Running a Restaurant/labor costs


We have a deli within a health food store. We are wondering what our labor and food costs should be? Our deli does hot food, sandwiches, homemade soups, salad bar etc...

Thank you for your help

Hi Allison,

When we owned our restaurant, our goal was to keep payroll under 20% of revenues and our food costs under 35%. So if your sales for the month were $50,000 then we'd try to keep our labor for the month under $10,000 and our food costs under $17,500.

Food and labor costs will vary according to each operation. Some restaurants need more labor than others, some food costs are higher than other depending on their ingredients.

We tried to keep our labor costs lower by not necessarily paying more than anyone else in town, since every dollar in payroll ended up being $2 by the time you factored in insurance, taxes, etc. so we'd instead attract and retain our employees by offering nice perks (ex: free shift meals) and making it a fun environment to work.

To keep food costs down, we'd only carry an ingredient if it could be used in multiple menu items. You also need to measure everything for consistency and portion control and do everything you can to cut down on waste.

One of our most effective ways to be profitable was to set up monthly budgets with targets for all our expenses based on our projected sales. We operated under an open books policy recommended by "The Great Game of Business" and had a profit sharing bonus system for our employees.

Then our employees understood how we made money and they had skin in the game and felt empowered like they were owners and would all do their part to keep costs down to get a bigger bonus.

We felt like whatever money we paid out in bonuses, we more than made up with higher profits.

Hope this helps,

Running a Restaurant

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Brian Ash


I can answer any type of question related to the restaurant industry. I started and owned my own restaurant for 15 years. I now own a web based business selling a piece of kitchen equipment (The Drain Strainer) that I invented in my restaurant as well as own my own marketing agency (Calibrate Marketing). If you have questions about running or marketing your restaurant, then feel free to ask me anything.


I started and have owned three restaurants for over 15 years. We started our restaurants from scratch and learned it all along the way. My duties included financials, marketing, hiring (everything except cooking). Before owning my restaurants, I was an engineer. My main job title is "problem solver". If you've got a problem and you're stumped on how to proceed, then even if I don't know the right answer, I can at least point you in the right direction.

Rotary Club of Springfield MO, American Cancer Society Action Network, Springfield MO Chamber of Commerce

Bachelors degree in Computer Science and Master's Degree in Engineering Managment from the University of Missouri - Science and Technology.

Awards and Honors
Awarded 2008 Restaurateur of The Year by the MO Restaurant Association.

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