What's a Good Labour Cost Percentage? Hospitality Benchmarks (and Why the Average Isn't Your Target)

Once you've worked out your labour cost percentage, the very next question is the obvious one: is that good? It's a fair thing to ask, and there are real industry benchmarks worth knowing. But the honest answer is that the “right” number for your venue depends on your format, your service model and your trade — and chasing someone else's average can quietly do more harm than good. Spoiler alert: average in hospitality is actually very poor, and will often mean you're not profitable at all!

Here's where the benchmarks sit, and how to think about your own number.

The benchmarks

As a general rule, a profitable hospitality venue needs to keep labour between 25% and 35% of sales.

Within that, it varies by the type of business;

• Quick service and Cafe's: 20–25%
• Casual Dining: 25–30%
• Pubs and Bars: 22% - 27%
• Fine dining / full table service: 27–32%

Labour is also one half of your prime cost (labour + cost of goods). A common rule of thumb is that prime cost should sit at a maximum of 60% of sales, with labour and COGS each making up roughly half of that. If your labour is running at 25% in your burger store, then the maximum your COGS should be is 35%. If the stock cost in your fine dining restaurant is running at 22%, then you've got a maximum of 38% to spend on labour.

Really high-performing hospitality groups we see across Australia and New Zealand — the ones that lean heavily into technology and have highly capable teams — are often able to run as low as 55% combined for labour and cost of goods.

Why the hospitality industry average isn't your target

A benchmark is a sense-check, not a goal. A fine-dining room running at 33% might be in great shape, because the service model justifies it and the menu prices carry it. A quick-service venue at 33% has a problem. The number only means something next to your format, your average spend, and your margins.

Two traps we see:

The first is cutting labour to hit a benchmark and ruining service — fewer staff on a busy Saturday saves a percentage of labour cost and loses you covers, tips and regulars. That's not a good result.

The second is the opposite: feeling fine because you're “within range” when your sites are wildly inconsistent. A group averaging 29% might have one venue at 24% and another at 36%, and the average hides the venue that's actually bleeding.

The number that matters more than the benchmark

For multi-venue operators, the most useful comparison usually isn't you vs the industry, it's your venues against each other, measured the same way.

When all your sites calculate labour cost in the same way, the outliers jump out. Why is this venue 6 percent higher than its sister site on similar revenue? Is it roster discipline, a different service model, or just a manager building schedules off a copy of last week's roster? Those are answerable questions, but only if the numbers are genuinely comparable. If each site defines labour cost slightly differently, the comparison is noise.

This does come with a caveat: the physical layout, the trend of customer demand, and the sales mix will also affect your overall labour cost. We had two venues serving an identical product 500m apart in the same city, and mainly because one was split across two levels, the labour cost was always different. In the end, we decided it was best for each venue to focus on its own performance rather than taking shortcuts and trying to match the other venue's labour cost.

What good looks like

Strong operators treat benchmarks as a guardrail or a general piece of knowledge, and then focus on two things: keeping each venue on a path of consistent improvement with numbers that are accurate and well communicated, and monitoring this daily and weekly rather than monthly. They know their healthy labour range and target, they know which of their sites are running on point, and they can see why.

That's much easier when labour cost and revenue sit in the same view, calculated identically across every venue. Then “are we good?” stops being a once-a-month guess and becomes a question you can answer at a glance — for any site, today.

How technology fits in

Loaded brings each venue's labour and revenue into one connected, live view, calculated the same way everywhere. That means you can compare your sites on a like-for-like basis, spot the outlier that's dragging the group average, and check it against your format's healthy range — without exporting payroll from one system and sales from another and hoping you've lined them up correctly.

Next steps

Pull your labour cost percentage per venue, line them up against the range for your format, and look at the spread between your own sites before you look at the industry. The gap between your best and worst venue is usually a bigger opportunity than the gap to the benchmark.

Want to compare your venues like-for-like in one view? Book a free, no-pressure 30-minute Loaded demo.

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Frequently asked questions

What is a good labour cost percentage for a restaurant?

Most hospitality venues aim for 25–35% of sales, but the right target depends on format: quick service and cafes around 20–25%, casual dining 25–30%, and fine dining 27–32%. The more useful question is whether you're beating your own past performance and staying consistent across sites — the industry average is often unfortunately a sign of a venue that isn't actually profitable.

Is 30% a good labour cost percentage?

For a casual-dining restaurant or bar, 30% is a reasonable place to be. For a quick-service venue or cafe it's high, and for fine dining it can be perfectly healthy. A single number means little without your venue style, your average spend and your stock margins next to it.

How does labour cost fit into prime cost?

Labour is one half of prime cost; cost of goods is the other. A common rule of thumb is that prime cost should sit at a maximum of around 60% of sales. So the two move together — if your stock cost is low, you've got more room for labour, and vice versa. The best-run groups we see in Australia and New Zealand push the combined figure as low as 55%.

Should I compare my labour cost to the industry average or to my other venues?

Your other venues, measured the same way, is almost always the more useful comparison — as long as you account for differences in layout, demand and sales mix. A group can sit bang on the industry average while quietly carrying one site that's bleeding. Comparing like-for-like across your own sites surfaces the outlier the average hides.

How often should I review my labour cost percentage?

Daily and weekly per site, not monthly across the group. A monthly average smooths over the venue and the week where the problem actually lives, and by the time you see it the labour's already been paid.

Labour cost management series

This guide is part of Loaded's labour cost series for hospitality operators. Continue reading:

Restaurant labour cost management: the complete guide — the full framework for multi-venue operators, from the formula to the five habits that keep prime cost under control.

How to reduce labour costs in a restaurant or bar — weekly budgeting, tracking, and the five habits that cut 2–4% in unnecessary wage spend.

How to reduce labour costs without cutting service — five specific levers that bring the number down without thinning out a busy floor.

Managing labour costs across multiple venues — why labour gets harder with every venue you add, and what good looks like across a group.

Real-time labour vs revenue: why month-end is too late — the case for seeing the number while you can still act on it.