First off, what are restaurant labor costs?

Restaurant management is complex. Owning and running a restaurant is a costly affair. It is not only because the restaurant industry is one of the most competitive businesses in the world, but because hordes of challenges accrue in a restaurant business.
In the restaurant business, managing people is much more than simply putting out orders or greeting guests on arrival and departure. At the heart of the business are the frontline staff responsible for handling customers day in and day out. Every member of staff counts, whether the chefs preparing food in the kitchen, managers managing staff in a restaurant, bussers and servers handling tables, and bartenders serving customers drinks. Each employee represents one cog in a very important machine. Better-trained employees mean better service for your customers, which can significantly increase your profits through increased sales not to mention happier customers mean fewer product returns or service complaints at the end of the day.
When it comes to a restaurant business, many factors affect the cost of running it. Fixed costs, which do not change with the company's activity, include rent, utilities, food and labor costs. To be certain, labor costs are the most expensive expenses a restaurant has so ensuring that you have good management and control over the expenses is crucial.
The labor cost for a restaurant is the amount of money it spends on its employees. It refers to all the expenses of maintaining a restaurant's workforce. For example, it typically includes wages, bonuses, payroll taxes, healthcare, training, and travel for service staff.
One can broadly break down the labor cost into two segments- direct labor and indirect labor. Direct labor is the wages for the employees who work directly with the food, such as chefs and line cooks. Indirect labor is the cost of the wages for the employees who do not work directly with the food, such as dishwashers, servers, and bussers.
It is important to manage these fixed expenses with tact and precision. Ultimately, how and where you spend your money determines how much you can minimize these costs. As it is, the United States Bureau of Labor Statistics suggests that restaurant wages have risen at more than twice the rate of inflation over the last five years, which has led to only an increase in labor costs.
It's important to calculate the total restaurant labor cost percentage as opposed to the total sales annually to get a correct picture of the profitability of your business.