Restaurant Labor Cost Percentage: What Good Looks Like and 6 Ways to Lower It

Short answer: a healthy restaurant labor cost percentage for most full-service spots is roughly 25 to 35 percent of sales, and the National Restaurant Association’s latest operations report put the 2024 median at 36.5 percent for full-service and 31.7 percent for limited-service. If yours sits above those numbers, the fix is almost always the schedule, not the paychecks.

Labor is the biggest bill you control. Rent is fixed. Food cost moves slowly. But labor changes every single week, depending on how you write the schedule. Here is how to calculate your restaurant labor cost percentage, what good looks like, and six moves that bring it down without gutting your team.

How to Calculate Your Restaurant Labor Cost Percentage

The formula is simple: total labor cost divided by total sales, times 100. Use the same period for both, a week or a month. 7shifts gives the example of $240,000 in labor on $800,000 in sales, which is 30 percent (7shifts restaurant labor cost guide).

The part owners get wrong is “total labor cost.” It is not just wages. Count all of it:

• Hourly wages and salaries, including managers.
• Overtime.
• Employer payroll taxes (FICA alone is 7.65 percent).
• Workers’ comp, benefits, paid time off and bonuses.
• Training hours for new hires.

A fully loaded employee often costs 25 to 40 percent more than their base wage. Say you paid $18,000 in wages last month on $60,000 in sales. That looks like 30 percent. Add $4,500 for taxes and workers’ comp and the real restaurant labor cost percentage is 37.5 percent. Same month, very different picture.

What a Good Restaurant Labor Cost Percentage Looks Like

There is no single magic number. It depends on your concept. These are common ranges for labor as a share of sales (Katalyst restaurant labor cost benchmarks):

• Quick service: 25 to 30 percent.
• Fast casual: 28 to 33 percent.
• Full-service casual: 25 to 35 percent.
• Fine dining: 30 to 40 percent.
• Standalone bar: 18 to 24 percent.

Treat these as guardrails, not grades. A small island restaurant with a short season and few covers on a Tuesday will run higher than a high-volume mainland diner. That is normal. What matters is whether your number is stable and whether you still make money after it.

Check Prime Cost, Not Just Labor

Labor alone can fool you. A low labor number with a sky-high food cost is still a bad month. That is why operators watch prime cost, which is food plus labor together. The usual target is about 60 percent of sales, inside a 55 to 65 percent band. Above 65 percent there is usually not enough left for rent, utilities and profit.

If you have not nailed the food half yet, start with our guides on how to calculate food cost percentage and menu pricing strategy. Menu price changes and labor changes work together. A better price on your top ten items lowers your restaurant labor cost percentage without cutting a single shift, because sales go up while hours stay put.

6 Ways to Lower Your Restaurant Labor Cost Percentage

1. Schedule to a sales forecast, not to habit

Pull the last 8 weeks of sales by day and by daypart from your POS. Staff to the forecast, not to what you did last year. Vendors in this space report savings of roughly 6 to 10 percent of labor spend from forecast-based scheduling, though that figure is vendor-reported, so treat it as a direction, not a promise.

2. Watch overtime before it happens

Federal law requires overtime pay at 1.5 times the regular rate for non-exempt employees after 40 hours in a workweek, and you cannot average hours across two weeks (U.S. Department of Labor overtime rules). Set an alert at 36 hours. Move the last shift to someone under the line.

3. Cut the dead hours

Look at sales per labor hour by shift. If Tuesday lunch brings in $400 across 40 labor hours, that is $10 an hour of sales, and you are paying people to wait. Cut the shift, stagger start times, or run a prep project that earns its keep. In low season on an island, this one change can save a month of runway.

4. Cross-train your crew

A server who can run the host stand and a line cook who can cover prep give you flexibility on slow nights. Two cross-trained people replace three single-role people. Pay a small bump for the extra skill and you still come out ahead.

5. Stop the turnover leak

Replacing one frontline hospitality worker costs about $5,864 once you count hiring, training and lost speed, according to a Cornell study cited by Katalyst. Restaurant turnover averages around 75 percent a year. Every person you keep is a number that does not hit your labor line. We wrote a whole playbook on restaurant staff retention.

6. Grow sales, not just trim hours

Labor percentage has two sides. You can cut the top or grow the bottom. If you add $10,000 a month in sales and your hours barely move, your percentage drops fast. See how to do that in how to increase restaurant revenue, and if your tables are empty, start with restaurant marketing that fills the slow shifts you already pay for. Third-party fees hit your margin the same way labor does, and we built a free tool for the booking side: the OTA Commission Calculator.

What to Do This Week

Do not try to fix everything. Pick one day. Calculate your restaurant labor cost percentage for the last 4 weeks, fully loaded. Find your two slowest shifts. Cut or shrink them next week. Check the number again in 30 days. If it moved, keep going. If it did not, your problem is probably sales, not staffing.

Restaurant Labor Cost Percentage FAQ

What is a good restaurant labor cost percentage?

Most full-service restaurants aim for 25 to 35 percent of sales. The NRA’s 2024 medians were 36.5 percent for full-service and 31.7 percent for limited-service, so many operators run higher than the textbook range.

Should I include manager salaries in labor cost?

Yes. Include every payroll dollar tied to running the restaurant, plus taxes, workers’ comp and benefits. Leaving managers out makes your number look better than it is.

Is restaurant labor cost percentage the same as prime cost?

No. Labor percentage is labor divided by sales. Prime cost adds food and beverage cost to labor, and the common target is around 60 percent of sales.

Want a second set of eyes on your numbers? Take the free Direct Booking Diagnostic and we will show you where the money is leaking.