Labor Cost

Hey Everybody,

What should be the labor percent for Pizza Carryout Delivery? I’ve always thought it should be not more than 25%. Is that realistic?

Depends where you are, how you count labor and how busy you are. Location and competitive markets determine both wages and prices. Are you counting the owner/manager as part of the cost? Also are you counting work comp and unemployment and employers share of fica?

Where I live there is no way I could run 25% unless I don’t count my manager. I do not work in the store, but if I ran the store replacing the manager and did not count my compensation as part of the labor percentage, our cost would be around 24-25%. With our GM, the labor cost is 33-34% not counting work comp but including employers share of fica and unemployment.

Our local wage picture is higher than some other places:

Cook: $10-12 per hour depending on experience
Phones: $9-11 per hour depending on experience
Asst Mngr: $14 per hour plus ski pass and paid vacation

We run several points lower during our busy season and higher in the off-season. If we could be as busy as we are in the high season more or less all year, we would drop our labor cost by 4 points.

Long winded way of saying, it is not possible to say what your labor cost should be without knowing what kind of pricing you can achieve, what your total volume is, what wages your local market requires to attract and keep the quality of people you seek to hire and whether the cost includes a general manager/owner who is putting full time hours into the operation of the business. (and, if the manager/owner is included how much they are paid… i.e. market wage or some other amount)

I run 22% on in-store (GM, AM, Cooks, Phones & Drivers) (no taxes or prep which adds about 5%)

Drivers $6 to $7 per hour on payroll. Phones $9-10, Cooks $9-11 AM $11-13, GM $13-17 I do not work in the shop.

Average price per order $18 65% delivery 35% carry out food cost 32%

My lower volume shop (about 1/3) runs 27% with all the same variables except it is 40% C/O 60% delivery. Volume does help run lower labor as the same amount of labor for $10,000 a week as $13,000

The starting point I like to use is that your combined food & labor costs should not exceed 55%,
50% is better.
So, basically your labor cost can be whatever you want it to be, but you’ll need to compensate with your food-cost ratio so they do not exceed 55% combined

Did that make sense? I am not fully caffeinated yet

We hit 55% or even lower when we are cranking, but for a year-round number COGS (includes all paper and supplies) plus labor including all taxes comes in around 62% for us if we do really well (29% COGS, 33% Labor), 65% if we blow it.

I’m the oddball in this discussion. We run right about 70% food and labor combined. We are a bit lower now with the cheese market crash. We run 34 to 35% labor. That includes all managers, taxes and insurance. Food right now is at 33 to 34 % and includes all supplies and paper products also. California has a lot of bills in the works to push the minimum wage up $15 an hour over the next few years and I don’t see much outcry to stop it. If that happens we will have to adjust our food cost down to 30% and our labor up to 40%.