What Is Prime Cost? The Number That Tells You If Your Restaurant Works
If you only track one number in your restaurant, track prime cost. Food cost percentage gets all the attention, but it only tells half the story. A kitchen can run a beautiful 28% food cost and still lose money every week because labor is quietly eating the rest of the margin.
The formula
Prime cost = COGS (food + beverage) + total labor (wages, taxes, and benefits)
Divide that by total sales for the same period and you get prime cost percentage. Most healthy full-service operations land between 55% and 62%. Quick service can run lower. If you're north of 65%, the business is working for your vendors and your payroll company — not for you.
Why it beats food cost alone
Food cost and labor trade against each other constantly. Buy pre-cut produce and your food cost rises while your labor falls. Break down whole proteins in-house and the opposite happens. Judging either number in isolation punishes good decisions. Prime cost captures the trade-off in one figure, which is why banks, buyers, and experienced operators all look at it first.
How to actually track it
- Use the same period for everything. Weekly is the sweet spot — monthly hides problems for too long.
- Include all labor. Payroll taxes, workers' comp, and benefits are real costs. Salaried managers count too.
- Use purchases adjusted for inventory, not just what you spent. A big Friday order isn't a cost until you use it.
Want to see where you stand right now? Run your numbers through our free prime cost calculator — it takes about thirty seconds. If labor is the piece that looks scary, the labor cost percentage calculator breaks that side down on its own.
What to do if the number is bad
Don't panic-cut. Slashing hours on a Tuesday feels productive and usually costs you more in service quality than it saves in payroll. Start by finding out which side is out of line — COGS or labor — then work the biggest line items first. That's exactly the kind of ground-level work we do with partners, and it's why we built our tools around the numbers operators actually use on the line.