labor cost??

Hi, everybody, there was a thread before asking whats ur weekly sales, now i want to ask : whats ur labor. I am taking over a store( not very successful) and trying to make it work. The previous owners last week’s labor was near 60%! Now with me working my labor cost(not counting myself) is about 20-25% , on a good day it is under 18%)) what is do u think reasonable labor expense if u(as the onwer) working the kitchen, or if not. Thanx greatly;)

One where you are making money. In my opinion, that is a hard one to answer. A reasonable labor percentage depends on many things, such as type of business (dine in, take out, delivery), trade area if offering delivery, sales volume (running lower labor percentages is a lot easier when you are doing 30,000+ a week).

Sorry that it isn’t much of an answer. One thing I will suggest though, is don’t lose sight of service to save on labor. When I was with a large chain, one of the other managers used to always boast his low labor costs. Mind you his deliveries would take 60 to 90 minutes at minimum, and carry outs 30 to 45. He never could understand why his sales were declining.

If it helps any, when I was GM of a 13,000/week store, I’d run around 24 to 26 percent labor, with my salary included, which was slightly under the company par. Usually had OTD times of 14 to 18 minutes on deliveries, and most carry outs ready in 10 to 15.

As Uncle Nicks stated; “It Depends”

A good starting point is to have your combined food & labor cost under 55% , being under 50% is even better.
My labor costs are all over the place in the winter due to our wildly varying sales amounts affected by our weather, tourist activities, snowmobile trail conditions, and ice-fishing.
When we are running hard in our summer tourist months, I typically see 10% or less on labor costs on a daily basis, i’ve seen them under 5% at times. But it all depends on how much product that we have going out the doors. I Love seeing large carry-out orders meant to feed 30-50 people, it moves massive product without a buttload of labor.

If I was in your position, I’d look at the current food cost ratio, try to get a good estimate on your current labor costs, and try to nail that “55% or less” benchmark by making the needed changes to get there.
These are some projections/calculations that almost border on alchemy, but it can be done.

A chef I worked under decades ago told me something that made real good sense, he said;
“Your profitability is not determined by what you’re paying for your meats, it is instead determined by what you are paying for the lettuce”
Translation; Watch the pennies and the nickels and the Dollars will take care of themselves.
Simple things such as excessive chemical usage, pizza boxes, customer discounts, employee meals, Etc Etc, They all add up to substantial monetary figures over a few months.
My sysco rep recently asked why I do not get some of our paper/disposable items through him, I showed him the price difference, and he says “Thats nothing” until I showed him our annual usage, and paying those extra few cents per piece added up to in only 1 year.

Good luck with your project and I hope you can get things down to where they need to be. it won’t be an overnight task.

Thats a great answer! Thanx.24% is great.we doing 12k aweek now and with my salary its is about 35…and those p.u. And delivery times are great.if my store ever does those numbers i would be extatic!

Thanx ,GotRocks.i was told before by my first pizza manager to keep labor and foodcost combined at ni more than 60%! 55% is the challange. What really surprises me is that the business in this town is absolitely unpredictible! Today we were extremely busy til 6 and almost nothing 6-9…and ussually it is totally the other way around .makes it very difficult to plan employees scheduals

In our busy months we can run labor in the mid-high 20s 26-28%. In our dead times between seasons we can run 45%… why let it get so high? Because our employees need a paycheck and I will need them when the season comes around again.

On a full year basis, including employers share of taxes etc etc we ran 33% last year (2014) and that is pretty typical for us. That is everything though. If I worked in the store and replaced the general manager etc at 50 hours a week and did not count myself the cost would be about 21%

Thanx ! a friend of mine just sold his pizza biz he had since earlier 90s. It was very busy operation for a 6 days a week the new owner saying that the labor was at 40% and his food cost… Is 47!. Before this i new they had exesive labor but this food cost is horrible!
I just want some numbers( real world number) to aim at and set some realistic goals for myself.

We run 33% company wide with our slower stores a little higher and busy stores a little lower. Managing labor cost for me is by far the most difficult part of this business.

Schedule too much and you can loose money real fast. Plus it becomes difficult to keep the crew focused when there are too many of them which drops productivity.
Schedule too light and you run the risk chasing off customers.

