Building a Schedule Against a Number Instead of Last Week's Habit

What labor cost percentage should look like

Labor cost percentage is total labor, including wages, taxes, and benefits, divided by total sales. For most full-service restaurants, the target is 28% to 35%. Fast casual can run lower, around 25% to 30%. If you are above 35% and your sales are not unusually slow, your schedule is likely the problem.

A restaurant doing $1.2 million a year running 34% labor cost when 30% is achievable is overspending $48,000 annually. That is not a rounding error. That is a manager's salary. The fix is almost never cutting people. It is building the schedule against a number instead of against last week's habit.

Sales per labor hour

The metric that matters most is sales per labor hour. Take your projected sales for a shift and divide it by the number of labor hours you have scheduled. If you project $4,000 in sales and you have 80 labor hours scheduled, your sales per labor hour is $50. Most full-service restaurants should target $35 to $55 per labor hour depending on service style and price point.

If your sales per labor hour drops below $30, you are overstaffed for the volume. If it is above $60, you may be understaffed and leaving service quality and sales on the table.

The schedule-by-projection method

Most operators build schedules by looking at last week's schedule and copying it. That is how you end up with the same crew on a slow Tuesday that you run on a busy Friday. Here is a better way.

1. Start with a revenue forecast. Look at the same week last year. Adjust for trends, events, weather, and seasonality. Write down your projected sales by day and daypart.

2. Assign a labor budget. If your target labor percentage is 30% and you project $10,000 in sales for the week, your labor budget is $3,000. That is the number you schedule against.

3. Fill shifts from there. Assign your manager and key holders first, then fill in based on projected volume by daypart. A busy Friday dinner needs more bodies than a slow Tuesday lunch. Match the schedule to the forecast, not the habit.

4. Review midweek. If Monday and Tuesday came in below forecast, cut hours on Wednesday and Thursday before the week compounds the loss. This is where most operators lose money. They wait until the end of the week to react.

How overtime sneaks in

Overtime is the silent killer of labor cost. One employee hitting overtime for a few hours a week does not seem like much. But at time and a half, a $16 per hour employee costs $24 per hour in overtime. If three employees each work 4 hours of overtime per week, that is $288 per week, or $14,976 per year.

The fix is scheduling discipline. Track hours in real time, not at the end of the week. Use your scheduling software to send alerts when someone approaches 40 hours. Cross-train so you have flexibility to send someone home early and still cover the floor.

Labor cost is half of your prime cost, which is the most important number in your restaurant. And if turnover is eating your labor budget, read our breakdown of what staff turnover actually costs.

For a full system on reviewing your numbers weekly, see our guide on the weekly financial review every operator should run. If you want someone to look at your schedule and your labor numbers, get a free audit.

The Bottom Line

Labor cost should run 28% to 35% of sales for most full-service restaurants, and most schedules are built by copying last week instead of projecting revenue. A restaurant doing $1.2M at 34% labor when 30% is achievable overspends $48,000 a year. Start with a sales forecast, assign a labor budget, fill shifts to match, and review midweek. That discipline alone moves the number.