The Science of SchedulingDriving sales and profit through right people, right place, right time.

Introduction

Labor productivity challenges:

Uncertainty around immigration reform

Changes to local and national minimum wage laws

Increased competition for workers

Competition among restaurant concepts

For most hospitality businesses, labor is the single highest cost, and it continues to grow. Changes to minimum wage laws (both locally and nationally), a skills shortage in the industry, fierce competition for both the best staff and for customer spend, as well as potential immigration reform are adding to the challenge of how to manage this extremely valuable resource.

Now more than ever the long-term success of businesses depends on their ability to employ and deploy their teams for optimal revenue and customer satisfaction.

Businesses have the data. It is sitting in multiple systems waiting for someone to generate reports to interpret what it means, to assess the opportunities for operational and financial efficiencies, and to gain valuable insights and identify trends. It is impossible for restaurants to get ahead if they are unable to look forward, using insights from the past to more accurately forecast the future. The value of insight from “good data’” cannot be underestimated. The quality of decision-making improves, the ability to react and adapt increases dramatically, and managers can use both their instinct and hard data when planning — a proven recipe for success.

Measuring and holding teams and managers accountable is difficult without good visibility of what’s happening in all areas of an operation. Getting the information out of silos, turning it into tangible, actionable insights, and equipping your managers with the tools they need is crucial to the success of the operation.

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While the operator is able to consider how to stay within budget for the week, this approach does not help them determine how and where to schedule non-revenue generating activity (like prep) across the week. As a result, too much labor is spent doing prep work at the beginning of the day, which impacts the restaurant’s ability to drive sales later in the day, and can cause last-minute shift changes (and cuts).

Why the Traditional Approach Provides a Challenge

Fundamentally, there is nothing wrong with scheduling based on a weekly budget; targeted allowance of hours/spend/cost are always applied to businesses, so it seems like a natural move. Yet, there are many challenges and limitations to this approach.

When operators do not consider activity levels by hour and staff accordingly, they will inevitably run into a situation where there are too many or too few employees on a given shift. Usually, too many are on the schedule for the beginning of the week. The error compounds, and in order to stay on budget for the week, managers are forced to cut shifts at the end of the week.

The Traditional Approach to Labor Scheduling – Budgets and Cash Targets

For decades, hospitality businesses have been working with the traditional approach of creating labor budgets, where allowed spend is based on a percentage of sales. The manager then allocates staffing across the week, checks the allocation against allowed spend and adds or cuts shifts as appropriate. Often operators will cut employees from peak shifts in order to stay within the budget, as peak shifts have more workers to pick up the slack.

It is typical for operators to take their set weekly budget and allocate a daily spend (such as in the example below), placing employees on set shifts without much staggering or thought to the shape of day and activity by time slot. In many cases, budgets might not even be phased across the week, and so the daily budget for labor is often unknown or irrelevant. In these cases, only the total weekly number is important to the operator.

Monday Tuesday Wednesday Thursday Friday Saturday Sunday

Budget $1,000 $1,000 $1,100 $1,200 $1,650 $2,000 $1,850

# of team BOH

AM 5 PM 6

AM 5 PM 6

AM 6 PM 7

AM 7 PM 8

AM 10 PM 10

AM 12 PM 12

AM 12 PM 10

# of team BOH

AM 5 PM 6

AM 5 PM 6

AM 5 PM 6

AM 5 PM 6

AM 8 PM 8

AM 10 PM 10

AM 10 PM 9

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Unfortunately, these also tend to be the busiest. This creates a vicious circle, the impacts of which are far reaching:

Disappointed Guests

If there are not enough employees on a busy shift, it can become very difficult to:

• Order a drink, or a second round.

• Get the check.

• Interact with your server.

• Receive a dessert within the acceptable 10 min wait time.

Meanwhile, your employees are stretched too thin which leads to stress and frustration, and makes it more difficult to deliver genuinely warm customer service.

The result? Guests may not return, and they are likely to share their negative experience on social media, or with friends and family. Negative reviews online quickly translate to lost revenue and decreased traffic: a recent survey by BrightLocal revealed that 40% of consumers will avoid a business after seeing a negative review online1.

Unhappy Teams

The wrong number of team members working at the wrong times and doing the wrong things leads to disengagement and frustration. Teams know that their tip averages will drop; they feel stressed and embarrassed; their productivity levels dip. The busiest shifts should be the best shifts, with the manager acting as the air traffic controller or conductor, a cheerful and capable host at the door who is able to fill the restaurant and keep it full, servers selling second drinks and desserts while delivering an engaged experience, and a kitchen team paced to deliver food within the acceptable time limits.

An unhappy, over-stretched team will:

• Hold the door, quoting long wait times.

• Miss key upselling opportunities, like mineral water over tap.

• Stop selling desserts.

• Fail to sell additional rounds of drinks or coffee/tea.

• Make mistakes, frustrating guests and team members alike.

• Collect too many orders from multiple tables at once, leaving kitchens at risk of crashing, and frustrating back-of-house employees.

