The average labor cost for restaurants
With so many types of restaurants from fast food to full-service bar and grills or fancy five-star fine dining, and so many restaurant services and management techniques, it's difficult to establish the average labour costs. However, numerous restaurant management resources are available online to help you determine what your labour cost should be, and advice on how to achieve favourable percentages.
National Restaurant Association
As of July 2010, the National Restaurant Association reported that labour expenses represented about 1/3 of the total sales of most U.S. full-service restaurants. According to the report, full-service restaurants with an average guest check of £9 or less spent about 32.2 per cent of their gross sales on salaries and wages. Restaurants with guest checks totalling between £9 and £16 spent about 31.8 per cent and restaurants with guest spending more than £16, as well as limited-service eateries, contributed 31.9 per cent of their sales to labour expenses.
Online restaurant management, marketing and operational resource website, Restaurant Report, offers slightly varying statistics in an article titled, "Restaurant Accounting: For Profit's Sake, Inventory Your Food Cost!" written by Ron Gorodesky and Kate Lange. According to the authors, at the time of publication, the food and labour costs to operate a restaurant accounted for anywhere from 50 to 75 per cent of the establishment's total sales. The article states that of that 50 to 75 per cent, 28 to 35 per cent represented the cost of foods. Ultimately, according to Restaurant Report, the cost of labour would consume 22 to 40 per cent of the restaurant's gross profits.
Ecolab is a national industrial sanitation supply company that does a considerable amount of business in the food service industry. The company provides statistics and information regarding operational management, budgeting and services online for restaurant managers, owners and personnel. According to Ecolab's white paper on ware-washing operational cost analysis, the typical labour expenses for a full-service food operation -- such as a restaurant or cafeteria -- usually equals about 34 per cent of the total food and beverage sales of a specified period.
Control and Improvement
If you're dissatisfied with your restaurant's excessive labour costs and would like to improve your profit margin, many online restaurant management publications -- such as Restaurant Owner, Restaurant Research Group and the CBS Interactive Business Network, Bnet -- offer professional advice and tips on how to reduce your company's labour expenses. A few tips and ideas include hiring the appropriate amount of servers, bartenders and kitchen help without over staffing, creating efficient work schedules and offering deferred bonus incentive programs to management teams for reaching predetermined sales goals.
- National Restaurant Association; Labor Costs Represent About a Third of Full Service Sales; July 2010
- Food and Beverage Underground: Controlling Your Restaurant Labor Cost
- Bnet; 10 Ways to Control Your Restaurant's Labor Costs; Jim Sullivan
- RRG; Boost Productivity to Control Labor Costs; David Pavesic, Ph. D.
- Ecolab; Warewashing Operational Cost Analysis; 2007
- RestaurantReport; Restaurant Accounting: For Profit's Sake, Inventory Your Food Cost!; Ron Gorodesky, et al.