How to Calculate Labor Cost Percentage for a Restaurant
Understand how to calculate labor cost percentage using payroll and sales data while improving scheduling, efficiency, budgeting, and restaurant profitability.
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Understand how to calculate labor cost percentage using payroll and sales data while improving scheduling, efficiency, budgeting, and restaurant profitability.
Jul 20, 2026
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Explore the recent cooling in the restaurant labor market and its impact on wage growth, employment trends, and labor turnover. Understand the dynamics shaping the industry.
Photo by rivage
Photo by rivage
The restaurant labor market has experienced a notable cooling trend, characterized by a moderation in wage growth and a gradual loosening of employment conditions. The initial surge in wage growth, particularly between 2019 and 2022, outpaced inflation and provided low-wage workers with increased bargaining power. However, recent data indicates a deceleration in nominal wage growth, signaling a shift in the market dynamics. This adjustment aligns with a return to pre-pandemic norms, where the labor market is stabilizing and moving towards a more balanced state.
Photo by rivage
The restaurant sector witnessed a significant rise in average wages, with even the lowest percentiles earning well above the minimum wage threshold. While nominal wages have shown a marked increase, it is crucial to consider the impact of inflation on real wage growth. Despite the nominal wage growth, inflation-adjusted wages have only seen a modest improvement, highlighting the ongoing struggles of low-wage workers in making meaningful economic gains.
Photo by rivage
Employment levels in the restaurant industry have stabilized around pre-pandemic numbers, indicating a potential shift towards full employment. However, the data also reveals a decrease in labor turnover, quits, and total separations, suggestive of a changing landscape where employers are gaining more control. Job openings continue to outpace hiring, emphasizing the ongoing challenge of retention in the industry. These trends reflect a nuanced rebalancing of power dynamics between workers and employers.
Photo by rivage
The current labor market conditions have significant implications for both restaurant workers and businesses. While the recent cooling may indicate a loss of bargaining power for workers, it also offers stability and predictability for employers. For workers, the slowdown in job turnover as a means to secure wage increases highlights the importance of addressing systemic wage disparities and creating sustainable income opportunities within the industry. Employers, on the other hand, face the challenge of retaining talent in an increasingly competitive environment.