1 https://www.brightlocal.com/research/local-consumer-review-survey/#Q62 https://tdn2k.com/snapshot/chilly-sales-traffic-growth-understaffed-restaurants-plagued-february/

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This adds up to a big dent in your bottom line, and also risks increased staff turnover. With a skills shortage already reported in the hospitality sector, staff retention is increasingly important. According to TDn2K, keeping restaurants fully staffed remains a top concern for operators2, and rises in open positions (both managerial and hourly-level) are increasingly challenging to fill3. If teams and managers are stressed or disengaged then they are more likely to leave, which means additional costs recruiting and training replacements — or may mean being short-staffed indefinitely.

Meanwhile, potential guests give up if the wait time at the door is too long, meaning many operators end up quoting people out the door instead of delivering a great welcome and offering them their first drink. Unhappy guests who have to wait end up spending less money, while long waits in between courses and in getting the check increase table turn times. In the worst-case scenario, operators run the risk of needing to take items off the bill or give free items to appease disgruntled diners.

The answer to the labor challenge is not spend less, it’s spend right. Spend only what you need, and at the right times.

A Shift in Thinking and Approach

To combat old habits, thinking and approaches to labor scheduling we need to create a shift away from traditional methodology. Budgets will always exist and they must, otherwise how do we regulate spend? It’s how we get to those budgets that needs reviewing. These are challenging times for the sector and using only what you need when you need it is more important now than ever.

Applying science is key. Instead of starting with desired spend, start with the demand forecast. In other words, you have to know what you are going to sell, so you can determine exactly what is required to prepare and deliver any given dish or drink. Look at how much workload there is, by area and type, and how much of that work each team member can handle in a given time slot. Simple, right?

With the right approach and supported by great technology the shift, in principle, is simple. This approach allows the scheduler to get right into the detail — how many people are needed for each timeslot, so that peak times are covered with the right people to deliver each task — in turn, driving sales.

Taking this approach to scheduling means that delivering the right people at the right place and in the right time is not just something we say we do or want to do, but something we can actually deliver. The results speak for themselves: happier teams, happier guests, and increased guest spend.

3 https://tdn2k.com/snapshot/2019-04-restaurant-sales-stumble-not-a-cause-for-panic-employee-vacancies-remain-bigger-concern/

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The key to applying this approach lies in fully utilizing the power of data. Harnessing the data that exists within the organization and combining it with external information (such as weather, national and local events, and holidays), makes it very possible to predict who you will need and when.

Fourth’s demand forecasting algorithm uses your data and machine learning to forecast sales ($) and items independently right down to 15-minute intervals. The data points in play are:

• Previous sales – Last year sales by time slot and by income type, and the last 8-21 weeks by time slot and by income type.

• Recent trends and seasonality index.

• Weather – temperature and rainfall by location, including last year’s numbers and this year’s forecast.

• Holidays and events, like Mother’s Day or Superbowl Sunday.

This approach is proven to reduce forecasting error by 6% on average (vs. manager forecasts alone)4. That percentage improves even further when managers overlay their local knowledge (such as a local traffic disruption, local events or scaffolding obstructing the sidewalk or entrance).

While it is obvious to all operators that this information is exceptionally important when forecasting, the process of collecting, analyzing and making sense of all that information can be a challenge. This is where we can help.

Why Bother, Why Is This Better?

Operators are often misinformed about how workloads actually affect their business. Without really knowing it, schedules are created using gut feelings, instinct and habits. Without the data analysis, science and rules in the approach, there is a missed opportunity for consistency and accuracy. Having a data-driven approach to scheduling helps drive sales and ensure the best possible environments for our guests and teams. Some of the outputs delivered through a shift in approach are:

Happier Guests

The right number of employees on a shift means that they are equipped to deliver the optimal guest experience. Customers will spend more, will return and are likely to share positive reviews of their experience.

Happier Team

Even the best employees are forced to cut corners if their workload exceeds their capacity. A balanced schedule set by anticipated demand makes for a more productive and less stressful working environment. Employees will be

4 Based on Fourth customer data analysed independently by data science firm, aLook Analytics.

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www.fourth.com *Bureau of Labor Statistics

more engaged, better equipped to deliver outstanding guest experiences, and more invested in the success of your organization.

Reduced Costs

Under-scheduling or over-scheduling…it all leads to overspending. Using only what you need and increasing sales means improvement of the overall labor margin. Businesses using our solution have seen as much as 2% savings. Plus, there are more opportunities for servers to offer coffees and desserts, and with reasonable wait times, guests are more likely to order additional rounds of drinks — all of which helps drive top-line sales.

Managers — Command and Control

Schedules are easier to create as managers have more information at their fingertips for better decision making.

The table below shows some of the opportunities, actions and benefits for an average $25k per week business.

