Labour Ratios

Labour Ratios

S4labour release labour percentages since lockdown ended

 Short story

 Industry Labour ratios increase by 10% in first month of trading as operators get a handle on new ways of operating and lower sales levels. Analysis from S4labour has shown that the labour ratio in July (from the 4th to the 31st) was 41.1% as compared with 30.9% in 2019. Richard Hartley, Chief Product Officer of S4labour commented “For the hospitality industry the last 10-20% of sales produces all of the profit, and so with the sales levels in July it will be hard for operators to make money. The added increases in labour will make that even harder. The change in consumer behaviour may well be with us for some time and those who adjust their labour model quickly and smartly will win the confidence of the customer, and therefore grow sales, and also enable them to manage costs appropriately through this very challenging time.”

Full article

S4labour, the labour management experts, have conducted a full review of labour costs for July since the industry re-opened on 4th July. This data only includes sites for days that were open from July 4.

In the first 7 days after lockdown the industry was running at an average labour cost of 65.9%. Sales were low and staff were starting back to work, getting used to new ways of working and doing their best to give customers reassurance that they were operating in a safe manner. This will have left nearly every operator making losses.

As the weeks have progressed this ratio has improved. Week two ran at 53.8% and week three 43.1% , with the final week in July running at 41.1%. This labour ratio compares with a ratio of 30.9% for the same period last year and therefore reduces industry profitability by a full 10% pts against the same period last year.

There are several causes for this:

1 – Lower sales

The lower sales levels have caused an increase in the labour ratio of a massive 6% points. This shows how vital incremental sales are to the industry and over time operators will need to rebase their rotas if sales remain at a lower level.

2 – A less productive business

Business have become less productive because of more outside service, more at seat service and Covid measures on cleaning and staff distancing, all of which have led to a decrease in productivity which S4 estimates to be 10-15%. And therefore accounts for a 3% pt increase in labour ratio

3 – VAT

Operators have taken different approaches with how to treat the reduction in VAT. For any that have chosen to not pass on the price reduction to customers this will have helped them to offset some of the other challenges. This will see an increase in productivity, as measured by sales per labour hour, of circa 10%.

4 – Sales uncertainty and volatility

When sales are uncertain and more volatile then typically more team are scheduled to cover sales that might not materialise. Slack, a measure of non-productive hours as measured by S4labour, has increased by 5%.

5 – Staff getting back up to speed and training

The industry has faced the double challenge of having both to re-train and re-energise staff as well as train new staff, and this will have undoubtedly contributed to the additional cost in July. While the government have offered to pay for training through furlough, less than 50% of businesses are using this facility. This is in part due to the challenge of determining what is, and what is not, training in the way we run our industry.

To summarise therefore the increase in labour ratio is driven as follows:

Sales decline                           +6%

Productivity decline                +3%

VAT change                             -2%

Sales uncertainty                    + 1.5%

Staff training                           + 1.5%

Total                                        +10%

Richard Hartley, Chief Product Officer of S4labour commented

“For the hospitality industry the last 10-20% of sales produces all of the profit, and so with the sales levels in July it will be hard for operators to make money. The added increases in labour will make that even harder. The change in consumer behaviour may well be with us for some time and those who adjust their labour model quickly and smartly will win the confidence of the customer, and therefore grow sales, and also enable them to manage costs appropriately through this very challenging time.”

 

For further information on this story please contact Richard Hartley, Chief Product Officer

richard@s4labour.co.uk

07766698442

Eat Out Sales Figures

Eat Out Sales Figures

Week on week sales jump 20.5% on the back of Eat Out Scheme.

Analysis from S4labour shows a leap in like-for-likes sales of 20.5% on last week. The figures also show that last weeks like-for-like sales surpassed the same week last year by 2%, the first week this milestone has been reached since before lockdown.
 
There was a marked difference between food and drink sales, with food week on week sales up 35.8% and drink sales up a more modest 8.3%. Looking at the figures from Monday to Wednesday (while the Eat Out Scheme was valid) food sales both inside and outside the capital were up a remarkable 132% on last week.
 
The analysis shows that there was both week on week sales growth last week and a bringing forward of sales to the beginning of the week, albeit with a 5.2% slip in Thursday to Sunday trading on the previous week.
 
Chief Product Officer, Richard Hartley commented that the figures are the first indicator of the effectiveness of the Governments Eat Out to Help Out Scheme, food sales have been slower to recover since lockdown measures eased and this is a welcome shot in the arm for operators.
 
The research also identified in the first week of the scheme, the average site participating in the Eat Out to Help Out Scheme gave a discount of £987.38 on food sales and £202.27 on drink sales, totalling £1,189.65.

Impact of the Eat Out to Help Out Scheme

Impact of the Eat Out to Help Out Scheme

Eat out to help out sees sales increase by 70.9% over the first three days of the week. Sales numbers taken from S4labour have shown that the Eat Out to Help Out scheme has proved hugely successful and a welcome boost to the industry. Food sales have more than doubled with a 114.3% increase, with drink, understandably, not as high at 29.8%. Richard Hartley, Chief Product Officer, commented “It’s been a great initiative at a crucial time for the industry and we hope that this will give consumers the vital confidence we need them to have to return enjoy the great hospitality our customers provide. We have seen confidence gradually increasing since the reopening of the industry at the start of July, however this level of support is the catalyst consumers needed on the journey back to normality.”