Gross wages are not what labor costs
The number on the payroll summary is the starting point. The employer share of FICA is 7.65 percent before unemployment insurance and workers compensation, and hospitality carries a higher comp rate than most industries.
Schedule against loaded labor, not gross wages, or every week runs 15 percent hotter than the sheet says.
- /Employer Social Security and Medicare: 7.65 percent of wages
- /Federal and state unemployment insurance: varies by state and claims history
- /Workers compensation: rated per 100 dollars of payroll by class code
- /Benefits, paid leave, and payroll processing fees
Prime cost is the number that gets underwritten
Lenders do not evaluate labor in isolation. They read prime cost, food plus labor, because it captures the two controllable lines that decide whether a payment is serviceable.
Prime cost above 70 percent means rent, utilities, marketing, and debt service are all competing for less than 30 cents on the dollar. That is where an approval turns into a decline or a shorter term.
Fixing labor without cutting service
Labor percentage moves on 2 levers, and cutting hours is the worse of the two. Sales per labor hour rises faster from prep consolidation, station cross-training, and moving low value tasks off peak than it does from sending a server home at 7.
Equipment does the same work. A combi oven or a dishwasher that removes 15 labor hours a week pays for its own financing at most wage levels, which is exactly the math to run before you sign for it.
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Restaurant labor cost and prime cost calculator
Gross wages understate what a schedule costs you. Load payroll taxes, unemployment insurance, and workers compensation on top, then read labor next to food as one prime cost number, because that is the number a lender underwrites.
7.65 percent FICA plus unemployment, workers comp, and benefits. 14 to 20 percent is typical.
Food and beverage product for the same period.
Prime cost above 70 percent is the single most common reason a profitable-looking restaurant cannot service new debt. Fix the schedule and the plate cost before you add a payment.
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We email you a copy of these figures. They are estimates for planning, not an offer, a quote, or a preapproval of any kind.
The arithmetic
Loaded labor = gross payroll x (1 + burden %). Labor % = loaded labor / sales x 100. Prime cost % = labor % + food cost %.
Sources
- 1Employer payroll tax: 6.2 percent Social Security plus 1.45 percent MedicareInternal Revenue Service, Publication 15. Employer FICA share, before federal and state unemployment insurance and workers compensation, which is why loaded labor runs above gross wages.
- 2Average hourly earnings, food services and drinking places: $21.95U.S. Bureau of Labor Statistics. Current Employment Statistics series CEU7072200003, all employees, average hourly earnings.
- 3Prime cost target: food plus labor at 55 to 65 percent of salesFoody Finance modeled assumption (modeled assumption, not a published figure). A planning band drawn from full service and limited service operating norms. Quick service and bar-forward concepts sit at the low end, full service at the high end. It is a benchmark, not a published statistic.
Estimates, not offers: Amounts, terms, and funding times are estimates based on programs commonly available in food service. Actual terms vary by program, lender underwriting, time in business, revenue, and credit profile. Nothing here is an offer of credit or a guarantee of approval.