Labor Cost Guidelines for a Restaurant

Paying restaurant employees, whether they are part of the waitstaff or kitchen crew, is one of the highest costs a restaurant must face. In a perfect world, the cost of paying your staff will be considerably less than the revenues you bring in each week. To keep costs low, especially in times when business is slow, you'll need to adjust the working schedule of your employees to maximize profit.

General Labor Guidelines

According to Randy White, CEO of the White-Hutchinson Leisure & Learning Group, a consulting group, the cost of labor and food at a restaurant should ideally be less than 60 percent of the revenue you bring in. Labor should be less than 30 percent of the revenue. Depending on the type of restaurant you run, though, costs may be higher or lower. For example, if you run a full-service, white-tablecloth restaurant, your labor costs will most likely be higher than if you run a casual dining restaurant, since you will employ more staff to provide a higher level of service.

Divide Labor Into Groups

When you evaluate your labor costs, it's helpful to divide your staff into groups so that you can see what groups are costing you the most. Create a group for front-of-house staff, which includes servers, hosts and bartenders. Managers can fall into another group and kitchen staff, including cooks and dishwashers, into a third.

If you pay half your staff an hourly wage and the other half a salary, you may divide the labor into two groups. Grouping your staff by category allows you to see what positions are costing you the most.

Adjusting Labor Costs

Before you can adjust costs, you need to know what the ideal labor cost compared to revenue is. For example, if your restaurant is doing very well and is booked nightly, you may have three servers, two food runners and a host on each night. The cost of labor at this point may be 20 percent of your revenue. If you only book half-full each night and keep the same number of staff on, your costs will jump to 40 percent.

To get the percentage back to 20 percent, you may have to remove one server and one food runner from the schedule on nights you know will be slow.

Keep an Eye On Things

Look at how much you are paying staff weekly versus how much the restaurant is bringing in each week to get a good idea of your labor costs. Also keep an eye on your employees throughout the week. If you notice that one of the two servers you schedule during lunch frequently sits around with nothing to do, you may consider removing her from the shift to improve costs. If customers mostly order sandwiches and salads during lunch, you may be able to cut the fry cook from the schedule or cross-train one cook so that he can handle multiple stations in the kitchen.