Menu Pricing vs Staffing Costs: Finding the Balance

Finance
Hospitality
By Louise

Every hospitality business owner knows the struggle. You need to keep prices competitive to attract customers. But you also need to pay your staff enough to keep them.

These two goals are in constant tension. Get the balance wrong, and your margins suffer — or your team walks.

Understand Your Labour Cost Percentage

The first step is knowing your numbers. Labour cost percentage is the proportion of your revenue that goes to staff wages. If you earn £10,000 in a week and pay £3,000 in wages, your labour cost is 30 per cent.

Industry benchmarks vary, but most hospitality businesses aim for 25 to 35 per cent. If yours is higher, your pricing might be too low or your staffing too generous. If it is lower, you might be understaffed and hurting service.

Many businesses set menu prices based on food cost alone. They calculate the cost of ingredients, apply a markup, and call it done. But labour is a significant cost too.

When pricing a dish, consider how much staff time it requires. A complex dish that needs a skilled chef to prepare costs more in labour than a simple dish. Your pricing should reflect that.

Adjust Staffing to Match Demand

Not every hour of the day needs the same number of staff. Your lunch service might be busy, your mid-afternoon quiet, and your dinner service packed again.

Staff to match the curve, not the peak. Use a split rota or part-time shifts to cover busy periods without paying staff to stand around during quiet ones. Rota software with forecasting helps you match staffing to demand precisely.

Review Regularly

Prices and costs change. The minimum wage goes up. Ingredient prices fluctuate. Customer spending habits shift.

Review your menu pricing and staffing levels at least quarterly. If your labour costs have crept up, it might be time to adjust your prices or rethink your staffing structure.

Communicate with Your Team

Your staff understand that the business needs to make money. If you explain why certain decisions are made — why shifts are quiet, why prices have gone up — they are more likely to accept them.

Transparency builds trust. And a team that trusts you will work with you to keep the business healthy.

The Bottom Line

Menu pricing and staffing costs are connected. You cannot manage one without the other. Know your numbers, review them regularly, and keep your team in the loop.