Food and Labor Costs 101 | Pizza Expo 2026 Education Exclusive

Control prime costs to achieve your profit goals

 

Sometimes success really is a matter of dollars and cents. In the pizza business, most of the costs are fixed and only a few are controllable. The main controllable costs are food and labor. These two areas likely make up 50% to 60% of overall costs; understanding how to manage those numbers is important to operators’ success. Learn how to calculate, forecast and determine your goals while holding managers accountable.

Calculating Labor Cost

Labor cost always feels like it is rising. If you set a goal cost and understand the necessary steps to take when writing your schedule, you can position yourself to have a good number that helps your bottom line. What is a “good” labor number? I shoot for a 55% prime cost – meaning labor and food cost total 55%.

Currently, the labor goal for our company is 25.5%. How do we determine that goal? At a 55% prime cost, I know the rest of my fixed costs are 35%, which leaves a profit margin of 10%. Many operators think the profit margin should be higher, and I won’t argue that it could be higher. However, 10% works for our company, as we invest everything over 10% back into the business. Some years, we profit even less and invest more into the business – especially when we are in growth mode. Once you figure out your fixed costs and how much profit you want left over, you can determine both labor and your food cost goals.

Once you have both goals, you should post them in the office for all managers to see. This will go a long way toward holding them accountable. The next step is to write a realistic schedule. By “realistic,” I mean that if every week you are calling in more help on certain days, then you should schedule those hours. Try and write a schedule that is close to what you really need.

Once you write a realistic schedule, you will want more than one person looking at it. You should have all your managers look it over for errors. It is important to start your schedule early in the week. Start writing it on Monday and Tuesday, have others review it on Wednesday and get it posted by Thursday.

If you do not have it finished by Thursday, you run into writing it on the weekend with very little time to analyze or adjust. You want to take a good look at start and end times while writing the schedule. It makes little sense to have everyone starting and ending at the same time.

Once the schedule is complete, you’ll add up each person’s wage for the week. Then, you will add up wages for the whole schedule. Then, add 14% on top of the number to include estimated payroll wages. That is your true predicted labor number. You’ll predict weekly sales based on the previous four weeks of sales. Adjust the prediction for any special events, such as Halloween, the Super Bowl, etc.

Once you have all that in place, you are ready to get your labor number. The formula is:

Total Wages: Wages of all employees
   and yourself, plus 14% payroll wages

Projected Labor: Total Wages / Projected Sales

Projected Wages: $4,050

Projected Sales: $15,000

Projected Labor: 27%

Labor Goal: 25.5% (or $3,825)

Labor to Cut: $4,050 – $3,825 = $225

   Labor to Cut / 7 Days = $32.14 per day

   $13 per hour employee + 14% payroll = $14.82

   $32.14 / $14.82 = 2.17 hours

So, you need to cut two hours per day off your schedule.

I start on Monday and work through each day, cutting the two hours necessary to meet my labor goal. If I cannot cut two hours on one day, I roll over to the next day. By the end of the week, I have cut the 14 hours of labor.

Hard and fast rules for how to cut: Stagger start and end times, cut whole hours into half hours, maybe there’s a whole shift you can cut. Do not tell everyone in the store you are cutting hours for labor; you will scare everyone. Add to the bottom of every schedule something like, “Scheduled Hours Are Based on Performance.”

Calculating Food Cost

Food costs start with inventory. Having a good ending inventory each Sunday helps to meet the food cost goal. Building a count sheet that makes inventory go quickly is key. It is OK to list items more than once. I like having my count sheets broken down by where each product lives – meaning we count the walk-in, and what’s listed in there also might be listed in the makeline section. Having a fast way to count helps make the inventory process bearable. Having the same person counting each Sunday is a good rule of thumb, if possible. Save the count sheets each week. We count everything and include everything in our food cost number. That includes all dry goods and cleaning supplies. 

Once you have the inventory number, this is how you calculate your food cost each week:

Starting Inventory: $6,000 + $3,000 invoices = $9,000

Ending Inventory: $4,000

Food Used: $9,000 – $4,000  = $5,000 

Food Cost: $5,000 food used / $15,000 net sales = 30%

Measures to Maintain Food Cost

Pricing your menu correctly is important. We use a software platform to price our menu based on costs, and it has saved us thousands of dollars. Knowing the cost of your menu items is key to this process.

When someone starts at a pizzeria, they make the pizza the way they think it should look. Training is important to your food cost; you must train new employees to make items your way:

• Use scales to train each new team member.
• Have a booklet or charts about how to make every single item to spec.
• Have the oven-tender give feedback on every pizza to keep team members engaged. (We take the loudest employee and train them on the oven.)

Talking about food cost on a regular basis in your pizzeria lets everyone know what’s being watched. Set boundaries about what employee meals are and what’s allowed.

Once you understand how labor and food costs work, it’s your job to teach your team, starting with your managers. Having a weekly meeting to discuss the numbers gets results. We have a phone meeting with our GMs each Tuesday at 8 p.m. We also incentivize meeting labor and food cost goals through quarterly bonuses.

Getting buy-in from your team is vital. At the end of the day, dollars and cents can’t just matter to you, they also need to matter to your team.

Nick Bogacz is the founder and president of Caliente Pizza & Draft House in Pittsburgh.  Instagram: @caliente_pizza

 

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