Prime cost is what you spend on food and on labour, divided by your sales: (food used + labour) ÷ sales before tax × 100. They are the two largest costs in almost any restaurant, and the two you can move every week. Work it out every Monday for the week before, count your own hours in the labour line, and compare it with a ceiling that comes from your own fixed costs, not someone else's average.
What goes into each part
Food used. Not what you bought, but what you used:
Usage = opening stock + purchases for the week − closing stock
If the meat delivery came on Monday for three days and nothing arrived on Saturday, the week's purchases tell you nothing. Usage does. For that you need to count what is on the shelves at close, at least the expensive lines: meat, fish, cheese, oil, coffee. How to do that count without losing an afternoon is in inventory basics. It is the same logic as cost of goods sold, applied to one week.
Labour. The hours of everyone who worked that week times what each hour costs you: kitchen, floor, dish pit. Use what each person really costs, including any payroll taxes or benefits you pay; check those with your accountant.
Your hours. If you cook or run the floor, those are labour too. Give them an hourly value: what you would pay someone else to do your job. The guide to costing your own labour helps you pick it, and how to pay yourself helps you keep that pay separate from profit.
Sales. Before any sales tax or VAT you collect, since that money is not yours. Check your local tax rules or ask an accountant.
Worked example: one week at a neighbourhood bistro
Sales for the week before tax: $11,500.
Food
- Opening stock (Monday): $2,100
- Purchases for the week: $4,300
- Closing stock (Sunday): $1,950
- Usage: 2,100 + 4,300 − 1,950 = $4,450
- As a share of sales: 4,450 ÷ 11,500 = 38.7%
Labour
| Who | Hours | Cost per hour | Total |
|---|---|---|---|
| Line cook | 40 | $17.00 | $680 |
| Prep cook | 30 | $15.00 | $450 |
| Server | 32 | $13.00 | $416 |
| Dishwasher | 20 | $12.00 | $240 |
| You, in the kitchen | 60 | $20.00 | $1,200 |
| Total | $2,986 |
As a share of sales: 2,986 ÷ 11,500 = 26.0%.
Prime cost: 4,450 + 2,986 = $7,436. As a share of sales: 7,436 ÷ 11,500 = 64.7%.
Without your hours prime cost would be 4,450 + 1,786 = $6,236, or 54.2%. More than ten points lower. That flattering number is the one that fools many owners: the restaurant looks healthy because you work 60 hours a week that appear nowhere.
Your prime cost ceiling
Do not look for a "correct" percentage online. Your ceiling comes from your own numbers:
Prime cost ceiling = 100% − other costs as a share of sales − profit you want
At the bistro, the week's other costs (rent, utilities, insurance, disposables, accounting) come to $2,300, which is 2,300 ÷ 11,500 = 20.0% of sales. If you want 10% profit after paying for your hours:
- Ceiling: 100 − 20.0 − 10 = 70.0%
- You are at 64.7%, inside the ceiling.
- Left this week: 11,500 − 7,436 − 2,300 = $1,764, which is 15.3%.
With higher rent, your ceiling would be lower. That is why another restaurant's number is no use to you.
A quiet week
The following week sales drop to $9,800. Labour is the same, because the rota did not change. Food falls with sales and stays at 38.7%.
- Food: 9,800 × 0.387 = $3,792.60
- Labour: $2,986, which is now 2,986 ÷ 9,800 = 30.5%
- Prime cost: 3,792.60 + 2,986 = $6,778.60, or 69.2%
- Left: 9,800 − 6,778.60 − 2,300 = $721.40, about 7.4%
Food cost did not move. Labour went up as a percentage, because the same people served fewer covers. If quiet weeks repeat (school holidays, the end of the month, a slow season), the rota has to follow sales. How to build it is in scheduling staff around your sales.
What moves prime cost
On the food side:
- Purchase prices. If beef or cheese goes up and you leave the menu alone, the percentage rises by itself.
- Waste. Fish that spoils, prep made in excess, fryer oil changed early. Measure it with the guide to tracking restaurant waste.
- Portions. An extra 20 g of fries on 600 plates a week is 12 kg.
- Staff meals and comps. Log them separately; otherwise they show up as an unexplained high food cost.
On the labour side:
- Rotas that do not follow covers. The same team on a dead Tuesday as on a packed Saturday.
- Idle hours. Staff waiting between prep and service.
- Your hours. If you work longer because you are short-staffed, your cost goes up too, even though no money leaves the till.
On the sales side: raising prices or selling more lowers the percentage without changing the dollars spent. But if labour or waste is wrong, selling more only hides the problem for a while.
Compare food with your cards
Compare the 38.7% actual usage with the food cost your plate cards predict for what you sold that week. If the cards say 34%, nearly five points are going on waste, portions or comps. How to work out food cost per dish is in the guide to food cost percentage. To see how prime cost fits with covers, average ticket and break-even, read how to make a restaurant profitable.
Do it with the calculator
Put each dish's recipe into the food cost calculator with its grams and prices to get its cost per portion. With those costs you know what the week's food cost should have been, and you can compare it with the actual usage in your prime cost.
Frequently asked questions
What prime cost percentage is good for a restaurant?
The one that leaves room for your other costs and the profit you want. Take 100, subtract what rent and other overheads are as a share of sales, then subtract the profit you want. What is left is your ceiling.
Why count my own hours if I do not pay myself a wage?
Because without them prime cost looks healthy even when the restaurant is not paying you for your work. Put an hourly value on what you do and add it to labour.
Do I use the week's purchases or actual usage?
Usage: opening stock plus purchases minus closing stock. Purchases alone swing with delivery days and tell you nothing about what you actually used.
How often should I calculate prime cost?
Every week. A monthly figure arrives four weeks into a problem; a weekly one still lets you fix next week's order or rota.