Why prime cost is the number that matters
Rent is fixed. Insurance is fixed. Food and labor are the two big costs you can actually move this week — that’s why they’re called prime costs, and why seasoned operators track them together as one percentage:
prime cost % = (COGS + total labor) ÷ total sales × 100
Keep the periods consistent: this week’s purchases, this week’s payroll, this week’s sales. Mixing a month of labor with a week of sales is the fastest way to a meaningless number.
Benchmarks
| Concept | Healthy prime cost |
|---|---|
| Full service | 55–60% of sales |
| Quick service / fast casual | 50–55% of sales |
| Bars & pubs | 50–58% of sales |
| Danger zone (any concept) | 65%+ |
If your prime cost is too high
- Split the problem first. The COGS % and labor % tiles above tell you which side is off — the fixes are completely different.
- COGS high: re-cost your top 10 sellers with the food cost calculator, check portioning, audit invoice prices against quotes, and tighten inventory to cut waste.
- Labor high: match schedules to sales by daypart, watch overtime creep, and cross-train so slow shifts run leaner.
- Both fine but sales soft: the ratio can lie when revenue dips — the cure is traffic and menu pricing, not cutting cooks.
Frequently asked questions
What is prime cost in a restaurant?
Prime cost is your cost of goods sold (food and beverage) plus total labor cost — wages, salaries, payroll taxes, and benefits — expressed in dollars and as a percentage of sales. It’s the share of every sales dollar you actually control week to week, which is why operators watch it more closely than any other number.
What is a good prime cost percentage?
A common target for full-service restaurants is 55–60% of sales, and under 60% is the classic rule of thumb. Quick-service concepts often run 50–55%. Above 65%, it’s very difficult to be profitable after rent, utilities, and everything else.
What counts as labor cost in prime cost?
Everything you spend on people: hourly wages, salaries (including kitchen and management), overtime, payroll taxes, workers’ comp, and benefits. Leaving out taxes and benefits is the most common mistake and understates labor by 10–15%.
How often should I calculate prime cost?
Weekly. Monthly numbers hide problems for too long — a bad week of overscheduling or a supplier price jump should show up while you can still react to it. Run it every week with the same definitions and watch the trend, not just the level.