Finance & Metrics
Labor Cost Percentage
Definition: Total labor cost including wages, taxes, and benefits divided by gross sales, expressed as a percentage.
Labor cost percentage captures front-of-house, back-of-house, and management payroll as a share of revenue. Targets vary widely: quick-service may run 25% to 30%, while full-service with table service often runs 30% to 35% or higher in high-wage markets.
Effective labor management uses sales forecasting by daypart, cross-training, and clear prep pars to avoid overstaffing slow periods. Minimum wage changes and tip credit rules materially shift achievable percentages by state.
Labor plus food cost equals prime cost for most independent operators. Scheduling software tied to POS sales history improves accuracy after the first 90 days of operation.
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