Fourth’s Solution for Labor Productivity

Our workforce management solution uses an advance forecast algorithm to look at historical sales data, recent trends, seasonality trends, weather forecast upcoming holidays and events to accurately forecast sales and items sold in 60-, 30-, and 15-minute increments. Managers can still adjust the system-generated forecast if required — overlaying overlay local knowledge to deliver the optimum level of accuracy. The algorithm is self-learning, so forecasting

Typical opportunity* Action Result/benefit

Forecasting will be incorrect by up to 10% either way

Workforce Management will improve forecast accuracy

Forecast labour schedule, cost and percentage (planned) can improve by

1-3%

FOH – Under-scheduling by a minimum of 30 hours at peak times

Workforce Management will redeploy 30 hours to peak times

Benefit = 30 x SPLH $115 = $3,450 per week

Average spend is reduced by a minimum of 75¢ per guest through lack of team on the floor

Workforce Management will schedule team in line with demand and labor

standards

Typically - $25k = approx. 1,470 guests – 75¢ x 1470 = $1,102.50

FOH – Over-scheduling during the shoulders of the business by a minimum 60 hours per week

30 hours redeployed to the peaks of the business, 30 hours saving

Benefit = 30 x hourly rate $15.56** = $466.80

BOH – 15 hours prep used in the kitchen that are not required

Workforce Management will remove 15hrs per week not required

Benefit = 15 x hourly rate$15.56 = $233.40

BOH – Over-scheduling at the end of the day by a min 15 hours per week

Workforce Management will remove 15hrs per week not required

Benefit = 15 x hourly rate $15.56 = $233.40

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accuracy continually improves as more and more data is added and analyzed. With an accurate understanding of what is needed, managers can match scheduled labor with forecasted activity, heightening productivity and increasing the ability to drive sales.

Scheduling metrics are created for the organization, and three types of metric are deployed:

• Variable metric – interacts with items sold.

• Minimum team – how many team members are needed as a minimum to operate at low or zero sales.

• Fixed hours – to account for tasks that have no direct item sales attribution.

As the user then schedules to workload demand by area, the graph changes in real time, displaying over, under, and corect staffing levels.

The system also includes features to make scheduling quicker and easier for the schedulers:

• Drag and drop shifts to copy to another day or person.

• Move shifts to reallocate by dragging and dropping.

• Create schedule templates and copy to new week(s).

• Copy last week’s schedule.

Aside from the benefits listed above, the solution also provides businesses with 100% visibility into performance by site. Area managers or head office staff can quickly and easily evaluate a snapshot report that gives a picture of the top-performing sites, and which are underperforming in terms of scheduling accuracy.

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Privately owned by TDI Capital, Stonegate Pub Company is the fourth-largest managed pub operator with 690 pubs and bars across the UK. Through a series of acquisitions, it has more than doubled in size since 2011, employing over 15,000 people. Stonegate operates a number of brands and formats, including Yates, Proper Pubs, Town, Pub & Kitchen, Slug & Lettuce, Common Room and Venues.

David Ross, a qualified chartered accountant, is the Chief Financial Officer. Responsible for financial and management accounting, pricing and risk, he is a strategic partner to the CEO — analyzing opportunities to grow sales margins and profits.

Ross recognized that the rise in labor costs demanded greater scrutiny of data showing staff performance. Furthermore, inefficiencies in the deployment of labor had become an increasing business issue — too few at peak times meant lost sales, too many at others meant unnecessary spending. They had many talented managers who “deployed labor by intuition” but he knew that overlaying hard data would tangibly help improve staff deployment.

An existing customer of Fourth’s Payroll solution, Ross chose to implement Fourth's workforce management solution to address these issues:

Case study: Stonegate Pub Company

Fourth was key to helping us deploy people to drive profit through the business…so Fourth was the catalyst to drive improved performance.

It was probably the first six months that we had those high performers who got it, and bang — they were making more money. But it took a year for the whole business to shake off ingrained habits and embrace the system.

The implementation was challenging at times, because we didn’t engage as well with our General Managers and Area Managers as we should have done.

Fourth has enabled the daily examination of the efficien-cy of rotas versus expected sales, across the 690 sites. By focusing on the exceptions, we can use the ‘best in class’ performance to help the underperformers maximize sales and profit.

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With the Fourth Solution, Stonegate can now:

• Target underperformance.

• Analyze schedule efficiency–labor versus budget.

• Forecast with greater accuracy to get better results.

• Analyze the hours and schedules for each site and every staff member — four weeks in advance.

• Change the type of labor according to the product to improve speed of service.

• Mitigate increases in labor costs.

• Improve performance in businesses that were already experiencing strong profit margins

We saved $5.4 million in one financial year. Driving efficiency is not about cutting labor, it’s about putting the right people on at the right time, and recognizing individual work preferences. Again, here data is key. I like the fact that I can challenge our teams with fact-based data, and I know Fourth is at the forefront of that kind of data analysis.

Dave RossCFO, Stonegate

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Questions? Call us at +1.877.539.5156 www.fourth.com

About Fourth

Fourth provides end-to-end, best-in-class technology and services for the restaurant and hospitality industries. Their supply chain, and workforce management solutions, coupled with the industry's most complete data and analytics suite, give operators the actionable insights they need to control costs, scale profitability, improve employee engagement, and maintain compliance. Since its merger with US-based HotSchedules, Fourth serves more than 7,000 customers across 120,000 locations globally.