Looking at your overall labor percentage can sometimes be deceiving. Split it into two (or more) parts.
There are a certain minimum number of people you need to even open. You can't change that and they need to be there even if you have (hypothetically) $0.00 in sales. That same crew can also handle up to a certain amount of sales before anyone else needs to come in. Your first task is to figure out how much that skeleton crew can handle in business and make sure that they can at least do that at a breakeven gross margin to their labor cost (although ideally you'd like to make some gross margin). That's your first part.
Then above and beyond that sales number, you have incremental labor. That's a different percentage. The further your sales above the "bare minimum" the lower your overall labor percentage will be.
So, what that means is that on a slow day (like a Monday) a 40% labor cost might be very good, but on a busy day (like a Friday), 40% would be absolutely terrible.
Depending on your business, you might even further break things down by day-part. Maybe you're in a business district with high lunch sales, but low dinner sales, or vice-versa.
All of these are reasons why a single labor % target is not always useful.
