The numbers a new restaurant manager owns: labor %, food cost % and sales per labor hour
This is part 5 of 7 in our series Your first year as a restaurant manager. Earlier: your first 30 days, running a pre-shift meeting, feedback on the floor and covering call-outs.
Sooner or later, the owner will ask you a question with a number in it. "Why was labor 36% last week?" "Why is food cost up?" As a new manager, you don't need to run the books, but you do need to know what those numbers mean, how they're calculated, and which parts of them you can move during a shift.
This post covers the three numbers managers are most often held to: labor cost percentage, food cost percentage and sales per labor hour. All the figures below are hypothetical, made up to show the arithmetic, not targets or industry averages. Your owner's targets are the ones that count.
Labor cost percentage
Labor cost % = labor cost ÷ net sales × 100
"Labor cost" can mean hourly wages only, or wages plus salaries, payroll taxes and benefits. Ask the owner which version you're judged on, and always compare like with like. Our post on labor cost percentage covers building a schedule to a labor budget and a 15-minute weekly review.
Food cost percentage
There are two different numbers called "food cost," and mixing them up causes arguments:
Plate cost % = what one item's ingredients cost ÷ its menu price × 100
That's the theoretical number, worked out from recipes. Our guide to plate costing and menu pricing shows how to cost a plate, yields included.
Food cost % for a period = (beginning inventory + purchases − ending inventory) ÷ food sales × 100
That's the actual number: what you really used, from your counts and invoices. The gap between the two is where waste, over-portioning, theft and counting mistakes show up. Food and beverage are often tracked separately; again, ask which version your owner uses.
Labor and food cost together are prime cost, covered in our post on prime cost for a new restaurant.
Sales per labor hour
Sales per labor hour (SPLH) = net sales ÷ labor hours worked
SPLH answers a different question from labor %: how much in sales did each hour of work bring in? Two things make it useful for a manager:
- It doesn't move with wage rates. Give everyone a raise and labor % goes up, even if you schedule exactly as well as before. SPLH stays the same. So SPLH tells you about scheduling; labor % tells you about scheduling and pay.
- It works hour by hour. You can't easily calculate labor % for 2 to 3 pm, but you can divide that hour's sales by the hours worked in it.
Decide which hours count (usually hourly staff only, not a salaried manager) and keep it the same every week.
A hypothetical week, worked through
A made-up café week, to show the arithmetic:
Item | Hypothetical figure |
|---|---|
Net sales | $24,000 |
Hourly labor hours worked | 480 |
Hourly wages paid | $7,680 (an average of $16.00 an hour) |
Beginning food and beverage inventory | $5,400 |
Purchases during the week | $7,300 |
Ending food and beverage inventory | $5,500 |
Then:
- Labor % (hourly wages only) = $7,680 ÷ $24,000 × 100 = 32.0%
- SPLH = $24,000 ÷ 480 = $50.00
- Cost of goods used = $5,400 + $7,300 − $5,500 = $7,200
- Food and beverage cost % = $7,200 ÷ $24,000 × 100 = 30.0%
Now give everyone a $1.00 raise and schedule exactly the same hours. Wages become 480 × $17.00 = $8,160, and labor % becomes $8,160 ÷ $24,000 × 100 = 34.0%. SPLH is still $50.00. Same scheduling, different labor %: that's why it helps to know both.
Hour by hour, the same week might look like this (also hypothetical):
Hour | Sales | People working | SPLH |
|---|---|---|---|
Saturday 8–9 am | $600 | 4 | $150 |
Tuesday 2–3 pm | $120 | 3 | $40 |
The weekly average hides both hours. The Saturday morning crew may be stretched thin; the Tuesday afternoon one may have a person who could start later or leave earlier. That's the conversation SPLH starts. Our guide to forecasting weekly sales from your POS shows how to split a day by hour.
What a manager can actually move
Not everything in these numbers is yours. Rent, wage rates and menu prices usually aren't. These usually are:
Number | Levers on a shift | Levers over a week |
|---|---|---|
Labor % and SPLH | Sending someone home early when sales are well under forecast; staggered start times instead of everyone at open; breaks timed to the slow hour | Scheduling to the forecast; overtime caught before the week is published; shift lengths matched to the rush |
Food cost % | Portioning (scoops, scales, recipe cards); first in, first out; logging waste instead of binning it quietly; comps and voids approved and recorded | Prep to par instead of "a full batch"; receiving checks for shorts and credits; accurate counts on the same day each week |
A few of these deserve a word of warning. Sending people home early saves hours, but check your state's rules on reporting time pay and any promises in your handbook first. And never "save" labor by having people finish tasks after they clock out: federal rules say "Work not requested but suffered or permitted is work time" (29 CFR 785.11). Part 7 of this series covers what that means for a manager.
A routine for the numbers
When | What to look at | Time |
|---|---|---|
Every shift | Sales against forecast by mid-shift; who can go home if it's slow; waste logged | 5 minutes |
Every day | Yesterday's sales, hours and labor %; comps and voids; any missed punches | 10 minutes |
Every week | Labor % and SPLH by day and daypart; overtime; the schedule for next week against the forecast | 20 minutes |
Every count period | Food cost % from counts and invoices; the gap against plate costs; the top three waste items | 30 minutes |
Our daily sales and cash report template puts the daily numbers on one page, and the monthly P&L review shows where your numbers land on the owner's statement.
Common mistakes
- Comparing to someone else's percentage. A café that sells mostly espresso drinks and one that sells mostly made-to-order breakfast run very different food and labor costs. Compare your numbers with your own targets and your own history.
- Gross instead of net sales. Use sales after discounts and comps, without sales tax, and use the same definition every time.
- Counting on different days. Food cost % from a count taken on Monday one week and Thursday the next is mostly noise.
- Mixing hours. If the SPLH for one week includes the salaried manager's hours and the next doesn't, the trend means nothing.
Where Mays fits
- Labor % while you build. On the web schedule, the Scheduled labor card adds up the week's shifts in dollars and hours, the Weekly budget card says whether you're within budget, and OT warnings shows who's heading into overtime. See Sales forecast and labor budget.
- Projected and actual. Scheduling → Forecast shows Projected labor % from your sales history, and Scheduling → Reports → Actuals lists projected sales, actual sales, actual labor and Labor % for each day. Both need a connected POS (Square or Union). See Scheduling reports.
- Plate cost %. Under Inventory → Setup → Recipes, each recipe shows its Cost and Cost %, and the list highlights items above 35% in red. See Recipes and costing.
Two limits to know: labor cost in Mays is wages and salaries, without payroll taxes or benefits, and Mays doesn't show sales per labor hour yet, so work it out from the Actuals report and your time clock hours.
Your numbers checklist
- Ask which version of labor cost and food cost you're judged on
- Labor % = labor cost ÷ net sales; SPLH = net sales ÷ labor hours
- Plate cost % from recipes, actual food cost % from counts and invoices
- SPLH by hour to find stretched and slack hours
- The levers you control: hours, overtime, portioning, waste, receiving, counts, comps
- A shift, daily, weekly and count-period routine
- The same definitions every week
See labor and food cost as you work
Schedule to a budget, compare projected and actual labor, and cost every recipe.
Start your free trial: 30 days, every module, no card needed. Or book a walkthrough and we'll connect your POS and set up the forecast with you.