Rising Labour Costs and Your Profitability
In six months from now minimum wage will increase by 22.8%, and then again 12 months later, raising your labour cost by a total 31.5% by January of 2019 from where it sits today. These increases will hit the hardest in the hospitality industry, as already shrinking profit margins of just 3.4% on average will grow even smaller. The owners I am speaking with are looking for ways to offset the coming increase in labour costs in one or more ways over the coming months. Together with a number of our partners we have identified that the fastest and most effective way to do this comes from one or both of the actions below:
- Getting every dollar out of your inventory holdings, and working towards eliminating losses through a tight inventory control process
- Creating the right pricing strategy for your location, based on both the coming wage increase and by understanding where your pricing strategy lies compared to your closest competitors
I urge you to think of what strategies you will be working through over the coming months to set your business up for success prior to January 1st, 2018. Our team at Results Hospitality are putting these solutions to work with our partners now to ensure that they are prepared when the increases come. If you need help working through the above solutions for your business, contact me to discuss your profitability strategy over the coming months.
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