Labor cost per meal is an important measure that provides insight into both the cost of labor and productivity. It defines the cost of hours worked per meal equivalent produced. The metric is calculated by dividing your monthly labor costs by total meals produced in the month.
The goal is to capture the salary cost for those in productive pay hours (worked hours) as opposed to paid hours. Monitoring this performance indicator is vital, especially in times of today where labor costs are rising and labor shortages are common.
Organizations are having to pay more to get and keep team members. These rising labor costs have likely contributed to the gradual elevation in the labor cost per meal metric as seen in AHF Benchmarking Express stats over the last few years (see figure one). This data can be helpful as justification if you are seeing a rise in your own labor cost per meal. It also demands our attention for future planning, especially understanding that 86 jurisdictions throughout the US have already implemented or announced a rise in minimum wage in 2023. (USA Today Dec 2022)
If and when you do see a rise in your labor cost per meal, it is a signal to dig deeper into your labor costs. Foodservice operations that are struggling with labor shortages may see an increase in this metric if they are having to use a lot of overtime pay. Other premium pay instances such as retention bonus’ can cause an increase as well. Consider staffing models that use premium pay sparingly to have a positive impact on labor cost/meal.
The actual cost of labor is not the only factor that can cause a rise in the labor cost per meal benchmark. To improve the metric, turn your attention to productivity and serving models. Do you have procedures in place to enable your team to produce meals efficiently? A lower number of meal equivalents produced will negatively impact the ratio. Perform a labor analysis to ensure staffing is appropriate for your volume and hours of service. The hours your operation is open and staffed can also impact this measure. Reducing the hours of operation or switching to unstaffed models during certain hours can positively impact the overall labor cost per meal.
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Article by AHF Benchmarking Committee Member & Sponsor, Dana Fillmore, RD, Gordon Food Service