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Managing Labour & Controlling Costs

I frequent my favourite neighbourhood café to bring variety into life. Like many that generally work from home, a change of the working environment tends to spark creativity and increase overall productivity.

In fact, I’m sitting at Poured on the Danforth as I write this. I’ve always been a sucker for a La Marzocco espresso machine, industrial design elements, and thoughtfully procured coffee beans, doing my best to fully appreciate the time and effort the café owner/manager (who is the expert) would have taken to make these selections. If you’ve ever been on the Danforth in Toronto’s East end, you’ll know there is no lack of cafés and boutique coffee shops. And many of them have these thoughtfully selected beans, exposed brick and wood beams, paired with high end Italian espresso machines. So, if there’s so much selection for great cafés in my neighbourhood, why have I narrowed in on frequenting the same spot week after week? I could get a similarly high-quality product at a number of other locations. I could pay approximately the same amount (or even less) at two places closer to my house. I could see even more exposed brick and old beams for literary inspiration at a few other locations! But I keep coming back to Poured.

Review Labour Costs

There are countless individuals in retail that can teach you about managing labour costs. I’m thankful to have learned from some of these over the years and look forward to continuing to learn from them in the future. Many of these theories and practices rightly focus on measuring the specific cost of labour in a given timespan. The baseline measure is often the average labour cost per hour. The slightly more in-depth version will look at the total labour over a long time horizon, in months or years. And those who want to begin to uncover meaningful trends will view labour in terms of sales per labour hour: how much was spent at any given time to earn the revenue accrued in the same time frame? Getting into this detail allows for meaningful discourse on what is driving sales. And hopefully, reviewing sales per labour hour begins to ask the truly meaningful question: what is it about this labour cost that is making our guests happy and want to come back? As with anything in retail, the customer should be guiding decision making.

Create a Sense of Belonging

My café excursions along the Danforth started after a push from my wife: there was a realization one Friday that the only time I had left the house that week was for daycare pick-up/drop-off for my son. “Dude, get out of here. How can you expect to come up with anything of value without leaving the house in days?” Thankful for good advice from someone smarter than myself, I packed my laptop and went exploring for café nirvana. The Danforth is rightfully known for being Greek Town and having epic food options. Poured was not my first stop on this many week excursion, but I have made it my go-to because of how it made me feel: I was sitting at a table in the corner, at my laptop, and observing the way the team members interacted with each guest coming in. I was clearly one of the few guests they had not seen before and there was a level of sincere interest with each coming in for their morning beverage and scone—these team members had been working at the location since the business opened. The new guests were warmly welcomed and the background and ethos of the café were explained to create a sense of belonging that went beyond the products being sold. The feeling of pride in ownership of the experience was apparent with each espresso shot pulled.

Develop a Stable Team

In the most simplified terms, our experience has shown: tenured team members improve guest experience to the tune of >5% increased basket size, and they free the leadership team’s time to focus on how to best serve guests. In order to keep team members engaged, there needs to be an investment in incentives that create the proper environment for the desired behaviours to flourish. What do you think is worth more: saving $1/hour on the wage of the team member working at the café or having a long tenured team member influencing a few free-floating guests to become regulars?

“Saving” money on labour is a nuanced subject.

The profit and loss statement doesn’t tell the full story of how a team member’s energy is building the base of business. For every new hire, how long is the store manager spending on reviewing resumes, interviewing, hiring, filing paperwork, training, duplicating effort, and then missing out on familiarity with guests? The dollar calculation for each business is different, but I’d bet it’s in the thousands of dollars lost for each of your new hires, especially when compared to the cost of having a strong, long standing, and competitively compensated employee remaining focused and working the floor. How many team members are you hiring per year? This adds up.

Allow Team Members to Interact with Customers

Think of the last retail experience you had: it could be anything from clothing to coffee to automotive or grocery. Was this the first time you were in this particular retail location? If this was a repeat visit, why was it a repeat visit? What are the first elements of the experience that stand out in your mind first when you think about it in passing? It might simply be the product or the price or the location, but if there was any team member interaction whatsoever, that likely had a major impact on the feeling you took away from the experience—whether good or bad. When we read Google reviews, are there more comments about the product in a store or about the team representing that product? That team has major implications for the business.

The way those team members interacted with guests on my first visit to Poured (and every subsequent visit since) is why I keep going back. They created an atmosphere I want to experience again and again. There is a minimum viable product when it comes to espresso beans and to the machine pulling the shots and the level of distress on the exposed beams—these take time and energy to produce, but are relatively easily duplicated. But duplicating a team and a familiar smile is extremely difficult: it can’t be faked. And guests know this, whether consciously or unconsciously—and they give their real positive reviews with their wallets, and on Google.

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