Why prime cost is the number that matters
Prime cost combines your two largest and most controllable costs — food and labour — into a single figure. Occupancy is largely fixed; you cannot renegotiate rent every week. But you can influence food and labour every single day, which is why prime cost is the operating metric that best predicts profitability.
The formula
Prime Cost = Cost of Goods Sold + Total Labour Cost Prime Cost % = Prime Cost ÷ Total Sales × 100
Target ranges
| Concept | Target prime cost % |
|---|---|
| Full-service restaurant | 60–65% |
| Quick-service (QSR) | 60–62% |
| Bar / high-beverage | 55–60% |
| Fine dining | 60–68% |
Above ~67% prime cost, most independents struggle to reach positive net profit after occupancy and operating expenses.
The weekly prime cost review
- Pull food cost (from inventory + purchases) and labour cost for the week.
- Add them and divide by weekly sales for prime cost %.
- Compare to target and to the same week last year.
- Identify whether the variance is food, labour or both.
- Assign one action per driver for the coming week.
One number to rule them
A single weekly prime cost number keeps the whole management team focused. It is the restaurant equivalent of a scoreboard.