Labour Cost: What’s Fair in a £1.5m Turnover Restaurant?

[polaroid]

Hi all,
I’m Charles, currently planning to open a premium casual pizzeria in an upmarket area of London. The space will seat around 30 guests, with an expected daily average of 100 covers. Based on my projections, annual turnover should be in the region of £1.5 million open for lunch and dinner 7 days a week.

I’d love to hear your thoughts on a couple of key questions:

1. What salary would be appropriate to attract a solid, experienced General Manager for this type of operation?
2. With rising costs across the board, what is now considered a healthy or realistic labour cost percentage?

I’m trying to strike the right balance between building a strong team and keeping the model sustainable from day one.

Appreciate any insights from those who have been through it—thanks in advance!

Best,
Charles

 

[Mark T Jones]

I know a number of restaurant consultants who could really drill into this with you. I'm happy to put you in contact.

Although in reality the trade press (eg the Caterer) should give a good indication of going wage for an experienced GM. I'm sure you know that recruiting and retaining quality staff is increasingly difficult

 

[FreddyG]

1. Depends on profit.
2. How long is a piece of string?

As @Mark T Jones states, getting good people is damn hard, particularly in London.

What worries me is what you have not mentioned - start capital, experience, who is to be the chef - stuff like that!

 

[Mark T Jones]

I'll add here, one you get into trade media, you will find all manner of generic norms on margins etc - they are useful for first round research, but you really want to get deeper and more specific to product, area, demographic etc.

It's all out there once you start digging...

 

[fisicx]

@polaroid

Is this you:

your marketing recommendations ?

Based in London. Type of business: pizzeria Any marketing companies recommendations ?

www.ukbusinessforums.co.uk

 

[HFE Signs]

It might stand a better chance of success if you are the manager for the first 24 months, that seems to be how a lot of businesses start off, this also gives you the opportunity to fully understand the business and iron out any inefficiencies

 

[Chris Ashdown]

What do you estimate the profit will be, that will give you a idea of how much you can afford to pay a manager

 

[HFE Signs]

What do you estimate the profit will be, that will give you a idea of how much you can afford to pay a manager

Again, you'll learn this once you have got the business off the ground - I'd strongly suggest forgetting the manager for the early stages

 

[Paul Kelly ICHYB]

I've been mulling over this:

What salary would be appropriate to attract a solid, experienced General Manager for this type of operation?

The one relevant to several parameters - venue location, competition & market position, job specification, experience, working hours, overal package etc.

With rising costs across the board, what is now considered a healthy or realistic labour cost percentage?

42 (from HHGTTG)

A self-service restaurant will have fewer front-of-house (and probably kitchen) staff than a Michelin-starred venue.

 

[Gecko001]

It depends on the type of restaurant. The OP describes it as a "premium casual pizzeria in an upmarket area of London.

The upmarket area of London is self-explanatory, but "premium" could mean a pizzeria where the pizzas are cooked in the traditional Italian way with only the best quality fresh ingredients, a range of quality foods and wine. Also, "casual" could mean no dress code, the style of the decor, no table cloths on the tables, or an informal serving manner.

 

[polaroid]

It depends on the type of restaurant. The OP describes it as a "premium casual pizzeria in an upmarket area of London.

The upmarket area of London is self-explanatory, but "premium" could mean a pizzeria where the pizzas are cooked in the traditional Italian way with only the best quality fresh ingredients, a range of quality foods and wine. Also, "casual" could mean no dress code, the style of the decor, no table cloths on the tables, or an informal serving manner.

Yes, that pretty much sums it up - really good quality pizza served in a beautiful, elegant space, in a strong, high-spend area. Full-service restaurant. Great wine list, proper hospitality, somewhere people can come for a proper meal. The vibe is elevated but still warm and welcoming. This pretty much describes.


It used to be 25%-30% for labour a few years ago — I keep hearing 35%-40% is the new normal. Is that actually true?

