What is a healthy prime cost for a restaurant?
Prime cost (labor + food costs) should stay between 55-65% of revenue for most restaurants. Calculate it monthly using the formula: (Labor Costs + Food Cost) / Revenue × 100. If you're above 70%, focus on reducing food waste, optimizing staff schedules, or increasing average check size to get back on track.
Prime cost (labor + food costs) should stay between 55-65% of revenue for most restaurants. Calculate it monthly using the formula: (Labor Costs + Food Cost) / Revenue × 100. If you're above 70%, focus on reducing food waste, optimizing staff schedules, or increasing average check size to get back on track.
A single percentage can make or break your restaurant's profitability. Prime cost combines your labor and food expenses into one crucial metric that sits between 55% and 65% for most successful restaurants. But the devil's in the details of your specific operation.
What exactly is prime cost?
Prime cost consists of two parts: your labor costs (wages, social contributions, temporary staff) plus your food cost (ingredients and beverages). These two expense categories largely determine whether your restaurant is profitable.
💡 Example:
Restaurant with €50,000 monthly revenue:
- Labor costs: €18,000 (36%)
- Food cost: €14,000 (28%)
Prime cost: €32,000 = 64% of revenue
Healthy prime cost percentages by business type
The ideal prime cost varies dramatically by restaurant type. Fast-casual operations run leaner, while fine dining accepts higher percentages:
- Fast-casual/delivery: 50-60% (fewer staff, streamlined processes)
- Casual dining/bistro: 55-65% (balanced service model)
- Fine dining: 60-70% (extensive staff, premium ingredients)
- Café with kitchen: 50-60% (simpler preparation)
⚠️ Watch out:
Prime cost above 70% usually means losses. There's too little left for rent, utilities, equipment, and profit.
How do you calculate your prime cost?
The formula is straightforward, but you need to capture all related expenses:
Prime Cost % = (Labor Costs + Food Cost) / Revenue × 100
💡 Example calculation:
March - revenue €45,000:
- Gross wages: €12,000
- Social contributions: €3,600
- Temporary staff/contractors: €2,400
- Ingredients/beverages: €13,500
Prime cost: (€18,000 + €13,500) / €45,000 × 100 = 70%
This is too high - immediate action required!
What do you do if your prime cost is too high?
A bloated prime cost demands swift intervention. From analyzing actual purchasing data across different restaurant types, I've seen three effective approaches work consistently:
- Boost revenue: Increase guest count, raise average check size, improve table turnover
- Trim labor costs: Optimize scheduling, reduce temporary staffing, boost team productivity
- Cut food costs: Negotiate better purchasing deals, minimize waste, standardize portions
💡 Practical example:
Reducing prime cost from 70% to 62% at €50,000 revenue:
- Was: €35,000 prime cost
- Becomes: €31,000 prime cost
- Difference: €4,000 additional profit monthly
Annual impact: €48,000!
Prime cost vs. other important ratios
Prime cost matters, but don't ignore these related metrics:
- Food cost alone: 25-35% of revenue
- Labor costs alone: 25-35% of revenue
- Total operating costs: Maximum 85-90% (to maintain profitability)
Modern restaurant management tools automatically track these percentages, calculating your food costs in real-time based on recipes and current purchase prices.
How do you calculate your prime cost? (step by step)
Gather all labor costs from last month
Add up: gross wages, social contributions, pension premiums, temporary staff and freelancers. Don't forget vacation pay or 13th month bonuses you've accrued.
Calculate your total food cost for the same month
Sum all purchases of ingredients, beverages and disposables. Note: only count what you actually used, not what you purchased (adjust for inventory changes).
Divide by your net revenue and multiply by 100
Formula: (Labor Costs + Food Cost) / Net Revenue × 100. Use your revenue excluding VAT for a clear picture of your prime cost percentage.
✨ Pro tip
Track your prime cost by day of the week, not just monthly averages. Tuesdays often show the highest percentages due to lower sales with full staffing, while Fridays typically deliver your best ratios.
Calculate this yourself?
In the KitchenNmbrs app you can do this in just a few clicks. 7 days free, no credit card.
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Frequently asked questions
What's the difference between prime cost and break-even?
Prime cost only includes labor and food expenses. Break-even is the revenue point where all your costs (rent, utilities, equipment, insurance, plus prime costs) equal your income. You can have a healthy prime cost but still not reach break-even if your fixed costs are too high.
Should I include management salaries in my prime cost calculation?
Yes, include all labor-related expenses including management wages, benefits, and payroll taxes. Some operators mistakenly exclude management costs, which gives them a falsely optimistic prime cost percentage.
How does seasonality affect my target prime cost?
During slow seasons, your prime cost percentage typically increases because fixed labor costs spread across lower revenue. Many successful restaurants accept 5-10% higher prime costs in off-season months, then tighten targets during peak periods.
📚 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.
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