What is a good labor cost percentage?
Typical Ranges by Restaurant Type
Labor cost percentages vary widely. Full-service restaurants with table service usually run 30–35%, while fast-casual or quick-service concepts often stay between 20–25%. Fine dining can be higher, sometimes 35–40%, due to more staff and higher service standards. Cafes and bakeries might be around 25–30%.
These are general ranges. Your ideal percentage depends on your average check, menu prices, and local wage laws. In areas with high minimum wages, labor cost may naturally be higher.
- Quick-service: 20–25%
- Fast-casual: 25–30%
- Full-service: 30–35%
- Fine dining: 35–40%
Why It Matters
Labor is one of the largest controllable expenses in a restaurant, along with food cost. Keeping labor cost in a healthy range helps ensure profitability. If labor cost is too high, you may need to adjust scheduling, raise prices, or improve efficiency. If it's too low, you might be understaffed, leading to poor service and burnout.
A good target is one that allows you to provide excellent service while still making a profit. Many operators aim for a prime cost (labor + food) of 60–65% of sales.
How to Improve Your Labor Cost Percentage
To lower labor cost, focus on scheduling to match sales patterns. Use sales data to schedule more staff during peak hours and fewer during slow times. Cross-train employees so they can handle multiple tasks. Reduce overtime by managing shifts carefully. Consider adjusting your menu to simplify prep work.
Raising prices can also improve the percentage, but be cautious—guests may resist. The best approach is usually a combination of smarter scheduling and efficiency improvements.
Common mistakes
- Assuming there's one universal target—labor cost varies by concept, location, and service model.
- Cutting labor too aggressively, which leads to slow service, mistakes, and higher turnover.
- Comparing your labor cost to a restaurant with a different average check or wage structure.
