Management  |  5 mins

Award rates are up again on October 1. What does it mean for your bottom line?

by: CEO & leadership team

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How will the minimum wage increase affect our bottom line?

If you’re a restaurant, cafe or bar operator, you’re familiar with the feeling of dread that creeps in before a wage rise like the one on October 1 2022. Especially when the rise is steep like the one our industry is up for this week. We’re already spending so much on wages. How are we going to support this next big hike?

With margins already narrow in our industry, many operators notice the significant chunk a wage rise can take out of their bottom line.

 

Let’s say wages account for 35% of your turnover, and those wages increase by ~5% (as they’ve just done). The exact same weekly roster is now costing around 36.75% of revenue: nearly 2% more. Where does the 2% come from? Unless you miraculously manage to cut hundreds off your ordering or rent overnight, it’s coming directly out of your profit margin.

 

When we consider the average profit margin in Australian foodservice is already running narrow — somewhere between 3-6% — things are starting to look pretty grim.

 

And it’s not just wages. Cost of goods is rising just as fast, and not likely to go down any time soon. Operators are feeling the squeeze more than ever, and those profit margins look slim. So what happens now?

The good news? There’s still room for great profit in hospo.

Running an F&B business costs far more than it did 10 years ago, no questions asked. But that’s not the end of the story.

 

Leaps and bounds in technology and business intelligence have meant that we, as operators, have the chance to streamline processes and create efficiencies business-wide. Yes, it’s bloody hard to keep up with the runaway COGS. Yes, the minimum wage increase is doing our heads in. BUT the future is not all doom and gloom …

Can increased productivity beat the wage increase?

Thanks to tech, our own time can be spent more efficiently, and so can the time of our FoH, baristas, chefs, accountants and bookkeepers.

 

Remember the early 2000s nonsense of spreadsheets, handwritten time books, calls to suppliers and manual payrolls? Some of us *ahem* are even old enough to remember a time before POS was widespread.

 

But fast forward to 2022, and we’ve got smarter solutions helping us perform more and more daily tasks, many times faster and more accurately than ever before.

Data = Power

Even more importantly, doing things digitally means we’ve got our own data recorded. And data = power. There isn’t a single profit-making trick in the book better than knowing your numbers back to front. Understanding exactly what costs are being incurred not only today but tomorrow. What about next week?

 

Thanks to smart technology, we have the power to predict what’s going to happen and make small adjustments with big results. With understanding of your whole business's data, a 2% increase becomes easier to control and manage.

 

In fact, using smart tools and modern analytics, the 2% can be recovered and exceeded with more effective rostering based on automated data collection and live recalculation of forecasts.

 

So although our teams might cost more per hour, they’re able to work more productively with the use of smart technologies, meaning that in the long term they can earn their keep. And although food costs are through the roof, tools for ordering and controlling stock make it easier than ever to avoid wastage, keep track of food costs and budget smarter for more efficient menus.

 

It sounds counter-intuitive, but we’re here to make it clear: despite costs rising, and the challenges that brings, business owners have more opportunity than ever to boost their bottom line using smart tools and productivity enhancements. The future of foodservice is integrated and connected.

How does that help us navigate the wage rise today?

There has never been a more important time to understand the data in your business. With costs rising, understanding exactly how, where and when your costs are incurred is vital. And understanding how those costs interact with each other and with revenue is even more important. Making sure we’ve got the tech you need to turn your data into smarts is the only way we’re going to survive in the post-covid economy.

 

If the wage rise is making you sweat because you don’t know what it will mean for your business, it’s time to get to know your numbers better.

If the wage rise is making you sweat because you know what it’s going to do to your profit margin, it’s time to get tools to help you get efficiencies into your workflow and get those percentage points back in your bottom line.

Practical stuff about the changes

When does the change happen?

The minimum wage changed across many industries as of 1 July this year.
Minimum wages increase for remaining hospitality and foodservice industry awards is applicable from the first pay period on or after 1 October.

 

How do I find the new minimum wage for restaurants, cafes or other foodservice sites?
 

To see the updated awards, visit the Fair Work Ombudsman Australia website.

 

Hospitality awards are changing this week. That includes:

  • Hospitality Industry (General) Award [MA000009]

  • Registered and Licensed Clubs Award [MA000058

  • Restaurant Industry Award [MA000119]

To understand more about how Viability can change your bottom line, get in touch with our team for a demo.

 

If you’re an existing Viability customer:

  • Using Xero? Update your pay rates in Xero then sync to Viability. 

  • Update pay rates directly in Viability if you’re not integrated. Details can be found in the Staffing Guide.

Need help? Send a message to our support team and they'll help you ensure everything is set up correctly.