMHO of course. To me a GM should be ABLE to make 50k plus a year in a high volume store. Check out places like McD’s, BK, Pizza Hut, Taco Bell…after bonuses those GMs can make a decent living and the quality of the managment staff reflects that.
Pay someone 1.50 over your average employee and you will get another employee (average meaning 10 bucks an hour)
“Guest”, may we request you get a login and let us know where you are posting from? Helps us with perspective about the various markets out there.
Let’s not foget that different states have different minimum wage standards. 9 bucks in my state is well above the minimum wage.
Remember as well that managers in the higher volume operations tend to get bonmus structures included from the . there are numerous intagibles you get working for someone other than the mega-corporate stores. My guys get meals, and a pleasant and encouraging work environment they won’t get at a faceless conpetitor’s place . . . hance my very limited turnover to date.
If it ultimately ALL about money, then someone will always do it cheaper and faster, and pay more hourly wages. Loyalty is not about money in either the price or the wage game. It is an important part, just not the only part.
Guest writes:
That 600 bucks a week is going to weigh heavier on the labor yield since it is spread across lesser sales.
If I had two stores, both paying a manager 600 a week (which is cheap actually) I would expect the manager at the lower volume store to run a LOWER labor percent since they are soaking up a higher percentage of the total labor “pool” per sales.
That was a good try. However… and unfortunately… your view of my entire post and your rebuttal are completely inaccurate.
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Labor YIELD and Labor PERCENT aren’t even in the same stratosphere when it comes to being related. The difference is night and day between the two.
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If you had two stores, both paying a manager $600/wk, how in the name of common sense would you expect the manager of the lower volume store to run a LOWER labor percent? Just the fact that higher sales would drop the manager’s salary as a percentage of labor alone would have the higher volume store running better labor %.
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The original post by DFW was:
I think this can help some people as this is one of our biggest expenses. What is everyone’s total expense for labor as a % of sales? Also, how many hours a week do you work?
I’m at 19% and 50 hours a week. I have sales of $34,500 a month.
The formula I offered in my post was to help everyone get an accurate idea of the “production” they generate in their stores because lower volume stores cannot compete with higher volume ones in Labor %. Doing so would be like comparing apples to oranges. What I presented was an alternative formula that can help operators look at their production with an “outside the box” point of view. If you’re not as productive, your labor YIELD drops and your labor PERCENT increases. ALL stores can compete when it comes to the Labor Yield productivity formula.
Productivity:
- Upselling on the phones, generating higher ticket averages.
- Efficient work in the kitchen where everyone is needed and busy.
- Efficient delivery drivers who average 3-4 deliveries per hour.
- Proper staffing for the projected business.
So, in conclusion…
I understand that you feel the need to try to call people on the posts they make because that’s probably the kind of person you are, but…
before you try to prove a formula wrong make sure you know what you’re talking about because your post makes absolutely no sense, and I am ABSOLUTELY, UNECQUIVOCALLY correct in the accuracy of the formula I presented to the group. -J_r0kk
jrokk,
My comments were 100% correct, I used one term incorrectly, my thesis stands as CORRECT.
With lower sales, the yield will be lower, that was my mistake…the output per labor dollar will be lower as you have a HIGHER fixed cost employee on the payroll.
Here is my example used to an extreme.
Using your thinking, if I had a store in Mexico and I only had to pay my manager 200 bucks a week, and the EXACT same figures existed, the yield would go up.
I stand completely behind my other comments, you sir are too serious in how you take criticism. I noticed you rebuffed someone last night for not kissing your rump when you gave a comment too.
If a low volume store is paying the same rate for a manager as a high volume store, then the OTHER labor costs have to be LOWER to compensate for paying the manager a higher rate, since you are spreading the FIXED labor cost over lesser sales.
I disagree with your yield theory, especially with the example you gave concerning lower volume store and a lower yield…of course that would be the case. If both stores had similar variable labor costs percentage wise then yeah since the FIXED labor cost is spread over higher sales, then the yield is higher.
I used ONE term incorrectly, the rest of my reply was correct.
