Prime cost combines food (and beverage) cost with labor cost — the two biggest controllable expenses. As a percentage of sales, it’s the single best gauge of restaurant operating health.
The example
$9k food + $10.5k labor on $35k.
| A | B | |
|---|---|---|
| 1 | Item | Value |
| 2 | Food + labor | 19500 |
| 3 | Sales | 35000 → 55.7% |
The formula
The formula:
How it works
How it works:
- Add food (and beverage) cost and total labor cost — the controllable big two.
- Divide by total sales for prime cost as a percentage.
- A common target is ~60% or below for full-service; lower leaves room for rent, utilities, and profit.
- Because both halves are controllable, prime cost is where managers focus to protect margin.
Why prime cost beats either half alone: a kitchen can hit a great food cost by over-working a thin crew (high labor) or vice versa. Prime cost catches that trade-off — it’s the number that can’t be gamed by shifting cost from one bucket to the other. Track it weekly against a target.
Try it: interactive demo
Food cost, labor cost, sales.
Variations
Prime cost dollars
The total:
Remaining for overhead
After prime:
With beverage
Full cost of goods:
Pitfalls & errors
Include beverage and benefits. Use full cost of goods and fully-loaded labor.
One period. All three inputs must cover the same window.
Target varies. ~60% suits full-service; QSR and bars differ — set your own benchmark.
Practice workbook
Frequently asked questions
How do I calculate prime cost in Excel?
Why is prime cost important?
What should be included?
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