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Issue #1:
Why Labor % Is Lying to You
Most franchise owners continue to tell me that labor is their biggest problem. It’s a persistent problem regardless of whether or not the market is in favor of the job seeker or the employer.
Operators always check sales figures first, then they stare at labor %.
They panic when it creeps up and the knee-jerk reaction is to tell managers to “cut hours.”
And that might work for certain instances. But it’s done as a reaction and not in the context of strategy. Profitable operators don’t “react their way” to success.
Then sales dip because service slowed down which creates a drop in employee morale and then turnover spikes. And so without realizing it, your “labor fix” just created a revenue problem.
While labor % is an important metric to use, it isn’t your problem; it’s your signal.
But as with the case above, most operators are reading and reacting to that figure incorrectly. Labor percentage tells you what already happened but it doesn’t tell you:
- If the right behaviors happened during the shift
- If upsells were attempted
- If attach rates were hit
- If tasks that drive sales were executed
- If your best people were placed in the right spots
It is true, you can lower labor % by cutting hours. You can also lower labor % by increasing revenue. Only one of those strategies builds wealth. I’ll let you figure that one out.
The best operators don’t obsess over labor % in isolation just as they don’t look only at sales figures, thinking that beating the forecast means the day was profitable.
Profitable operators know the answers to these questions:
- What did the team do during this shift?
- Did they rally around the forecast?
- Were sales goals visible and clear?
- Did anyone know what “winning the shift” looked like?
The secret that these operators understand is that profit is not a cost-cutting exercise.
It’s a behavior system.
I spoke to two large operators this week. They oversee locations in the hundreds. When I asked them those same questions above, there was silence. Not only do they not know the answers, they admitted that their managers do not know those answers. They’re leaking profits in tiny daily gaps. And when your organization is in the hundreds, that doesn’t mean that those losses get easily absorbed; it means that it is costing them that much more every single shift, every day.
• The upsell that wasn’t attempted
• The promo that wasn’t mentioned
• The slow shift that wasn’t adjusted
• The labor schedule built from gut feel
• The tasks completed… but never verified
Individually? Small. Collectively? Thousands per month.
And labor % quietly absorbs the blame.
When you go to work tomorrow, look at the schedule. Literally look at who is working when. And ask yourself this question:
“How do I increase productive behavior per labor hour?”
That’s where the real money lives. Because when behavior improves:
- Revenue increases
- Labor % stabilizes
- Retention improves ←- this is HUGE. Huge.
- Managers feel in control again
Next week, we’ll talk about the metric that most operators misunderstand even more than labor %.
Until then, remember:
Profit isn’t one number. It’s a system.
This is one part of the playbook that these operators use. And profit only comes when the pieces work together.
Click here for Part 2.
Subscribe and follow along for the next 8 weeks as I share how it all fits together.
