Prime Cost (Restaurants)
Short answer
Prime cost is food cost plus labor cost combined — the single number that decides whether a restaurant can be profitable.
Formula
Prime Cost (%) = (Food Cost + Labor Cost) / Revenue × 100
Add cost of food sold and total labor cost (wages + payroll taxes + benefits). Divide by revenue. Multiply by 100.
Why it matters
Prime cost is the master KPI in restaurants. Most operators target ≤ 60% prime cost. Above 65% and rent, utilities, marketing, and management have to be funded from less than 35% of revenue — and there's usually nothing left for the owner.
Benchmarks
People also ask
Common questions about Prime Cost (Restaurants)
What is Prime Cost (Restaurants)?+
Prime cost is food cost plus labor cost combined — the single number that decides whether a restaurant can be profitable.
How is Prime Cost (Restaurants) calculated?+
Add cost of food sold and total labor cost (wages + payroll taxes + benefits). Divide by revenue. Multiply by 100.
What is a good Prime Cost (Restaurants)?+
A healthy prime cost (restaurants) is typically around < 55% — industry-leading. Specific targets vary by industry and stage; check our benchmarks above for your sector.
Why does Prime Cost (Restaurants) matter?+
Prime cost is the master KPI in restaurants. Most operators target ≤ 60% prime cost.
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Related concepts
Where this matters most
See Prime Cost (Restaurants) in the context of restaurants & food service.
Industry-specific benchmarks, common pitfalls, and what lenders look for in this sector.