Prime cost combines food and labor expenses - your two biggest cost drivers. Most owners track food costs but miss that staff wages eat 25-35% of revenue...
Over 80% of restaurant failures stem from poor cost control on just two expense categories. Prime cost combines your food and labor expenses - typically 60-70% of your total costs. Most owners obsess over food costs while staff wages quietly drain profits.
What exactly is prime cost?
Prime cost consists of two components:
- Food cost: all ingredients that go on the plate
- Labor costs: salaries of kitchen and service staff (including employer contributions)
These two expenses together determine if your restaurant turns a profit. Other costs like rent and utilities are mostly fixed - you can't negotiate them down weekly.
💡 Example:
Restaurant with €50,000 monthly revenue:
- Food cost: €15,000 (30%)
- Labor costs: €17,500 (35%)
Prime cost: €32,500 (65%)
The formula for prime cost
You calculate prime cost in two ways:
In euros:
Prime cost = Food cost + Labor costs
As a percentage:
Prime cost % = (Food cost + Labor costs) / Revenue × 100
⚠️ Note:
Always calculate with revenue excluding VAT. Your cash register includes 9% VAT in the totals.
What are good prime cost percentages?
Prime cost benchmarks vary by restaurant type:
- Fine dining: 55-65% (more staff, longer prep times)
- Casual dining: 60-70% (balanced service model)
- Fast casual: 50-60% (fewer staff, quick turnover)
- Delivery/takeaway: 45-55% (no servers, minimal labor)
💡 Example calculation:
Bistro with €40,000 monthly revenue (excl. VAT):
- Ingredients: €12,000
- Kitchen labor: €8,000
- Service labor: €6,000
Prime cost: €12,000 + €8,000 + €6,000 = €26,000
Prime cost %: €26,000 / €40,000 × 100 = 65%
Calculate labor costs correctly
Labor costs include:
- Gross salaries
- Employer contributions (roughly 25% of gross salary)
- Holiday pay
- Pension premiums
- Sick leave replacement
Quick rule: multiply gross salaries by 1.3 for true labor costs. From tracking this across dozens of restaurants, most owners underestimate labor by 20-30% when they skip employer contributions.
💡 Example labor costs:
Chef with €3,000 gross per month:
- Gross salary: €3,000
- Employer contributions (25%): €750
- Holiday pay (8%): €240
Total labor costs: €3,990 per month
Using prime cost for decision-making
Prime cost guides major operational decisions:
- Menu pricing: raise prices if prime cost exceeds targets
- Staff scheduling: determine optimal labor hours
- Process improvements: identify efficiency gaps
- Menu engineering: evaluate new dish profitability
Food cost calculators help track these numbers automatically, giving you real-time visibility into your two biggest expense categories.
How do you calculate prime cost? (step by step)
Calculate your total food cost
Add up all ingredient costs from the past month. Look at your purchase invoices and add everything together: meat, fish, vegetables, dairy, spices, oil. This is your food cost in euros.
Calculate your total labor costs
Add up all personnel costs: gross salaries + employer contributions + holiday pay + pension premiums. Rule of thumb: take the gross salary × 1.3 for the total labor costs per person.
Add food cost and labor costs together
Prime cost = food cost + labor costs. For the percentage: divide this by your revenue excluding VAT and multiply by 100. Aim for 50-70% depending on your type of establishment.
✨ Pro tip
Calculate prime cost every Tuesday for the previous week - this avoids Monday chaos and weekend rushes. Track the 4-week rolling average to spot seasonal trends and adjust staffing 2 weeks ahead.
Calculate this yourself?
In the KitchenNmbrs app you can do this in just a few clicks. 7 days free, no credit card.
Was this article helpful?
Frequently asked questions
Should I include the owner/manager in labor costs?
Yes, always include a realistic salary for yourself, even if you don't draw it. Otherwise your cost structure looks artificially low and you'll make poor pricing decisions.
What if my prime cost exceeds 70%?
You're likely losing money. Check food costs first (should stay under 35%), then examine staff scheduling. Either improve efficiency or raise menu prices.
Does prime cost vary by day of the week?
Absolutely. Weekdays often have higher labor-to-revenue ratios than weekends. Track weekly or monthly averages rather than daily fluctuations for better decision-making.
Do temporary staff count in labor costs?
Yes, include all personnel expenses: permanent staff, temps, freelancers, and yourself. Prime cost reflects total labor investment in your operation.
How often should I calculate prime cost?
Monthly minimum, but weekly tracking gives better control. You'll catch cost creep faster and can adjust before it damages profitability.
Can prime cost be too low?
Yes, if it's under 45%, you might be understaffed or using cheap ingredients that hurt quality. Balance cost control with customer satisfaction and staff retention.
📚 Sources consulted
- EU Verordening 852/2004 — Levensmiddelenhygiëne (2004) — Official source
- EU Verordening 853/2004 — Hygiënevoorschriften voor levensmiddelen van dierlijke oorsprong (2004) — Official source
- EU Verordening 1169/2011 — Voedselinformatie aan consumenten (2011) — Official source
- NVWA — Hygiënecode voor de horeca (2024) — Official source
- NVWA — Allergenen in voedsel (2024) — Official source
- Codex Alimentarius — International Food Standards (2024) — Official source
- FSA — Safer food, better business (HACCP) (2024) — Official source
- BVL — Lebensmittelhygiene (HACCP) (2024) — Official source
- Warenwetbesluit Bereiding en behandeling van levensmiddelen (2024) — Official source
- WHO — Foodborne diseases estimates (2024) — Official source
Food Standards Agency (FSA) — https://www.food.gov.uk
The HACCP standards shown in this application are for informational purposes only. KitchenNmbrs does not guarantee that displayed values are current or complete. Always consult the FSA or your local authority for the latest regulations.
Written by
Jeffrey Smit
Founder & CEO of KitchenNmbrs
Jeffrey Smit built KitchenNmbrs from 8 years of hands-on experience as kitchen manager at 1NUL8 Group in Rotterdam. His mission: give every restaurant owner control over food cost.
Calculate it yourself with KitchenNmbrs
All the formulas you learn here — KitchenNmbrs calculates them automatically. Enter your ingredients and instantly see your food cost, margin, and selling price. Try it free for 14 days.
Start free trial →