How To Calculate Restaurant Labor Cost
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- Опубліковано 27 гру 2021
- How to Calculate Restaurant Labor Cost - Are you wondering how to calculate restaurant labor cost or whether you're doing it the right way? Restaurant labor cost is often a restaurant's biggest expense, other than an empty chair in your restaurant. Calculating your restaurant costs correctly is critical to you making money or losing money. In this video I'll teach you how to calculate restaurant labor cost.
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Welcome to my UA-cam Channel. I am David Scott Peters, a restaurant coach and speaker who teaches restaurant operators how to cut costs and increase profits with my trademark Restaurant Prosperity Formula. Known as THE expert in the restaurant industry, I apply my no-BS style to teach and motivate restaurant owners to take control of their businesses and finally realize their full potential. Thousands of restaurants have used my formula to transform their businesses. To learn more about me and my coaching program, visit www.davidscottpeters.com.
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First you need to gather the right numbers. If you gather the wrong data, you get bad results, ultimately making bad decisions in your business. This very first step is where a lot of restaurant owners go wrong: gross sales vs net sales. Which one do you use? Gross sales are the ring at the register before the discounts have been removed, not including sales tax. Net sales are the ring at the register after the discounts, not including sales tax.
Let me shortcut this for you and tell you it’s gross sales. Why? Because if you run any form of promotional discounts, employee meals, anything, there are comps. You should measure your team based on what the sales would have been, whether you collected the money or not. For instance, let's say I'm planning on a $10,000 a day, but I'm going to comp 50 percent for a favorite charity or something, so it ends up being a $5,000 day. Does your management team buy product for a $10,000 a day or a $5,000 a day? Do you staff to handle the business for a $5,000 day or $10,000 day? The answer to both is $10,000. Use gross sales when you calculate your restaurant's labor cost.
The second thing you need to gather is the raw labor cost versus total labor cost. What's the difference? In raw labor cost, if you pay a cook $15 an hour, he or she punches in and punches out in one hour, $15 is what they get paid. But that's not what comes out of your bank account. You also pay taxes, benefits and insurance. The raw labor costs is for your managers to follow. When you give them a labor target, it is going to be after you’ve removed taxes, benefits and insurance because your managers are not going to sit there and calculate every employee to find out when they've reached their limit of FICA and SUI, but they can control $15 an hour times the number of hours somebody works. Total labor cost is for budgeting and tracking. That's where you look at everything: every position, including taxes, benefits, and insurance, because that is a part of your prime cost, which is a key cost target for running a profitable restaurant. Any money that comes out of your bank account based on labor is a part of your labor cost.
The third thing you have to understand is the calculation labor cost? It's use divided by gross sales. Believe it or not, if you've been on my channel for any length of time, you understand that is the same calculation you use for cost of goods sold: food cost, bottled beer, draught beer, wine, liquor, N/A BEV, is use divided by sales. In this case, it's not use of product. It's use of minutes, hours, and dollars you are going to spend in payroll.
I'm sure your next question is, “Where should my labor cost be and what should it be by position?”
That’s where we get into the prime cost calculation, which you can learn about here ( • Restaurant Prime Cost ... , • Restaurant Prime Cost ... ). With the information you learn in these videos, you can understand what kind of changes you need to make to hit the right labor cost for your restaurant and your goals.
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2 questions please: In calculating gross sales are you including tips? and when calculating labor do you include owner's pay?
Thank you so much this was the perfect explanation for me cause as a gm I was never trained on this
Good stuff... For me. I use just as a quick calculation for my budget.
1.15x my raw numbers. So I have an idea for the end of the period/week/month.
Hopefully what I've taught in this video helps you in your management of labor hours. Thanks for watching!
your face got violently red when you transitioned at the end of the video lol
I was probably running out of breath!
What is the ideal labour cost??
It really depends on a variety of factors - including the style of your restaurant and your menu. But the point is you should be coming in at 55% for food cost/COGS and labor cost combined.
only talking no calculation?????
If you didn't find this helpful, I encourage you to search my channel for more labor videos. Here is a playlist with the videos that are about labor cost: ua-cam.com/play/PLHT_Ug9-cDkL4iDJwnBmVNk0F--aO3v1P.html
Total waste of my Time!
I'm sorry my message didn't meet your expectations. There are a lot of videos on my channel on calculating labor cost for restaurants. BUT, I also understand I'm not for everybody and there are lots of restaurant coaches out there. I hope you find someone you want to learn from!