Years ago, we had a formula through Dominos that gave us an ideal labor amount to shoot for based on net sales volume. Does anyone have a formula like this? Do you pick a percentage and try to get there weekly? What labor percentage would you be trying to hit doing $25-$30,000 per week?
Our recommendation is that labor costs (including payroll, payroll tax, benefits, etc…) should not exceed 30% of revenue, if possible. If you are aiming for $25-$30k in sales per week, that would mean total labor should not exceed $7,500 - $9,000 per week.
I run 37% and it’s going higher next year
30% is a good rule of thumb overall, but when you have low sales it is unachievable (my worst week was about 45%) and when you have high sales, you’re just throwing money away because you are not reaping the economies of scale (my best week is about 25%).
I have a split calculation.
There is a certain amount of labor that it takes to open the store, period. Whether I sell $0 or $1000, those people have to be there to even open the door. So, I calculated what that is and that is my baseline.
Then, looking at my history, I can see how much overall labor was for any given amount of nightly sales.
Using a little algebra, I came up with a calculation that is baseline + (nightly sales x labor factor) = labor target.
I made a chart for various nightly sales amounts and the corresponding labor target for each. I put it in the manager’s office.
S/he checks it at about 7pm each night, uses his/her gut to decide where the night is going to end up, and then makes cuts accordingly.
Unless there is an equipment failure, etc. We are within $100 of the weekly labor target at the end of each week. Anytime we are significantly higher than that, I call a meeting to get the managers back on track.