We have always gone with the schedule a little under theory. We rarely ever have too many people. Everyone keeps busy and stays focused. But there are those times ( New Years ) when I wonder why we don’t schedule more.

The rule of 60! Food and labor should stay below 60% combined. We run our labor around 27%, which is very difficult since we need to have 12-15 drivers on at night. Our managers do a great job of cutting since we over schedule intentionally just in case we get destroyed.

What is a good target percentage to be at if you include all the cost of goods (everything you purchase i.e. paper, chemicals, food)? Currently my Cost Of Goods (calculated like I listed previously) is around 42% and Labor around 32% with a General Manager and payroll taxes calculated into Labor costs. I know that the Costs Of Goods number is not accurate because I am not doing a weekly inventory of what we started with before the week plus what we purchased minus what was left over. Trying to get to that magic number of 60 but I’m not sure if I am calculating the correct items.

paper is not included, so thats a big difference. Neither is our average daily costs like rent and all our bills. This puts our overall percentage close to 90%. That means we’re profiting around 10%-15% per week. Very solid number! The daily and the paper are numbers that are pretty much set and controlled by you. Labor and food are constant struggles that include all your employees.

I have tried the rule of 60 and for us it just doesn’t work. We can’t create enough value to the customer at 60. Payroll taxes and insurance in California is almost 5% of sales by itself. 5 years ago I moved my 60 to 70 and never looked back. Keep in mind though, our advertising sits around 1% and our rent is around 3%. Far below industry standards.

I would love to just close in our off-season, because I see all of our summer profits get eaten up October through December.
I only stay open because my guys work hard, and they need year-round employment. Plus, I cannot start with a fresh crew every summer, especially with the poor excuse for labor we have up here!
I finally have 2 decent key players in my operation, If I lost them, I’d be screwed.

This last fall, we road-tripped to the Bakken oil field to see if we could land some big money jobs out there so I could close, and they’d have decent money through the winter. I planned to take an RV out there, house us 3 in it, work our tails off until March, come back here take 6 weeks off, and kick butt in the summer here. Sadly, the oil boom labor vacuum is done and over out there, so we did not do it.
I am only as good as my crew, and for us to be great, I need the guys I currently have!

@Rico, our “food cost” numbers include paper… I include everything we use up… so paper, other containers, cleaning supplies etc etc are in my target 29%. Last couple of years have been more like 31% though with high cost on cheese especially. rule of 60 is an excellent target, but we do not quite get there… more like 62-64. If we could hit 61% I would be thrilled… again that includes all paper etc on the “food” side and all employer share of taxes and unemployment etc on the labor side.

One of my clients said they were running under 50% for food and labour but were going broke…Problem was in order to get those numbers they were selling “crap”…Food & labour % must be looked at in conjunction with prices…Competition can cause you to vary greatly (one way or the other) from what the ideal numbers are…

Thanx for all the answers, so i have an addendum to my question!: when u schedual people how many do u put on the floor of cooks and drivers, per thousand?? Say for me on mon-wed we do anywhere between 900-1300. At 900 i only need one driver but at 1300 i need some one to take a couple deliveries, so i need someone else, so for night time i get an extra cook(lunch time its only me and the counter girl, where i can easiely do all the cooking) who also takes deliveries as u guys do it? Thanx

We need one driver for about $500 in business but we will schedule the 2nd driver when we forecast $500 or more. We have one day driver and one night and they overlap for an hour or two at dinner. Third driver scheduled at about $1200, fourth at $1700, fifth at 24oo, sixth at $3000

The problem with having less staff than you need is the level of service you can give…If you do not have enough drivers your delivery times suffer ant that may “rattle” some of your clients…Sadly you may be caught between a rock and a hard place when sales are low…

We staff according to number of deliveries, we schedule 1 driver for every 2.5 to 3 deliveries per hour. So if an hour is projected to have 8 deliveries we will schedule 3 drivers, 12 deliveries 4 drivers, etc. Our goal is to run 30-35 minute delivery times.

Can you give an estimation of your delivery area size? How many miles each direction, how many minutes to get to your farthest point and if possible how many square miles do you cover?