How to Culculate Labour Cost for Your Restaurant

By:chef ssentongo Geoffrey

Labour Cost Percentage

To calculate the labor cost percentage for your restaurant, follow these steps:

Determine the time period you want to analyze (e.g., monthly, annually).
Calculate the total labor costs during that period. Include salaries, wages, benefits, and any other payroll expenses.
Find the total gross revenue from food sales for the same period.
Use the following formula to calculate the labor cost percentage: Labor cost percentage=(Gross food salesTotal labor costs)×100

For example, if your total labor costs are $50,000, and your gross food sales amount to $150,000:

Labor cost percentage=(150,00050,000​)\times100=33.33%

Analyzing historical data will provide a reliable baseline for future planning.

Keep an eye on this metric to optimize your restaurant’s profitability!

What are some other operational costs to consider?

Beyond labor costs, there are several other operational expenses to consider when managing a restaurant. Here are some key ones:

Food Costs: These include the cost of ingredients, food storage, and spoilage. Regularly review supplier contracts and negotiate better prices. Implement portion control and minimize waste to optimize food costs.
Rent and Utilities: Rent or lease payments for the restaurant space, as well as utility bills (electricity, water, gas), are significant expenses. Consider energy-efficient appliances and monitor usage to reduce costs.
Marketing and Advertising: Promoting your restaurant through advertising, social media, and events requires a budget. Allocate funds for marketing campaigns and track their effectiveness.
Insurance: Restaurant insurance covers liability, property damage, workers’ compensation, and other risks. Shop around for competitive rates and ensure adequate coverage.
Equipment Maintenance and Repairs: Regular maintenance of kitchen equipment, HVAC systems, and other machinery is essential. Budget for unexpected repairs as well.
Inventory and Supplies: Track inventory levels to prevent overstocking or shortages. Efficient inventory management reduces waste and ensures freshness.
Licenses and Permits: Obtain necessary licenses (health, alcohol, business) and renew them as required. Factor in associated fees.
Credit Card Processing Fees: If you accept credit cards, be aware of transaction fees charged by payment processors.
Cleaning and Pest Control: Regular cleaning services and pest control are essential for maintaining hygiene and compliance.
Training and Development: Invest in staff training, certifications, and professional development to enhance skills and service quality.