3 Secrets to Reducing Labor Cost in QSR Biz

Over the past few years, the Indian food industry has seen a substantial transformation, with some restaurants evolving from multi-billion-dollar ventures. Rising popularity of dining out, with favorable demographics and rising disposable income and an increase in working women are all factors contributing to the industry's success. Consequently, organized players have moved into smaller towns and cities in addition to urban areas, seeing greater opportunities in these market. 

Given that Tier-II and Tier-III cities in India are developing into new financial centers, emerging markets in these areas provide substantial income prospects for enterprises, particularly those in the Quick Service Restaurant (QSR) sector. They are setting up units in these areas as rentals and other costing is cheaper than the metro cities. Despite the fact that QSR brands have been around for decades in India, the industry has changed significantly, and there is a lot of room for growth in these areas.

Getting the Right Talent

“To effectively reduce labor costs in QSR restaurants, a comprehensive approach is necessary. It begins with a proper recruitment and selection process to ensure we bring in the right talent. Once they are onboard, mentoring employees on their internal career paths can guide them toward a bright future, fostering loyalty and motivation,” shared Manohar Datta Pularvathi, Co-Founder of Mr. Philly's.

Similarly, implementing a robust training program is crucial for equipping staff with the necessary skills and knowledge. Employee retention is paramount, and brands achieve this by consistently collecting exit feedback to understand and address any underlying issues. Additionally, maintaining adequate staffing according to the restaurant’s requirements is essential for operational efficiency, as inadequate staffing can lead to burnout and attrition. Placing the right people in the right roles ensures optimal performance, and cross-training staff across departments enhances flexibility and productivity. Treating staff with respect and keeping them happy not only improves morale but also reduces turnover. 

“Recognizing and rewarding their contributions through rewards and recognition programs further boosts engagement and satisfaction. This holistic strategy not only controls the labor costs but also cultivates a dedicated and efficient workforce, ultimately contributing to the overall success of the restaurant,” added Pularvathi.

Limiting Human Involvement by Enhancing Customer Experience

“Prevailing evidence suggests that these strategies can help QSR brands effectively control their labor costs, and the top players in the market have embraced these solutions. For instance, McDonald has adopted techniques such as self-serve kiosks and mobile applications for ordering to limit human resource contacts at the organization’s operational level. Starbucks deploys efficient tools for schedule planning and matching the employees with the demand that exists among the customers, and Chipotle focuses on employee turnover by offering them extensive training courses which would assist him/her in enhancing the skill set and grow in their carrier,” pointed Sahil Arya, Co-founder and Director, Fat Tiger.

Cross-Training is Important

“Quick Service Restaurants (QSRs) in India are popular for their speedy service and variety of options. However, they face high labor costs and intense industry competition. To manage these challenges, brands can adopt smart staffing strategies. By scheduling staff based on peak and off-peak hours, restaurants can align their workforce with customer traffic. Additionally, cross-training employees allow them to cover multiple roles during busy hours, reducing the need for extra staff,” said Vishal Mahajan, Founder & MD of Optimal Retail Pvt Ltd.

“It's crucial to balance cost-cutting measures with maintaining customer satisfaction and the brand's reputation. Some restaurants in India and internationally, like KFC and Cafe Coffee Day, are using technology such as kiosks for self-ordering/payment and mobile ordering. These innovations help improve waiting times and enhance customer satisfaction without increasing staff numbers,” he concluded.