If you own or manage a restaurant, you’ve probably heard the acronym SPLH and wondered what it means. These four letters stand for “sales per labor hour” (SPLH), one of the key performance metrics that help you effectively manage your restaurant’s business resources. Understanding SPLH can help you accurately balance staffing levels to meet customer demand and your profitability goals. In this article, I break down what SPLH is, how to calculate it, and how you can use SPLH to increase profitability.
Key Takeaways:
- SPLH means “sales per labor hour,” a common key performance indicator for restaurants.
- Calculating SPLH can help you increase profit margins for each hour your restaurant operates.
- Monitoring and calculating SPLH is easier to do with a tool like a point of sale (POS) with a built-in time clock that tracks your sales and labor costs in a single software platform.
What Is Sales per Labor Hour
Sales per labor hour, commonly abbreviated as SPLH, is a metric that compares your total sales to the amount of labor required to produce those sales. It is a restaurant metric that dives deeper into your labor costs to give you a more immediate understanding of how much you spend on labor to earn each sales dollar.
You might also hear the term “sales per man hour,” or SPMH. Sales per man hour and sales per labor Hour are the same metrics under a different name. Most restaurants use the term SPLH because it is more inclusive.
Why SPLH Is Important
SPLH is important because labor is one of the very few costs you can control. Understanding SPLH will help you track and control labor costs through the day, week, month, and year, which can lead to better profit margins and a longer, more profitable life for your business.
SPLH Formula
To figure sales per labor hour, you need a couple of numbers first: your total sales and total labor hours worked in the same timeframe. You can figure SPLH for whatever timeframe you like, per day, per week, per month, or per year. Just make sure your total sales and total labor hours figures are for the same timeframe before you begin calculating.
Your total labor hours is the sum of all the hours worked by your hourly staff in a certain timeframe; it is not just the number of hours you are open. For example, if your restaurant operates for lunch and dinner, with a full staff of cooks, waiters, bartenders, bussers, and hosts, you’ll need to add all the hours your team worked in a day to get your total labor hours for that day. If you don’t use a POS (which provides this in your daily labor report), you can get this information from your time clock or payroll software.
Once you have the baseline figures, the SPLH calculation is simple.
Total Sales $ ÷ Total Hours Worked = Sales per Labor Hour
A note on hourly staff: SPLH focuses on hourly staff, excluding the hours worked by salaried employees like managers and sous chefs, because SPLH tracks how efficiently you are managing your controllable labor costs, and salaries are fixed costs that are not influenced by the number of hours worked.
Manual Versus Automated Tracking
If you use a point of sale (POS) system, you can easily pull the sales and labor numbers you need from the system’s sales and labor reports. A POS makes it faster and easier to calculate sales per labor hour, but you can still calculate SPLH if you track your operation manually. If you don’t use a POS, then hopefully, you maintain detailed nightly manager logs or spreadsheets that track your sales and labor for each day. If you do, you can pull the numbers you need from those logs.
SPLH Example
Let’s figure out an SPLH calculation for a quick service cafe. To keep it simple, we’ll calculate the SPLH for a single day. The total sales for the day are $12,000.00. The day’s total labor hours break down like this:
Example Restaurant Daily Labor Hours
Employee | Hours Worked |
Cook 1 | 8 |
Cook 2 | 8 |
Cook 3 | 8 |
Dishwasher | 8 |
Barista 1 | 5 |
Barista 2 | 5 |
Cashier 1 | 6 |
Cashier 2 | 6 |
Cashier 3 | 6 |
Cashier 4 | 6 |
Total Labor Hours: | 66 |
So, for this restaurant, the total labor hours are 66. And the daily SPLH looks like this:
$12,000 ÷ 64 = $181.81
Is $181.81 a “good” SPLH? Well, that depends on the cafe’s total operating costs and whether they earn a profit overall. For most restaurants, an SPLH over $120 is considered excellent.
What Is a Good SPLH?
A good SPLH varies by restaurant. Every operation is different and has different overall costs. A good SPLH is one that allows your restaurant to turn a profit.
