What is a good labor cost percentage for a restaurant?
A healthy labor cost percentage for a quick-service restaurant is typically 25–30% of gross sales; full-service runs 30–35%. It includes wages, payroll taxes, and benefits divided by gross revenue. Tracking it daily — not monthly — is what keeps it in range.
How do you calculate restaurant labor cost percentage?
Add up everything you paid people to work during a period — wages, overtime, payroll taxes and benefits — then divide it by gross revenue for the same period and multiply by 100. Use the same window for both numbers, and calculate it daily or weekly so you can act on it.
Labor Cost % = (Total Labor Cost ÷ Gross Revenue) × 100
- Pick a period. A day or a week is best for running the restaurant; a month lines up with your P&L. Use the same period for labor and sales.
- Add up gross wages for everyone who worked in that period: hourly pay including overtime, plus salaried managers' pay for the same period.
- Add employer payroll taxes on those wages.
- Add benefits you pay for, such as health premiums, retirement contributions and paid time off taken.
- Divide by gross revenue for the same period, then multiply by 100.
What counts as labor cost?
Labor cost is everything the restaurant pays to have people working: hourly wages, overtime, salaried managers' pay, the employer's share of payroll taxes, and benefits. Tips that customers leave for staff don't count, because they pass through to employees and are neither your cost nor your revenue.
- Counts: hourly wages, overtime premiums, manager salaries, employer payroll taxes, health premiums, retirement contributions, paid time off.
- Doesn't count: customer tips passed through to staff, and food or other cost of goods.
What is a good labor cost percentage by restaurant segment?
It depends on your service model. Quick-service restaurants typically run labor at 25–30% of gross sales, while full-service restaurants run 30–35% because table service needs more staff per guest. Compare yourself with your own segment, and watch your own baseline week to week rather than chasing another restaurant's number.
| Restaurant segment | Typical labor cost % | Why |
|---|---|---|
| Quick-service | 25–30% of gross sales | Counter service and a smaller crew per guest |
| Full-service | 30–35% of gross sales | Servers, hosts and bussers on top of the kitchen |
Outside restaurants the ranges look different; our labor cost percentage guide covers other industries and ways to bring the number down.
What happened when a real restaurant started tracking it daily
A three-location Texas gelato group ran labor above 30% of sales before PeopleBridge. After switching — with daily labor-cost spike alerts, the overtime predictor flagging 40-hour weeks before schedules publish, and Toast sales data next to hours in one view — labor has held under 25% of sales. The drop came from catching overstaffing daily instead of discovering it at month-end.
Read the full customer story for how the switch went.
Choosing a scheduling tool for your restaurant? Compare PeopleBridge vs 7shifts and PeopleBridge vs Homebase. Already on Homebase? See a Homebase alternative built for restaurants.
Restaurant labor cost FAQ
Do tips count toward restaurant labor cost?
No. Tips that customers leave for your staff are not your labor cost, and they are not your revenue either. Count only what the restaurant pays: wages, overtime, payroll taxes and benefits. Including pass-through tips would make your labor cost percentage look higher than it really is and hide the number you can actually control.
Why should restaurants track labor cost daily instead of monthly?
Because a monthly number arrives after the money is spent. Checking labor against sales every day shows overstaffed shifts while you can still adjust the schedule, send someone home early or rebalance coverage. A month-end report only tells you labor ran high; daily tracking is what lets you keep it in range.
Is a lower labor cost percentage always better?
No. Cutting labor below what your service model needs usually shows up as longer ticket times, worse reviews and burned-out staff, and that costs sales. The goal is to stay inside the healthy range for your segment and catch drift early, not to push the number as low as it will go.
How does PeopleBridge help restaurants control labor cost?
On the Pro plan, PeopleBridge puts Toast sales next to scheduled and clocked hours in one view, sends daily labor-cost spike alerts, and warns you about employees heading past 40 hours before a schedule is published. Owners see overstaffing while they can still fix it, instead of discovering it at month-end.
See labor cost every day, not after payroll
Toast sales next to your schedule, daily labor-cost alerts, and an overtime warning before you publish — all on Pro, $2 per employee + $10 per location a month. Scheduling and the time clock are free for 1 location and up to 10 employees.
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