Prime cost combines food and labor expenses to reveal how much revenue goes toward your biggest operational costs. Healthy ranges vary by restaurant type but staying under 60% ensures room for fixed costs and profit.
Most restaurants track food costs religiously but ignore the bigger picture. Prime cost combines your food expenses with labor costs to show exactly how much revenue disappears before you even touch fixed expenses. The difference between a 55% and 65% prime cost? About €48,000 in annual profit for a typical operation.
What exactly is prime cost?
Prime cost consists of two components:
- Food cost: all ingredients and beverages you purchase
- Labor costs: salaries, social charges and staff hiring
These two expenses typically consume 50-65% of total revenue. What's left must cover rent, utilities, insurance, and hopefully generate profit.
💡 Example:
Restaurant with €50,000 monthly revenue:
- Food cost: €15,000 (30%)
- Labor costs: €13,000 (26%)
Prime cost: €28,000 (56%)
How do you calculate prime cost?
The formula couldn't be simpler:
Prime cost % = ((Food cost + Labor costs) / Revenue) × 100
Always use consistent time periods. Monthly calculations work best for most operations since they smooth out weekly fluctuations.
💡 Calculation example:
March results:
- Revenue: €45,000
- Ingredient purchases: €13,500
- Labor costs: €11,250
Prime cost: (€13,500 + €11,250) / €45,000 × 100 = 55%
What are normal prime cost percentages?
Prime cost varies significantly by restaurant type:
- Fast casual / delivery: 50-58%
- Casual dining: 55-62%
- Fine dining: 58-65%
- Café with kitchen: 52-60%
Once you hit 65%, profitability becomes nearly impossible. Too much revenue gets consumed by ingredients and wages alone.
⚠️ Note:
Include temporary staff, overtime and social charges in labor calculations. Base salaries alone create misleading numbers.
Why is prime cost so important?
Prime cost reveals whether profitability is even possible. If it's excessive, you can't cover basic operating expenses.
Consider a 68% prime cost scenario. You're left with just 32% for:
- Rent (typically 8-12% of revenue)
- Utilities (3-5%)
- Insurance (1-2%)
- Marketing (2-4%)
- Other expenses (5-8%)
- Profit
With only 32% remaining, there's barely enough to break even. This explains why 60% represents the practical ceiling for most operations. In my experience, this is one of the most common blind spots in kitchen management - operators focus intensely on food costs while labor expenses spiral unchecked.
💡 Impact example:
Two restaurants, identical €40,000 revenue:
- Restaurant A: 55% prime cost = €18,000 for fixed costs
- Restaurant B: 65% prime cost = €14,000 for fixed costs
Annual difference: €48,000
How do you improve your prime cost?
You have two adjustment levers:
1. Reduce food cost:
- Standardize recipes (eliminates waste)
- Smarter purchasing (seasonal buying, supplier comparisons)
- Control portion sizes
- Menu optimization (emphasize profitable dishes)
2. Optimize labor costs:
- Efficient scheduling (avoid overstaffing during slow periods)
- Boost productivity (improved mise en place)
- Strategic task distribution
⚠️ Note:
Never compromise on ingredient quality or fair wages. Both strategies backfire spectacularly. Focus on efficiency and waste reduction instead.
Tracking prime cost in practice
Monitor your prime cost monthly at minimum. Annual reviews are useless - you need real-time visibility to make meaningful adjustments.
Excel tracking works but consumes valuable time. Automated systems calculate food costs per dish and monitor labor expenses continuously, providing instant prime cost visibility.
How to calculate prime cost? (step by step)
Collect your numbers from one month
Take your total revenue, all purchases of ingredients and beverages, and all labor costs including social charges and temporary staff. Always use the same period for all numbers.
Add food cost and labor costs together
Food cost = all ingredients and beverages you purchased. Labor costs = salaries + social charges + temporary staff + overtime. Add these two numbers together.
Calculate the percentage
Divide the sum from step 2 by your total revenue and multiply by 100. The result is your prime cost percentage. Under 60% is good, above 65% becomes difficult.
✨ Pro tip
Track prime cost weekly for 6 consecutive weeks, then calculate the average. This reveals your true operational baseline and eliminates the noise from one-off events like staff parties or supplier delivery delays.
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
My prime cost is 68%, what now?
That's dangerously high for profitability. Start by auditing your food cost per dish - aim for under 35%. Then examine staff scheduling during slow periods where you might be overstaffed.
Should I include my own salary as owner in labor costs?
Absolutely. Your time has value and should be factored into labor calculations. Many owner-operators overlook this, creating artificially low prime cost numbers that don't reflect true operational expenses.
Does prime cost fluctuate seasonally?
Yes, significantly. During slower months, fixed labor costs spread across lower revenue typically pushes prime cost higher. Plan for these seasonal variations rather than panicking over temporary spikes.
📚 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 →