Labor cost
Example: A neighborhood diner sees its labor cost climb to 35% of sales during a slow month and adjusts next week's schedule to trim an overstaffed Tuesday lunch, a faster fix than anything it could do about ingredient prices.
wages + payroll taxes, as a % of sales
Wages, payroll taxes, and the tipped-employee contribution expressed as a percentage of sales. Target 28–32% for most formats, with quick-service at the low end and full-service at the high end.
Why it matters
Rising labor markets make this the margin battlefield of the 2020s. Labor has faster turning radius than food cost — you can adjust a schedule this week; you can't renegotiate a tomato contract. When prime cost runs hot, this is usually where owners look first.
Frequently asked
What is labor cost?
Labor cost is wages, payroll taxes, and the tipped-employee contribution expressed as a percentage of sales. Target 28–32% for most formats, with quick-service at the low end and full-service at the high end.
Why does labor cost matter for a restaurant?
Rising labor markets make this the margin battlefield of the 2020s. Labor has faster turning radius than food cost — you can adjust a schedule this week; you can't renegotiate a tomato contract. When prime cost runs hot, this is usually where owners look first.
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