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Labor Cost Percentage illustration

Franchise · Cost

Labor Cost Percentage

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Use labor cost percentage to track wages against sales, a key control metric in food-service and retail franchises where labor can quietly erode margin.

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Interactive workbench

Cafe staffing

Labor CostRevenue×100

$12,000 of labor on $40,000 of sales is a 30% labor cost.

Step 1 of 3

Variables and units

  • Labor Cost

    Total wages for the period.

    currency

  • Revenue

    Total sales revenue for the period.

    currency

Common mistakes

  • Leaving payroll taxes and benefits out of labor.
  • Using a different period for labor and sales.

Step-by-step example

Cafe staffing

  1. 1. Start with the example inputs

    • Labor Cost$12,000
    • Revenue$40,000

  2. 2. Apply the formula

    Labor CostRevenue×100

  3. 3. Run the numbers

    30%

    $12,000 of labor on $40,000 of sales is a 30% labor cost.

What this result means

Labor at 30% of revenue is one of the two big controllable costs in food and retail. Full-service restaurants often run roughly 30–35%, counter service lower; persistent creep usually means scheduling against slow hours rather than wage rates.