What percentage of revenue should restaurant labor cost be?

Restaurant labor cost as a percentage of revenue varies by venue type. Quick service targets 25-30%. Fast casual targets 28-33%. Casual dining targets 30-35%. Fine dining targets 30-35% but with higher revenue per cover offsetting the percentage. Bars typically target 20-28%. If total labor cost exceeds 35% of revenue consistently, profitability is at risk.

What is included in restaurant labor cost?

True restaurant labor cost includes gross wages plus the employer's share of FICA (Social Security and Medicare at 7.65%), federal and state unemployment taxes (FUTA/SUTA, typically 1-3%), workers' compensation insurance, and any benefits provided such as health insurance or paid time off. The true cost of an employee is typically 18-25% more than their base wage.

How do you reduce labor cost in a restaurant?

The most effective ways to reduce restaurant labor cost are: schedule based on projected covers rather than habit, cross-train staff to reduce the number of positions needed per shift, reduce turnover (turnover is expensive and increases training labor), use a POS system to track labor cost in real time against revenue, and audit overtime regularly since overtime at 1.5x rate significantly impacts labor cost percentage.

Restaurant Labor Cost Calculator -- True Cost by Venue Type

What Percentage of Revenue Should Go to Labor?

Labor cost targets vary significantly by venue type. Full-service restaurants typically target 30-35% of revenue. Quick service and fast casual run leaner at 25-30%. Fine dining can run 35-40% due to higher staff-to-cover ratios. Bars typically target 20-25%. Coffee shops generally target 35-40% given their labor-intensive preparation and lower average checks. Running above benchmark does not always mean a problem -- but it always means a conversation worth having.

How to Calculate Your True Restaurant Labor Cost

Most operators calculate labor cost as wages divided by revenue -- but that understates the real number. True labor cost includes employer payroll taxes (FICA, FUTA, SUTA), workers compensation insurance, any employer-provided benefits, and the cost of paid time off. Depending on your state and benefit structure, these add-ons typically run 18-25% on top of base wages. A $15/hour employee costs closer to $18-19/hour all-in. This calculator accounts for all of it.

Calculate Your Labor Costs

Venue Type

Total Weekly Labor Hours

Sum of all hourly staff hours per week

Average Hourly Wage ($)

Number of Managers

Average Manager Salary (Annual $)

Payroll Tax Rate (%)

FICA, FUTA, SUTA combined

Benefits Cost (% of wages)

Health, retirement, etc.

Number of Locations

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Annual Labor Cost

Weekly Labor Spend

Implied Revenue (@ 30% labor)

Email Address

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Total Annual Labor Cost

Weekly Spend

Cost Per Location

Payroll Tax Burden

Benefits Burden

Cost Breakdown

Category	Annual Cost	% of Total
Hourly Staff Wages	$0	0%
Manager Salaries	$0	0%
Payroll Taxes	$0	0%
Benefits	$0	0%
Total Labor Cost	$0	100%

Restaurant Labor Cost Calculator