Labor cost data to decide whether

Quick answer

Labor cost data acts like a financial GPS for determining if an extra service will actually turn a profit. Many hospitality entrepreneurs shut down services that generate money, or keep running services that drain resources.

Labor cost data acts like a financial GPS for determining if an extra service will actually turn a profit. Many hospitality entrepreneurs shut down services that generate money, or keep running services that drain resources. Here's your step-by-step roadmap for making smart decisions.

What is labor cost data for services?

Labor cost data for services tracks how many staff hours you need for a specific service, and what those hours actually cost. Consider these examples:

Sunday brunch (extra kitchen and serving staff)
Hotel room service (separate delivery person)
Off-site catering (transport + setup)
Late night menu (ea competing platform until 1:00 AM)
Delivery service (delivery person + packaging)

Your goal: figure out whether the extra revenue beats the extra labor costs.

The formula for service profitability

? Basic formula:

Service profit = Service revenue - (Food cost + Extra labor costs + Other costs)

If you get a negative number, you're bleeding money on that service.

Step 1: Measure your current labor costs

Before making any decision, you need to know what staff actually costs per hour:

Gross hourly wage: what appears on the payslip
Employer contributions: add 30-35% (pension, insurance, holiday pay)
Indirect costs: training, sick leave coverage, uniforms

? Example calculation:

Chef earns €16 per hour gross

Gross wage: €16
Employer contributions (32%): €5.12
Indirect costs: €1.50

Real cost: €22.62 per hour

Step 2: Calculate the extra labor hours per service

Count exactly how much additional staff you need for that service:

? Example: Sunday brunch

Regular Sunday: 2 chefs + 3 servers (5 hours)

With brunch: 3 chefs + 5 servers (7 hours)

Ea competing platform: 1 × 7 hours = 7 hours × €22.62 = €158.34
Extra servers: 2 × 7 hours = 14 hours × €18.50 = €259.00

Total extra labor costs: €417.34

Step 3: Compare with extra revenue

Now you match the extra labor costs against what the service brings in. From analyzing actual purchasing data across different restaurant types, services often look profitable on paper but fail this crucial test.

⚠️ Important:

Don't use total revenue - calculate with the extra revenue you only get because of that service.

? Example calculation:

Sunday brunch revenue: €1,200

Regular Sunday revenue: €600

Extra revenue from brunch: €600

Extra revenue: €600
Extra food cost (30%): €180
Extra labor costs: €417.34

Result: €600 - €180 - €417.34 = €2.66 profit

When should you stop a service?

Stopping a service makes sense if:

Consistent losses: 3 months straight of negative results
High opportunity cost: your staff could earn more on other tasks
Team burnout: exhaustion creates higher sick leave and turnover
Quality decline: too many services hurt your main offerings

Alternatives to stopping

Before you quit, try these fixes first:

? Optimization options:

Raise prices: 10% higher price often means 30% better margin
Simplify menu: easier dishes need fewer labor hours
Restrict hours: only offer during peak periods
Set minimums: higher average bill per service

Include long-term impact

Some services lose money but build customer loyalty:

Delivery attracts new customers who later dine in
Brunch brings families who return for dinner
Catering generates more reservations

Calculate: how much additional revenue does the service create indirectly? Tools like KitchenNmbrs can help track these connections between services and customer behavior.

How do you make the decision? (step by step)

Gather 3 months of data

Record for each service: revenue, extra labor hours, and extra material costs. Without data, you make decisions on gut feeling, and that often goes wrong.

Calculate actual labor costs per hour

Add 30-35% employer contributions to the gross wage, plus indirect costs. Most entrepreneurs calculate too low and think services are profitable when they're actually losing money.

Make the comparison per service

Subtract the extra food cost and labor costs from the extra revenue. If the result is negative 3 months in a row, stopping is often the best option.

✨ Pro tip

Track your labor cost per service hour for 30 days before launching any new offering. Services that require more than 40% of revenue in labor costs rarely survive long-term.

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Frequently asked questions

What if a service breaks even but doesn't make a profit?

Break-even usually isn't enough. Your staff could use those hours for profitable activities, or you could give them time off to cut costs. Target at least 10-15% margin on every service.

How do I factor in indirect benefits like customers who return later?

Track what percentage of your service customers return within 3 months for other services. Count 20-30% of that revenue toward the service as indirect value.

Should I include fixed costs like rent and utilities?

Only if the service creates extra fixed costs - delivery means extra fuel costs, for example. Fixed costs that exist anyway don't count in the service decision.

How do prep cooks factor into labor calculations for new services?

Include prep time that's specific to the service - if brunch needs 2 hours of prep cook time for pancake batter and fruit cutting, add those hours at the prep cook's true hourly rate. Don't count prep that happens anyway.

When is seasonality a factor?

For seasonal services like terrace dining or Christmas menus, only count the months you offer the service. A summer terrace doesn't need 12-month profitability, but it must work for the 6 months it's open.

How do I avoid stopping a new service too quickly?

Give new services at least 3 months. The first month always costs more due to startup expenses and inefficiency. Only measure after that to see if it becomes consistently profitable.

ℹ️ This article was prepared based on official sources and professional expertise. While we strive for current and accurate information, the content may differ from the most recent regulations. Always consult the official authorities for binding standards.

Sources consulted

EU Verordening 852/2004 — Levensmiddelenhygiëne (2004) — Official source
EU Verordening 853/2004 — Hygiënevoorschriften voor levensmiddelen van dierlijke oorsprong (2004) — Official source
EU Verordening 1169/2011 — Voedselinformatie aan consumenten (2011) — Official source
NVWA — Hygiënecode voor de horeca (2024) — Official source
NVWA — Allergenen in voedsel (2024) — Official source
Codex Alimentarius — International Food Standards (2024) — Official source
FSA — Safer food, better business (HACCP) (2024) — Official source
BVL — Lebensmittelhygiene (HACCP) (2024) — Official source

Food Standards Agency (FSA) — https://www.food.gov.uk

The HACCP standards shown in this application are for informational purposes only. KitchenNmbrs does not guarantee that displayed values are current or complete. Always consult the FSA or your local authority for the latest regulations.

Written by

Jeffrey Smit

Founder & CEO of KitchenNmbrs

Jeffrey Smit built KitchenNmbrs from 8 years of hands-on experience as kitchen manager at 1NUL8 Group in Rotterdam. His mission: give every restaurant owner control over food cost.

8 years kitchen manager at 1NUL8 Group Rotterdam

Expertise: food cost management HACCP kitchen management restaurant operations food safety compliance

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