Does learning how you can better manage the cost of labor in your business ever cross your mind? If so, labor forecasting should be on your radar. 

Sure, every business owner knows that they have to assign a set number of shifts to each employee. But what if there was a way to do this strategically? What if there was a way to maximize revenue without heightening the labor cost?

This blog is going to cover everything you need to know about labor forecasting and its importance amongst restaurants. From the basic definition to key metrics to monitor, we’ve got you covered. What are you waiting for? Let’s get to work!

Labor Forecasting Definition 

Labor forecasting refers to the process of determining when a certain number of employees should work. It’s a technique used in unconventional working situations, as they’re unpredictable. It's also a tactic that helps budget labor expenses. 

In traditional workplaces, such as corporate offices, it’s standard for employees to work a set forty hours per week. But take the restaurant industry, for example. Eateries fluctuate quite a bit based on factors like location and the season. So, it might warrant more or less staff members depending on the time period.

How Restaurants Can Collect Data 

Before you can conduct labor forecasting, you need to acquire the right data metrics. But what kind of data will you need to analyze, and where will you find it?

Well, if you don’t use one already, we highly recommend you onboard an all-inclusive POS system. Not only can POS software streamline restaurant operations, but it can retrieve customer data in real time. No matter the restaurant, it's an absolute game-changer. 

As orders enter the restaurant POS platform, related data will be present within a dashboard. Cart values, items sold, and busy times of day are just a few metrics the system will collect. Typically, POS integrations will have numerous charts within a single dashboard. Each one displaying various types of restaurant data analytics. 

The best part about an integrated POS system is that cloud technology hosts all its features. Cloud computing let's data be accessible from multiple devices. Even if you have to monitor data from another brick and mortar location or your own home, you can do so with these kinds of tech solutions.

Labor forecasting revolves around the staff. However, it’s heavily influenced by consumer data. From online ordering statistics to the number of reservations you get each day, every metric is essential in putting schedules together. Now, let's go over which of those numbers are most important.

9 Metrics to Monitor When Forecasting Labor

Labor forecasting will prepare you for staff optimization, a more engaged team, and long-term employee retention. The following metrics are those you should keep an eye on for optimal restaurant success. Read on:

1. Overall Labor Budget 

Sure, labor solutions and labor saving devices can help cut costs. But it’s still necessary to budget the amount of money you’ll spend on employee-related expenses. Frequently monitor this metric and ensure it doesn’t exceed your budget. And remember, the labor cost percentage should be anywhere between 20 and 35 percent.

2. Restaurant Inventory Levels

Manually tracking inventory can be pretty time-consuming. It involves a ton of manual labor that can be shortened with digital solutions. That’s why it’s so important to use a restaurant inventory management app that syncs with the POS system. Then, the restaurant manager can check and see what sells. This will assist labor forecasting, as it will indicate who needs to work in the kitchen and when.

3. Busy Days and Times 

When you conduct labor forecasting, you're also preparing well in advance for a potential labor shortage. Implementing effective workforce management techniques will help dodge related issues. Frequently check out sales trends to determine when your restaurant is the busiest. Then, you'll know exactly when to assign shifts to more team members. This tip is sure to help productivity and work overload.

4. Employee Turnover Rate 

Vacancies and recruiting new hires can cost a substantial amount of money. After all, labor work is what keeps the business in motion. Review historical data to determine retention rates. Then, conduct interview processes and hire new employees accordingly.

5. Absenteeism Rate

Absentee servers or bussers might not be the biggest deal, especially in casual dining establishments. However, if there's only one sous chef on duty, their absence can cause the whole business to close early. If data suggests that your cook is frequently absent, onboard multiple types of chefs. 

6. Historical Staffing Levels

On average, how often does your current team work? This metric is clearly one of the most important when conducting labor forecasting. It will help guide decisions regarding the shift scheduling cadence. It may also show a correlation between hours worked and employee engagement. Typically, loyalty coincides with time.

7. Projections for Growth Opportunities 

Are your restaurant's profits on a steady incline? If so, it might finally be time to expand your team! Just be sure to implement proper staff development resources and training materials during the hiring process. The bigger the team, the busier the business. So, this isn't a time you want to provoke employee turnover. 

8. Industry Trends

Market and food trends are vital in labor forecasting. Not only do they speak for how busy shifts may become, but menu items that will sell fast. Setting benchmarks for your restaurant business can only begin once you know where the industry is heading. 

9. Employee Feedback and Survey Results 

Allow your employees to provide honest feedback about their roles. As a business owner, you're not in their shoes. But the nice part is that you can learn a ton of new things about the workplace. Then, you can use this insight to your advantage when planning labor forecasting efforts.

Frequently Asked Questions About Labor Forecasting 

Without labor forecasting, it can be difficult to properly manage your labor force. There are many concepts that go into such efforts. In the FAQ section below, we’ll cover additional information that may be helpful before getting started. Read on:

What Is Labor Forecasting?

Labor forecasting refers to the process of planning shifts, hiring procedures, and staff development. The practice also uses data metrics to make sound decisions. In doing so, business owners are able to make important changes with confidence.

What Are the Methods of Labor Forecasting?

There are five methods of labor forecasting, which are:

1. Historical analysis
2. Market research
3. Delphi method
4. Quantitative analysis
5. Managerial assessments

What Does Forecasting Mean In Staffing?

Forecasting in staffing refers to the act of planning hiring and shift scheduling in advance. Or, the act of rearranging current processes for greater efficiency.

What Is An Example of Labor Forecasting?

An example of labor forecasting would be if a business owner reviewed which seasons are busiest. Then, they go and hire more employees before those seasons roll around. It’s any situation where you’re using data to back up employee-related decisions.

What Are the Three Key Elements of Labor Forecasting?

The three key elements of labor forecasting are:

1. Forecasting the demand for labor
2. Forecasting the supply of labor
3. Balancing supply and demand considerations

Effective Strategies Begin With Labor Forecasting

The team that operates your restaurant is your most valuable resource. Ensure that you're mapping out schedules strategically, whilst making decisions backed by data. In doing so, you’ll be able to plan in a way that produces results. If you don’t, you’ll be basing a lot of important decisions off of guesswork. However, the numbers don’t lie. So, use this post to build a checklist of labor forecasting metrics you’ll be monitoring on a regular basis.