What's a good labor cost percentage? Hourly vs P&L labor
Why the labor figure from your POS reads lower than finance's, and which one to schedule by.
For quick-service restaurants, fully loaded labor on the P&L is often cited in the range of 28–33% of sales, and hourly labor from the POS in the range of 18–25%. Both can be right at the same store, because they measure different things.
What the POS can't see
Punch data carries hours and hourly rates. It has no payroll taxes, no benefits and no salaries. A salaried manager's hours are counted, but their cost isn't. Compared with a P&L figure, 25.7% hourly labor looks comfortable. Against an hourly benchmark it's tight.
Which number to schedule by
Hourly labor is the cost a GM moves shift to shift; a salary doesn't change whatever the schedule does. Manage the week by hourly labor and sales per labor hour, and leave fully loaded labor to the monthly P&L. How to reduce labor cost.
Two things that break the number
- An hourly employee entered at $0.00 understates labor. Fix the pay rate in the POS.
- Dividing labor cost by labor hours to get an average wage. Salaried hours are in the hours but not the cost, so the answer comes out too low.
Where Franlever fits
Franlever labels POS labor as hourly labor everywhere, so nobody compares it with a P&L figure by mistake, and says why when a day's labor can't be calculated.
Common questions
- What is a good labor cost percentage for a restaurant?
- It depends on whether you mean hourly or fully loaded labor. For quick-service, hourly labor is often in the 18–25% range and fully loaded P&L labor in the 28–33% range. Compare with your brand and format.
General information for restaurant and franchise operators, not legal, tax, accounting or financial advice. Figures in examples are illustrations, not predictions or promises of results. Laws and platform policies change and differ by location, so check the current rules and talk to a qualified advisor about your situation.