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Understanding, Calculating, and Reducing Your Restaurant Labor Cost Percentage from The Fork CPA's

April 7, 2023

Calculating your restaurant labor cost percentage is essential to running a successful restaurant. The labor cost percentage is the amount of money you spend on employee wages and benefits as it compares to your total sales.

This number is significant because it tells you how much profit you’re making on each dollar that comes through your door. If your labor cost percentage is too high, it means that you’re losing money every time a customer buys food or drinks at your restaurant. This can lead to lower profits and eventually force you out of business if you don’t act fast to resolve these issues.

Labor costs are an essential part of any restaurant management. When operating a small- or medium-sized restaurant, you must understand precisely where your money is going. By breaking down your labor costs into different categories, you’ll see where you might need to cut costs or make adjustments to increase profits.

Labor costs are the wages and benefits paid to employees, including hourly and salaried staff. It includes payroll taxes, health insurance premiums, unemployment, and workers’ compensation insurance premiums.

Read more to explore how to calculate your labor cost percentage and reduce the labor costs in your restaurant