There are some industry benchmarks for SPLH for different restaurant types, though. These industry standards can give you an idea of how your restaurant is performing compared to others like yours.
Target Sales per Labor Hour by Restaurant Type
Restaurant Type | SPLH Range | Insights |
---|---|---|
Quick Service | $100-$200 | Quick service restaurants (QSRs) tend to do a high sales volume with fewer support staff (bussers, runners, etc.), so their SPLH tends to be higher. |
Fast Casual | $100-$200 | Fast casual restaurants may have more staff members than QSRs (like prep and line cooks), so they tend to have a slightly lower average SPLH than quick service. |
Full-service Casual | $60-$100 | Full service restaurants (FSRs) need more support staff in both the kitchen and dining room than QSRs and have lower menu prices than fine dining. So $60 to $100 is still a great SPLH for them. |
Full-service Fine Dining | $90-$150 | Fine dining restaurants have armies of cook and service staff, but they can also charge a premium for their high-end experience, so their SPLH tends to be higher than casual FSRs. |
Bar | $150-$250 | The profit margins on liquor are very generous, and bars tend to see a high volume of business, which increases their SPLH. |
Coffee Shop/Cafe | $50-$100 | Coffee shops have a lower menu price point than other food businesses, and some may also have a kitchen staff to prepare light meals. But when you’re selling a craveable item like coffee, sales volumes tend to be high, leading to a healthy SPLH. |
So, if your SPLH is outside these ranges, is your business in trouble? Not necessarily. A low SPLH might be fine if your business is earning a profit overall. And a higher SPLH can sometimes be an indication that you are understaffed.
SPLH is only one metric. It can help you identify areas where you can be more efficient and drive more profit. However, it is not a standalone number; you need to consider your SPLH within the context of other restaurant metrics and KPIs to create a holistic picture of your business before you make any major strategy changes.
Applying SPLH to Your Restaurant
Now you have your SPLH calculated, and you have some idea whether your SPLH is healthy based on industry benchmarks. There are many ways that SPLH can inform your restaurant management decisions; these are some of the best ones.
Set a Target SPLH
Using your restaurant’s historical sales and labor data alongside industry-standard benchmarks, figure out a target SPLH for your restaurant. Your target SPLH should be a reasonable number that allows your restaurant to earn a healthy profit without causing understaffing. Understaffing, even for a short time, can result in poor customer service, which can lower your sales, causing more long-term problems. So make sure your target SPLH doesn’t cut too many labor hours from your schedule.
Calculate your SPLH daily, and compare it to this target. This will give you a deeper understanding of how your business ebbs and flows and how those patterns affect your labor needs and profitability. If you’re not sure where to begin, start by figuring out your actual SPLH and set a goal to increase it by 10% over the next three months.
Use SPLH to Create Labor Budgets
The most common way to apply your SPLH is when creating labor budgets. Consider your target SPLH alongside historical sales data and sales forecasts to set a budget before you write your staff schedule.
For example, let’s say your target SPLH is $120, and historically, your sales on a Saturday night are $10,000. Then you know you can safely schedule around 80 labor hours ( or $10,000 ÷ $120 = 83.33) on a Saturday night without compromising your SPLH targets.
Use SPLH for Labor Forecasting
Your SPLH can help you forecast how much labor you’ll need in the future. There are a couple of steps to this process. First, you use your historical sales data to predict your future sales for future weeks, months, or seasons. Then use your target SPLH to backtrack and figure out how many labor hours you can schedule in that timeframe to meet your goals.
That calculation looks like this:
Total Projected Sales $ ÷ Target SLPH = Total Labor Hours to Schedule
So, if you project a total sales of $15,000 for New Year’s Eve dinner service and your target SLPH is $120, then you can schedule 120 labor hours for that shift. This breaks down to about 15 people working eight-hour shifts, or 20 people working six-hour shifts. Doing the forecast in advance saves you a ton of time when writing schedules later in the year.
