How to Increase Your Profitability by Examining Earned vs Actual Hours
Learn how to keep your labor costs low by measuring your Earned vs. Actual Hours
Labor accounts for approximately one-third or more of a restaurant's cost of sales. Effectively managing this major cost bucket starts with optimized schedules, which includes measuring “earned hours.”
Most restaurant managers create schedules based on their sales forecast, but what if a restaurant's actual sales don't match its forecasted sales? If your sales forecast doesn't align with your actual sales, then it's likely your restaurant won't be staffed correctly. If you are overstaffed, your restaurant is losing profits, and if you're understaffed, your guest experience will suffer.
Earned hours vs. actual hours is a powerful equation that can help optimize schedules and avoid staffing mishaps, while also evaluating operational effectiveness.
Watch the video below to understand how you can apply the concept of Earned Hours at your restaurant:
How to Use Earned Hours vs. Actual Hours to Evaluate Restaurant Managers
Earned hours indicate how long your employees should have worked during a shift based on the actual sales during their shift.
In response to sales conditions throughout the day, managers should make adjustments to their staffing levels. By analyzing your restaurants’ earned hours, you can see how well your managers are making adjustments and help them drive better schedule planning, execution, and reaction in the future.
A manager's earned hours performance is determined by their actual hours-to-earned hours variance. The variance is derived from calculating actual hours (how many hours the employees worked) – minus – earned hours (how many hours they should have worked given the actual sales performance). The resulting (+/-) variance indicates how well a manager reacted to real-time restaurant sales against their employee schedule.
If the actual-to-earned hours variance is close to zero, they are doing a good job responding to the restaurant's sales that day and calling in extra people or sending people home as needed. If the variance is too high or too low, there's likely a problem that needs to be fixed. It may mean they aren't reacting to sales conditions that require schedule adjustments.
Understanding this data means that managers with a variance that is too high or low can be coached by an experienced supervisor on earned hours vs. actual hours and can become more responsive to current conditions. This will enhance performance, profitability, and the guest experience.
A best-of-breed labor management solution can help you measure earned hours vs. actual hours, optimize schedules, and reduce labor costs.
Want to learn more about using earned hours vs. actual hours to measure your shift scheduling performance? Contact us today.