Labor Cost Percentage (Restaurants & Services)
Short answer
Labor cost is total wages and payroll taxes as a percentage of revenue — the second pillar of restaurant economics alongside food cost.
Formula
Labor Cost (%) = (Wages + Payroll Taxes + Benefits) / Revenue × 100
Add up all wages, payroll taxes, and benefits for the period. Divide by total revenue. Multiply by 100.
Why it matters
Labor cost is the second-largest controllable expense after food. Most healthy restaurants run 28–35% labor cost. Combined with food cost, this gives you 'prime cost' — the number that decides whether you're profitable.
Benchmarks
People also ask
Common questions about Labor Cost Percentage (Restaurants & Services)
What is Labor Cost Percentage (Restaurants & Services)?+
Labor cost is total wages and payroll taxes as a percentage of revenue — the second pillar of restaurant economics alongside food cost.
How is Labor Cost Percentage (Restaurants & Services) calculated?+
Add up all wages, payroll taxes, and benefits for the period. Divide by total revenue. Multiply by 100.
What is a good Labor Cost Percentage (Restaurants & Services)?+
A healthy labor cost percentage (restaurants & services) is typically around < 28% — lean operation. Specific targets vary by industry and stage; check our benchmarks above for your sector.
Why does Labor Cost Percentage (Restaurants & Services) matter?+
Labor cost is the second-largest controllable expense after food. Most healthy restaurants run 28–35% labor cost.
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Related concepts
Where this matters most
See Labor Cost Percentage (Restaurants & Services) in the context of restaurants & food service.
Industry-specific benchmarks, common pitfalls, and what lenders look for in this sector.