Make Real-time Service Adjustments
Once you get comfortable quickly calculating SPLH, you’ll be able to use it daily to make real-time cuts to your hourly staffing. For example, let’s say you are the manager on duty on a slower-than-usual Saturday night service. You pull a sales report that confirms sales are lower than expected. You can confidently start getting service staff off the clock to maintain your SPLH.
How to Improve SPLH
There are two main ways to influence your SPLH, increase sales or decrease labor. So, there are several concrete things you can do to impact your SPLH.
Increase Sales
There are many ways to Increase your restaurant sales. These are just a few strategies to start things rolling in the right direction.
Reduce Labor Costs
When you hear “reduce labor costs” you might think that means “cut employee hours.” There are other ways to reduce labor costs than cutting employees or cutting their hours. Consider more precise moves like these:
SPLH Pros and Cons
SPLH is a revealing metric that illustrates how well you are managing controllable labor costs. It is a favorite metric of many restaurant managers. But it is only one metric and there are pros and cons to using it.
Pros:
- Deepens operational understanding: SPLH and metrics like it give you a deep understanding of how all the pieces fit together.
- Helps with scheduling: SPLH helps you set and stick to labor budgets and removes any doubts about whether you have enough staff.
- Illustrates seasonal changes: SPLH shows patterns like seasonal dips in sales and spikes in labor need so you can plan ahead.
- Provides focus when change is needed: SPLH helps you focus on making specific, surgical changes to your operation to shift your sales and costs in the right direction. It can provide clarity when managing a business full of variables.
- Informs real-time decision-making: You can figure SPLH at times when you need to make in-the-moment staffing decisions, like when to cut staff for the day.
Cons:
- Tunnel-vision: SPLH can give you confidence in decision-making, and it can be easy to focus on it and ignore other metrics that might complicate your decision-making.
- Stress: Focusing on metrics can lead to a lot of stress about numbers, especially if your business is struggling.
- Potential for understaffing: Cutting staff hours is one of the fastest ways to impact your SPLH, and impacting your SPLH feels great. But it can quickly lead to understaffing, which will eventually tank your sales, and set your business in a spiral.
- Can be misinterpreted if sales are low: If your sales are low, your SPLH might lead you to think that overstaffing is your issue. You need other metrics like food cost, check average, and more to give you a more nuanced view.
- Over-emphasis on short-term gains: Dramatic shifts like massive menu price increases or scheduling cuts will boost your SPLH in the short term, but could have negative consequences long-term. It is important to keep your eye on long-term profitability and aim for incremental SPLH gains.
Restaurant SPLH Best Practices
Restaurant metrics are a great way to get a real-time picture of your restaurant and make operational changes at a point when it can actually make an impact on your operation. Mastering metrics can feel like a superpower. And it kind of is, so it can be easy to get carried away. There are some best practices to keep in mind.
- Take a balanced approach: SPLH is just one of a slew of metrics that measure your restaurant performance. Take some time to get comfortable with the numbers and consider your SPLH figures alongside other metrics to help you determine a measured way forward.
- Monitor employee morale: Managing people is one of the more stressful parts of operating a restaurant. Metrics can make staff feel like they are under a microscope, leading to stress and burnout. Keep an eye on your employees’ state of mind and maintain an open door for feedback. That may sound like a lot of work. But remember, your staff are the people who show up every day and keep your business running.
- Focus on long-term, incremental change: It can be tempting to make big changes to see how quickly you can impact your SPLH. This is a recipe for stress for both you and your staff. If you focus on long-term change, then any incremental shift in the right direction will feel like a win.
SPLH FAQs
Addressing these common SPLH questions can help restaurant owners and managers better understand how to use this metric to grow profits and measure the health of their operations.
Last Bite
Tracking SPLH can give you confidence when making labor scheduling decisions in your restaurant. Consistently monitoring SPLH will help you fine-tune your operation to reduce wasted time and increase sales. Remember to consider this metric alongside complementary performance indicators like your food cost and check the average before you make major strategy moves. SPLH is a revealing metric, but it is only one number.
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