Yield is somthing you learned working for a franchise and unless you have the steady constant sales to spread the fixed costs, the manager will have to run the show with one employee for safety concerns during the slow period.
Nice try rebutting me, I guess you didnt read the entire post, rather my flub on the ONE term you were stuck on.
:roll:
Last comment for the evening and it is late for me.
Jrokk seems to be stuck on this yield issue, to me the REAL issue is VARIABLE labor costs (non-managment labor)
Lets look at his examples.
Store 1
10k a week sales
1740 a week in VARIABLE labor
Thus a 17.40 percent variable labor.
Store 2
3500 a week in sales
348 a week in variable labor
Thus a 10% variable labor percent.
What does that mean? It means that the NET EFFECT of backing out the fixed labor costs has a greater impact when comparing two stores with equal fixed managment labor costs.
Yield is some useless word that can mean nearly anything. It could mean that the variable labor in store 2 meant they had half the crew not show up, so the manager had to carry the load. It could mean that store 1 had training hours or the schedule was done incorrectly.
The correct way to determine efficiency is more than some yield calculation. Determine what variable labor cost percent you are happy with, and DO NOT ignore total labor percent, to do so is foolish. Why? Because maybe you are better off having two or three shift managers versus a store manager…
To me what matters most is making money, driving sales and lowering fixed costs by increasing the top line, not by forcing a store manager to get worn out by only having 62 hrs of labor to use for a WEEK. In Jrokks example, the store with the higher YIELD had about 62 variable hours of labor to use for the WEEK. That means for 7 days, if the store is open 9-9, 10 hours, you have 8 hrs of variable coverage available to hit that YIELD. I would prefer to have proper staffing, maybe even over staffing slightly during the off periods and have prep, cleaning, marketing, maintenance done and try to trim a bit during the peak period and expect more of the best workers when it was busy, than to bust my chops trying to force one of those labor schedules and balance out available labor hours per day because some YIELD figure told me I had to schedule one person from 9 until 4 or I would miss my yield for those hours in question.
It isnt so easy just tossing out numbers, in reality if you drive sales, the fixed labor costs will be easier to spread and labor isnt that big of an issue.
Guest,
Maybe you should READ the formula again.
Net sales divided by Labor HOURS = Labor Yield
Cost is not a consideration in this formula. It is based solely on the PRODUCTION manufactured in a store.
The only reasoning for me throwing salaries in the equation was to give an EXAMPLE of two scenarios that could be argued. The only reasoning for me throwing hourly wages in the scenarios were to calculate total hours worked.
With that said…
Using your thinking, if I had a store in Mexico and I only had to pay my manager 200 bucks a week, and the EXACT same figures existed, the yield would go up.
makes no sense. The manager would still be working 50 hours per week.
I stand completely behind my other comments, you sir are too serious in how you take criticism. I noticed you rebuffed someone last night for not kissing your rump when you gave a comment too.
I take criticism when criticism is due. In this case… it simply isn’t.
Now… let’s agree on something and at the same time strengthen my point:
If a low volume store is paying the same rate for a manager as a high volume store, then the OTHER labor costs have to be LOWER to compensate for paying the manager a higher rate, since you are spreading the FIXED labor cost over lesser sales.
