Hitting Your Labor Target but Still Broke? Here’s Why
This is the scenario that drives restaurant operators crazy.
Your labor percentage is right where it should be. 29%. 30%. Whatever your target is—you’re hitting it. Week after week, the reports look fine.
Your accountant isn’t worried. Your P&L shows a profit. Everything is supposedly working.
So why is there never as much cash in the bank as there should be?
Why are you still checking the balance before every payroll? Why does “profitable” not feel profitable?
Why This Feels Maddening
It feels maddening because you’re doing what you’re told to do.
You’re tracking numbers. You’re watching labor. You’re hitting the target.
And yet—cash still feels tight.
That gap between what the report says and what you experience is real. Something is happening that standard metrics weren’t designed to catch.
Labor Percentage Is a Ratio. Cash Is Reality.
Labor percentage is an accounting construct. It’s a ratio:
Labor dollars ÷ Sales dollars
It tells you what happened after the week is over.
Cash is what’s actually in your bank account. It’s what pays bills, payroll, repairs, vendors—and your own life.
Those two can tell completely different stories.
You can hit your labor percentage target and still bleed cash because:
Labor % is an average across days that behave differently.
If you’re heavy on slow days and light on busy days, the weekly average can look fine while the week itself is misbuilt.The cash leak happens on slow days.
Slow-day hours don’t just “count less.” They cost the same. The bank account doesn’t care that Friday “balanced it out.”
How Small Overstaffing Compounds
Let’s make it concrete.
Say you’re 3 hours heavy on Monday, 4 hours heavy on Tuesday, and 2 hours heavy on Wednesday.
That’s 9 extra hours on slow days.
At $16/hour all in, that’s:
9 × $16 = $144/week
$144 × 52 = $7,488/year
That’s not a rounding error. That’s real money leaving your account to pay for hours that didn’t need to be scheduled.
And your labor % might still look fine—because you were slightly light on Friday and Saturday and the average evened out.
The percentage says “on target.” The bank account says otherwise.
Why “On Target” Doesn’t Mean “Right”
Being on target just means you matched a number. It doesn’t mean the number is correct.
Where did your labor target come from?
If it came from an industry benchmark, it wasn’t built for your operation.
If it came from “what we’ve always done,” it may be based on conditions that no longer apply.
If it came from someone’s spreadsheet from years ago, it’s probably stale.
Hitting a wrong target with precision doesn’t make it right. It just means you’re consistently wrong.
The question isn’t “Am I hitting the target?”
The question is “Is the target correct for how my restaurant runs today?”
The Blind Spot: Hours vs. Dollars
Most operators think about labor in dollars because it’s an expense on the P&L.
But you don’t schedule dollars. You schedule hours.
When you write the schedule, you are making a cash commitment. Those hours will get paid whether sales hit projections or not.
The percentage shows up later. After the cash is gone.
If you’re making decisions in hours and evaluating in percentages, you’re missing the direct connection.
What to Track Alongside Labor %
Labor % isn’t useless. It’s just not sufficient.
Add these:
Scheduled hours vs. target hours by day
Before the week starts, do you have a target for each day? Can you compare what you scheduled against it?Hours per dollar of sales (by day, not week)
After the week, look at each day individually. The weekly average hides where the waste lives.The slow-day vs. busy-day gap
If slow days are consistently far less productive, that’s where the cash leak is.
If your P&L looks fine but cash isn’t building, the issue is usually hiding in the schedule—specifically in the hours you commit on slow days.
And that leads to the next question operators get stuck on:
Am I actually overstaffed—and how do I prove it?
Read this next → Are You Overstaffed? How Restaurant Operators Can Finally Prove It
