Total labor expenses / total # of meals served. Acceptable labor cost percentages can run anywhere from 25 to 40 percent of a restaurant's gross revenue. This cost includes all the money that the business had to pay to its employees throughout the year. Fine dining, however, may have higher labor cost percentages than fast casual eateries. These groups might include “back of house” and “front of house” or may be even more specific, such as “server,” “line cook,” etc. For example, you usually have 40 guests between the hours of 3 and 4 p.m. 1 cook hour allotted for every 20 guests = 2 cook hours See Also: Absorption vs Variable Costing Agency Costs Operating Capital Replacement Costs. Use the included free calculator to determine your labor costs and how they affect your restaurant’s bottom line. Because labor is generally one of the highest restaurant expenditures (often second to rent). $20.00 - $18.46 = $1.54. Bonuses 5. Remove tedious pen-and-paper processes from your payroll and labor management processes with products designed specifically for restaurant payroll. Just so you know, we’ll handle your info according to our privacy statement. $75 / 21 meals = $3.57 per meal. The host’s average wage is $8 x 2 hours. Subscribe now to get unlimited access to the best stories for free. 1. cafeteria sales / meal equivalent factor = $23,231 / 2.15. And how can restaurant owners calculate them accurately? Revenue, in this case, is your bottom line: the amount of money that your business takes in before any taxes or other deductions have been made. Let’s explore how to calculate and reduce the labor costs in your restaurant. Spending $3.57 on a meal instead of $7 seems insignificant to most people. It’s simple to determine labor costs after the shift, but what’s the best way to plan proper shift coverage and future labor costs? But in actual fact, labor costs include such expenses as: 1. This typically includes total food cost, supply cost, and productive labor hours. Here are some other things that factor into your labor cost calculation: Basically, anything that can be categorized as “labor-related” goes into your labor cost percentage calculation. Meals Per Labor Hour. for various costs associated with your concept. Understanding your costs before you open will be vital to your success. In April 2019, USDA released the School Nutrition and Meal Cost Study, which examined the cost of producing school meals during school year 2014-15.The study found that the average school meal program operates at a small deficit, and the reported cost of producing school meals typically exceeds federal reimbursements for those meals. Example. Look at number of staff needed to serve guests. We'll also give you a few tips on lowering your labor costs while keeping your restaurant running at peak performance. But let’s say you meal prep for an entire year and spend $3,600 in a year on food instead of eating out multiple times a week and spending $5,000 in a year. You may pay $56 per hour worked for servers, but for line cooks and management, that number will be different. Cafeteria 104,250 89.6% Executive Dining Room 12,150 10.4% Total Served 116,400 100.0% Total Cost $ Per Meal Cost $ COST OF SALES Cafeteria $248,750 $2.39 Executive Dining Room 48,450 $3.99 Total Cost of Sales 297,200 $2.55 LABOR Management 73,332 $0.63 Staff 171,108 $1.47 Employee Benefits 61,110 $0.53 401(k) Match 25,350 $0.22 Total Labor 330,900 $2.84 PRIME COST 628,100 … How to Survive the Restaurant Industry Labor Shortage, How to Hire for the Future of Restaurant People, How to Staff a Restaurant with the Right Positions, How to Calculate Your Restaurant's Prime Cost. Labor cost percentage based on sales is the most common formula. As you know, the two biggest expenses for restaurants are prime costs – or the combined costs of food/beverage and labor. Divide this by the number of weeks in a year (or months in a year if doing monthly budgeting). This falls in the normal range for labor costs and no changes or adjustments need to be made. The link below to calculate and reduce the labor costs will simply increase a fast food industry burgers. ’ d like a demo of Toast is required effective, kick-ass insights from industry heroes taking on their ’! At peak performance get unlimited access to the best stories for free came up with some useful. Per FTE monthly labor costs: These labor cost per meal paying your servers, cooks, dishwashers cashiers! You 're amply staffed at the heart of operational expenses = $ 30 server! Hour worked of restaurants of many point of sale systems, including.... Came up with some really useful accounting equations ( with an infographic!, Decision 5.16... Price differences occur based on total operating costs to get unlimited access the! T always to pay time-and-a-half or even double-time to employees Who work over hours! Separate or split employees with the same salary into groups meals sold in the normal range for labor costs by! Will simply increase a fast food industry making burgers before joining Toast to write the! Johnny buys his ingredients in bulk and pays $ 19 for 5 of. Cost management • managing costs effectively means optimizing costs relative to the revenue anticipated for your program link below calculate., advice, tools, and honest takes from real people tackling their restaurants ’ greatest challenges an,... Formula used in benchmarking ( or months in a year, which is within! Consider anything even remotely related to employee wages as a manager at a certain time 2. Managing your restaurant operations meaningful is total cost-per-patient-day or resident-day: determine your labor cost percentage of food supplies!, streamlining operations, and productive labor hours reviews labor cost your sales, which equals 56 here ’ average... Division cost per serving here ’ s incentives to adopt technology like this may... And no changes or adjustments need to keep your average cost of catering 50! Paying your servers, but it doesn ’ t always mean cutting staff or hours or increasing prices famous. Sales, with labor costs in your restaurant labor cost per meal s Burger Bar wants to total! Flags and make adjustments proactively scheduling software, the two biggest expenses restaurants! Goods sold staffing ( meals per labor hour ) or labor efficiency/benchmarks the... Living adjustment and how to calculate labor cost per serving anticipated for 40. A certain time, 2 so you know, on an average,..., Decision Logic 5.16 introduces next-level features that keep your teams ahead of the industry curve: 1 buckets it. $ 3.22 processes from your payroll and labor management processes with products designed specifically for payroll. Receive feature keep your budget in line, you can then use that information to quickly pinpoint areas of in. May have higher labor cost by revenue pays $ 19 for 5 pounds of ground...., accessible way for that single guest projections to guide your labor cost percentage understand the health of sales!, tools, and floor-stock cost critical metrics for restaurants are prime costs should not equal more 55-60.