Based on what you JUST stated, OTHER labor costs have to be LOWER to compensate for paying the manager a higher rate. In order for these other labor costs to be lower, would you agree that these other employees would have to work less hours (remember the scenario in which everyone gets paid $5.80/hr)? The only way to decrease labor costs is to cut labor hours. By cutting these labor hours you are INCREASING productivity, which makes my point completely valid. Here’s the example you offered (and we’ll use the original scenario):
Scenario 1:
Net Sales…$10,000/week
Labor %…23.4%
Labor $…$2,340
(subtract)manager pay…($600)
Crew Labor $…$1,740<~ these are your hourly employees
divided by $5.80/hr…300 hours
Manager hours…50 hours
Total hours…350 hours
$10,000 / 350 hours = $28.57 Labor Yield ($28.57 in sales per manhour used)
Scenario 2:
Net Sales…$3,500/week
Labor %…27.8%
Labor $…$948
(subtract)manager pay…($600)
Crew Labor $…$348
divided by $5.80/hr…60 hours
Manager hours…50 hours
Total hours…110 hours
$3,500 / 110 hours = $31.81 Labor Yield ($31.81 in sales per manhour used)
Now, let’s change some things up to prove your argument, and at the same time, prove my formula…
Scenario 1:
Net Sales…$10,000/week
Labor %…23.4%
Labor $…$2,340
(subtract)manager pay…($600)
Crew Labor $…$1,740
divided by $5.80/hr…300 hours
Manager hours…50 hours
Total hours…350 hours
$10,000 / 350 hours = $28.57 Labor Yield
Scenario 2 (running the exact same labor % as scenario 1):
Net Sales…$3,500/week
Labor %…23.4% <~~ same labor %
Labor $…$819
(subtract)manager pay…($600)
Crew Labor $…$219
divided by $5.80/hr…37.75 hours
Manager hours…50 hours
Total hours…87.75 hours
$3,500 / 87.75 hous = $39.89 Labor Yield
Of course, by presenting the numbers in this fashion, it would be impossible for a $3,500/week store to run a 23.4% labor because most stores are open an average of 70-80 hours per week. I just offered this scenario to prove the point (you made) that Labor Yield would increase if variable costs were to drop.
-J_r0kk
j_rokk, your formula has really gotten me thinking…thanks.
just curious, where does the $30 goal per hour come from? is that some type of national average?
my new minimum wage in missouri is $6.50, which brought my hourly employee wage to $7.10 per hour, and I can see having difficulty getting to that number. thanks for the info…
Napoli,
I truly feel for ya. That has got to sting just a little bit paying drivers $7.10 plus mileage and tips. Ouch.
Actually, what I was trying to explain to the “Guest” is that this Labor Yield has nothing to do with Labor %. Do this:
Go to your POS system and find your payroll report. It will tell you how many total hours your employees worked for a specific period, whether it be a day, a week, a month, or a year. Write the total hours down on a sheet of paper. Next, look up your Net sales for that same time period. Write that number down.
Net sales divided by hours worked = Labor Yield
The closer your Labor Yield is to $30 the better. If you’re over $30, then you have an extremely efficient operation. Higher volume stores usually have the upper hand because they’re constantly busy and don’t have too much time to do anything but answer phones, greet customers, make pizzas, and deliver them (therefore being extremely efficient). In lower volume stores, the task of hitting $30 is extremely difficult. There are always slower times when the phones aren’t ringing so your operation is naturally inefficient. I’m not saying the operators of lower volume stores are bad and inefficient… the OPERATIONS are inefficient because of lack of sales.
One extremely easy way to increase your labor yield is to increase your average ticket. Here’s another one of my examples:
Store #1
Total orders/week…1,000
Avg. ticket…$14.00
Total labor hours…515 (manager - 50 hrs. Crew - 465 hrs.)
Net sales…$14,000
$14,000 divided by 515 = $27.18
Store #2
Total orders/week…1,000
Avg. ticket…$16.50
Total labor hours…515 (manager - 50 hours. Crew - 465 hours)
Net sales…$16,500
$16,500 divided by 515 = $32.03
Incidentally, in these stores (after reading previous posts it looks like the guest and I were both arguing the same point, just with different perspectives), the manager gets paid $600/wk and works 50 hours/wk. Average hourly wage is $5.80. The store that is more efficient (running a better labor yield) is also running a lower variable labor %.
On a side note:
To whomever is reading this, understand one thing... I'm only trying to help. I wish I could take credit, but not one of the ideas I share with you are original. These are things that have been shown to me in one form or another as I was learning the business. I've been shown good. I've been shown bad. I only apply and share with you the things that have worked in the real world in real pizza stores. If you don't like the ideas, then no problem. I'm not asking anyone to do things exactly the way I do things. I just want to offer a different approach that some may have overlooked.
I want to see people become successful, plain and simple. You do NOT want to be in the position where you’re about to lose everything you’ve worked for because you lack the knowledge, or a different perspective. It is truly the worst thing you can imagine. Take it from someone who knows. I’ve been there. It sucks a$$.
-J_r0kk