How do I calculate my restaurant labor cost?

There are a few important things to know about your labor cost.  In the free training video at the bottom of the page, I deep dive into labor costing for you.

1.) The formula for calculating labor cost is simple: Total Labor/Total Sales = Labor Cost.

2.) Food cost is not included in labor cost. They are separate calculations. This video on calculating restaurant food cost explains why.

3.) Total Labor includes employer-related expenses like taxes, benefits, insurance, and the cost of processing payroll.

4.) Labor cost is not directly related to volume. What I mean by this is that your labor could remain the same while volume goes up. Most restaurants can have a 20-30% increase in sales without needing to add more labor.

5.) I do know what your labor cost should be. Of course, there are industry averages, but most importantly your labor costs are your labor costs. The goal each month should be to hit that same number or decrease it.


Restaurant financials can get confusing. I get that and to help with the complexity, I created software called clickBACON that does the work for you. Check it out if you don’t want to do the math yourself!

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