In short
- Prime cost = cost of goods sold + total labour cost.
- Many operators aim for roughly 60% to 65% of sales or lower.
- Track it weekly. Fixes in this number are the fastest wins.
Food cost alone can look fine while the restaurant loses money, because a kitchen can hit its food target by overstaffing. Prime cost puts the two biggest costs on one line, so you cannot improve one by quietly worsening the other.
The formula
prime cost % = prime cost ÷ net sales × 100
Cost of goods sold includes food and, if you sell them, beverages. Total labour includes wages, payroll taxes, benefits and, ideally, the owner's pay if the owner works the line.
Worked example
| Line | Amount | % of sales |
|---|---|---|
| Net sales | 50,000 | 100% |
| Food cost | 15,000 | 30% |
| Total labour | 16,000 | 32% |
| Prime cost | 31,000 | 62% |
What is left, 38% of sales, has to cover rent, utilities, insurance, marketing, repairs and profit.
What is a good number?
A common rule of thumb says around 60% to 65% of sales, with lower being better. Quick-service tends to run lower, and full-service with high labour tends to run higher. Treat it as a range to test against your own numbers, not as a verdict.
Why weekly matters
Monthly accounts arrive three weeks late. Prime cost can be worked out every week from the stock count, the purchases and the payroll. If it moves two points, you want to know in days.
Levers
- Food side: correct recipe costs, portion control, supplier prices, waste.
- Labour side: schedule against forecast sales, cross-train, cut idle hours at the edges of the day.
- Sales side: a higher average check lowers both percentages at once.
Questions
Is prime cost the same as food cost?
No. Food cost counts ingredients only. Prime cost adds all labour.
Does prime cost include rent?
No. Rent and other overheads sit below prime cost.