Because that feels high, but maybe it's just where things are now. We’ve seen wages go up, plus payroll taxes, holiday pay, NI — all of that adds up. Full-service restaurants especially must be feeling it. I wonder if anyone’s still managing to keep it under 30%, or if 35%to 40% is just what you have to work with now.

 

[fisicx]

Your initial staffing and service costs are likely to be much higher until the restaurant becomes established.

You really need to be there managing the restaurant. You need to be the one creating the vibe, atmosphere and ambiance. A paid manager is unlikely to have the passion to build the business. For them it’s just a job.

 

[Mark T Jones]

Yes, that pretty much sums it up - really good quality pizza served in a beautiful, elegant space, in a strong, high-spend area. Full-service restaurant. Great wine list, proper hospitality, somewhere people can come for a proper meal. The vibe is elevated but still warm and welcoming. This pretty much describes.


It used to be 25%-30% for labour a few years ago — I keep hearing 35%-40% is the new normal. Is that actually true?

Because that feels high, but maybe it's just where things are now. We’ve seen wages go up, plus payroll taxes, holiday pay, NI — all of that adds up. Full-service restaurants especially must be feeling it. I wonder if anyone’s still managing to keep it under 30%, or if 35%to 40% is just what you have to work with now.

Here are some core costs which have risen way ahead of inflation in the last 3 years:

- wages (higher wages have risen in proportion to minimum wage)

- Employer's NI

- Utilities- down from their crazy peak, but still way above 3 years ago

- Ingredients/ Consumables

But you still need to research in context of product and geography

Like others, I'm wondering why you are looking to employ a GM as a start up?

 

[Porky]

A quick look up using Ai tells you that the salary range for a Resturant GM in London looks like this:-

• Entry-level or smaller restaurants: Salaries may start around £31,000.
  
  
• Established branded restaurants: Expect salaries around £43,900 plus bonuses.
  
  
• Premium or stylish restaurants: Salaries can range from £45,000 to £55,000.
  
  
• Fine dining or high-profile restaurants: Salaries can reach £60,000 to £70,000 or even higher.
  
  
• Premium casual dining: Senior managers in this setting could earn £45,000 to £50,000.

So a wide range BUT elephant in the room here: Why do you want to put in an outside GM that a) unlikely to share your passion b) could potentially sink your business before its started and c) cost you a massive chunk of your NET taking which will be materially disproportionate to income as the resturant gets off the ground and takes a while to establish.

I have no experience of resturants but loads of experience regarding employing staff and frankly imo employing anyone is a royal.pain in the ars@ finding good people a real challenge. My view is if you want this to work you need to be fully hands on especially so during start up/ establishing phase

Good luck

 

[Chris Ashdown]

Just as a matter of interest, what percentage of the estimated turnover is used for Rent and Rates in a prime location

 

[Mark T Jones]

Just as a matter of interest, what percentage of the estimated turnover is used for Rent and Rates in a prime location

Historically there was a VERY rough matrix of 25% ingredients/product, 25% wages (usually didn't include a decent wage for the owner), 25% overheads and 25% bottom line.


That's pretty much blown out of the water now - youll be doing well to make 10% net. I've no idea if there is a new normal, or if the market is just waiting to settle.

 

[polaroid]

rent and rates are 10% of revenue before costs like labour, food, etc., but after VAT

 

[fisicx]

Makes no difference. You need to be the manager running the restaurant.

Right now you have zero revenue. It could take years before you see a profit.

 

[Paul Kelly ICHYB]

really good quality pizza served in a beautiful, elegant space, in a strong, high-spend area. Full-service restaurant. Great wine list

What is your USP?

As someone who frequents central London (and other parts!) a bit, I am intrigued about how you marry pizza (a traditionally cheap, fast food) with high cost etc. I know similar has been done, but it makes a difficult job even more difficult!

 

[frankie007]

Pizza places are 2 a penny in London. It has always been hard in this industry but it is really hard at the moment. all the people I know are trying to get rid of their brick and mortar food places. For really good, experienced operators 10 - 15 % net of the turnover is a result.