RESTAURANT STRATEGY
Host: Chip Klose
Episode: Labor Cost Optimization Without Sacrificing Service
Release Date: September 1, 2025

Episode Overview

In this episode, Chip Klose tackles one of the most pressing challenges facing independent restaurant owners: managing and optimizing labor costs without compromising the quality of service. Rather than advocating painful cuts or drastic staff reductions, Chip presents data-driven strategies and real-world tactics that allow operators to serve more guests with the same team, or deliver the same service with fewer hours — ultimately driving profitability while maintaining (or even enhancing) customer satisfaction.

Key Discussion Points & Insights

The “Labor Trap” Dilemma (00:00–05:15)

• Many restaurant owners feel trapped: cut labor and risk poor service or staff turnover; keep it high and profits evaporate.

• Quote:

  "Revenue does not necessarily cure all sins because it takes time to grow your revenue to the point where you make 38% labor in line."
  — Chip Klose (04:12)

• There’s a third option: optimize labor deployment rather than simply cutting or increasing it.

• Case Example: Chip shares a story of a P3 member running a 120-seat Denver restaurant, stuck at 38% labor cost. Gut-based scheduling led to misaligned staffing (e.g., busy Monday dinners but overstaffed slow periods).

Principle 1: Data-Driven Scheduling (05:15–07:30)

• Most operators schedule by tradition, not by actual demand.
• Use sales per hour, not per day, to guide staffing decisions.
• Actionable Tip:
  • Break down sales by day and shift (lunch, dinner, etc.) for at least two weeks.
  • Compare actual guest count and sales by each segment to reveal true staffing needs.
• Quote:

  "You need to break down your sales data by day of the week and time of day... What you'll find is your busy periods and slow periods aren't where you thought they were."
  — Chip Klose (06:21)

Principle 2: Cross-Training for Efficiency (07:30–10:00)

• Cross-training allows staff to move fluidly between roles and respond to real-time demand.
• Practical Example:
  • A Portland sports bar cut labor cost from 27% to 24% by having a skeleton but cross-trained crew during slow times, scaling up only for events.
  • Staff appreciated the variety, and flexibility increased overall efficiency.
• Disneyland Analogy:
  • Disney regularly cycles cast members between jobs to keep them refreshed and cover absences seamlessly.
• Quote:

  "When you train people to do multiple jobs, you can deploy them where they're needed most in real time."
  — Chip Klose (08:05)

Principle 3: Embrace Simple Technology (10:00–13:30)

• Modern tech (even simple solutions) can dramatically boost labor efficiency.
  • Kitchen Display Systems (KDS): Digital screens make communication seamless, speeding up food delivery and reducing errors.
  • Handheld POS Devices: Allow orders and payments right at the table, enabling servers to turn tables faster and handle more covers per shift.
• Impact Example:
  • After implementing KDS, handhelds, and labor management software, a client’s table turns increased by 15% and servers handled 20% more covers.
• Quote:

  "It's simple stuff, but it adds up, right?"
  — Chip Klose (12:01)

Principle 4: Track the Right Productivity Metrics (13:30–16:00)

• Go beyond labor % of sales; measure Sales Per Labor Hour and Covers Per Labor Hour (by role and by shift).
• Analyze by department — e.g., overstaffed kitchen vs. efficient servers — to identify specific pain points and opportunities.
• Quote:

  "You can't manage what you don't measure."
  — Chip Klose (13:31)

• Example:
  • “…servers were generating $65 per hour, while kitchen staff was only generating $45 per hour. What it meant was that the kitchen was overstaffed relative to the volume.” (15:35)

Principle 5: Scheduling Discipline & “Labor Banking” (16:00–18:30)

• Stick to the optimized schedule without letting last-minute shift swaps, call-ins, or “just in case” hires undermine efficiency.
• Labor Banking Concept:
  • Manage labor costs by week, not by day. If you’re under budget on a slow day, “bank” that savings for a busy day.
• Quote:

  "If you're budgeted for 28% labor costs, that's your weekly target... By managing it, it gives you the flexibility to staff appropriately for the actual volume."
  — Chip Klose (17:15)

Addressing True Overstaffing (18:30–20:15)

• If, after optimization, you’re genuinely overstaffed:
  1. Check productivity metrics — sometimes it’s a sales volume problem, not a staffing one.
  2. Evaluate service standards — are high labor costs actually yielding exceptional, premium service?
  3. Make tough calls — start by letting go of lowest performers to elevate team quality.
• Real Outcome Example:
  • Case study client moved from 38% to 31% labor, sales per labor hour rose, and customer satisfaction improved.

Actionable Homework (20:15–end)

• Pull last 30 days’ sales data.
• Break it down by day/shift, calculate sales per labor hour for each period.
• Identify over/understaffed shifts and adjust accordingly.
• Use data, not tradition, to guide changes.
• Quote:

  "Labor optimization isn't about cutting quarters. It isn't about having to run with a skeleton crew. It's just about being smart with your most expensive resource—also your most incredible and your most valuable resource. Of course, I'm talking about your people."
  — Chip Klose (20:20)

Notable Quotes & Memorable Moments

• “You can optimize your labor deployment... she was still staffing Wednesday like it was a slow day. She was scheduling based on tradition, not necessarily on data. And it was costing her thousands of dollars every single month.” (05:15)
• "When someone calls in sick, you don't automatically call in a replacement... If yes, you operate a little short that night. If no, then yes, call someone in." (16:40)
• "Same quality of service, but in the end, much better profitability." (19:25)
• "Better service, better profitability, better business, happier employees." (20:38)

Key Timestamps

• 00:00 — Labor Cost Frustration: The Common Restaurant Owner Dilemma
• 04:10 — Why Revenue Alone Won’t Solve Labor Cost Issues
• 05:15 — The Importance of Data-Driven Scheduling
• 07:30 — Cross-Training Staff for Real-Time Flexibility
• 10:00 — Leveraging Simple Technology (KDS & Handheld POS)
• 13:30 — Productivity Metrics Beyond Labor % of Sales
• 16:00 — Scheduling Discipline & Introduction to Labor Banking
• 18:30 — What To Do When You're Genuinely Overstaffed
• 20:15 — Weekly Homework: Analyzing and Optimizing Your Schedule

Practical Takeaways

• Abandon “gut feeling” and tradition: use sales-by-shift data to align labor to true demand.
• Cross-training and flexible deployment minimize downtime and help weather busy periods.
• Simple technology is a force multiplier for both efficiency and guest service.
• Discipline in scheduling — and viewing labor costs at a weekly level — empowers smarter decisions and better flexibility.
• Use performance data to confront tough staffing decisions and continually improve the team.

Summary

Chip Klose delivers a detailed, tactical blueprint for optimizing labor without sacrificing restaurant service quality. Through real-world examples, practical frameworks, and actionable steps, he makes clear that the path to sustainable profitability is paved with data, not just hard decisions. Restaurant owners and managers will walk away equipped to rethink their approach and take the next step towards consistent, reliable returns — with happier guests and a more engaged team.