He Knew Labour to the Cent. He Had No Idea It Was Killing Him

A restaurant owner told me his labour costs were under control. I asked what percentage of revenue that was. He knew the dollar figure to the cent: forty one thousand a month. He had never turned it into a percentage, and never checked it against anything.

I did the maths in front of him. Thirty eight percent of revenue. For a full service restaurant, anything north of thirty five is a business slowly bleeding out.

He didn’t want to hear it. “Under control” felt true. Comparing his number to a benchmark turned a feeling he was comfortable with into a fact he wasn’t.

A benchmark doesn’t tell you anything you couldn’t have calculated yourself. It tells you what your own calculation actually means. Thirty eight percent sounds like a number. Thirty eight percent against an industry benchmark of thirty two sounds like a five figure annual leak, because that’s what it is.

Owners avoid this comparison for the same reason people avoid the scale after a long holiday. Not knowing keeps the story flexible. The moment you have a number and a benchmark side by side, the story is over.

Ask yourself: when was the last time you checked, rather than assumed, that your business really was the exception you’ve decided it is?

Find your industry’s numbers. Labour cost, cost of goods, occupancy cost, marketing spend, all as a percentage of revenue. Industry associations publish these. Accountants who specialise in your sector have them memorised. There is no excuse for not knowing where you sit. Only reluctance.

The restaurant owner cut two casual shifts a week and renegotiated one supplier contract after seeing his number against the benchmark. Labour cost dropped to thirty three percent within two months. He still says the roster “feels the same.” It doesn’t run the same. It runs at a profit.

PS: A simple hack is to be more granular across your scheduling. You don’t have to start someone at 10am when 10:15 will do just fine. Multiply that out over all the shifts across a year and you add maybe $30k to the bottom line.