It's not even just labor, it is the fully burdened labor (i.e., all costs of that labor, which is well beyond the wage/salary an employee sees...the true cost of labor, i.e., a $20/hr wage is actually a $25-28 expense), multiplied by the number of hours and number of people working during those hours that becomes a cumulative overhead cost that is added to the wholesale and other general overhead costs that the item margin must cover in addition to providing a certain profit.
Then there is also something like spoilage that comes into play in an example like your "fried chicken snack", which may not sell within FDA food regulation timeline and temperature, and therefore must be thrown away...a total loss.
But it's not just a total loss; not only did you then not make a profit on the sale of the "fried chicken snack", you also are in the hole to the tune of the wholesale cost of the chicken snack, e.g., $4, the labor and other indirect and overhead costs in addition to the opportunity cost, e.g., $1.
So a $1 earnings from a $6 "fried chicken snack" may turn into a $4 loss of the chicken at wholesale price and an additional loss of $1 for labor, overhead, etc. So now you are $5 in the hole when you had hoped to be $1 in the black, and now have to sell 6x$6 "fried chicken snacks" just to break even and finally make that $1 you had previously hoped for.
That's just a very simplified version of just something as simple as "fried chicken snacks". It gets way more complicated from there.
