A popular bistro discovers their 28% food cost looks great on paper, but they're still losing money each month. The missing piece? Labor costs that push their combined expenses to 72% of revenue. Food cost and labor together form your prime cost - the foundation of restaurant profitability.
What exactly is prime cost?
Prime cost consists of two components:
- Food cost: all ingredients you purchase
- Labor costs: wages, social contributions, temp agencies
These two costs connect directly to your production volume. More covers means more ingredients and additional staff hours.
? Example prime cost calculation:
Restaurant with €50,000 monthly revenue:
- Food cost: €15,000 (30%)
- Labor costs: €12,500 (25%)
- Prime cost: €27,500 (55%)
This leaves €22,500 for rent, utilities, equipment and profit.
Why is the relationship between food cost and prime cost important?
You can't judge profitability by food cost alone. A dish with low ingredient costs might destroy your margins if it requires extensive prep time.
? Comparison of two dishes:
Pasta carbonara:
- Food cost: 28% (€4.50)
- Prep time: 8 minutes
- Labor cost per portion: €2.40
Beef wellington:
- Food cost: 35% (€12.00)
- Prep time: 45 minutes
- Labor cost per portion: €13.50
The pasta shows lower food cost, but the wellington delivers better profit per minute of kitchen labor.
How do you calculate labor costs per dish?
This calculation proves trickier than food costing, but it's essential for accurate profitability analysis:
- Prep time: total minutes required for the dish
- Kitchen hourly rate: gross wages plus social contributions
- Utilization rate: percentage of productive work time
⚠️ Note:
Include mise-en-place, cleanup and downtime in your calculations. Chefs aren't 100% productive during their shifts.
What are healthy prime cost percentages?
Target percentages vary significantly by restaurant concept. From tracking this across dozens of restaurants, here are realistic benchmarks:
- Fine dining: 50-60% (higher labor due to service intensity)
- Casual dining: 55-65%
- Fast casual: 60-70% (higher food cost, streamlined labor)
- Delivery only: 45-55% (no service staff, but packaging costs)
? Prime cost warning signs:
If your prime cost exceeds 65%, investigate these issues:
- Food cost climbing above 35%
- Overstaffing relative to sales volume
- Inefficient kitchen workflows
- Menu prices set too low
How do you use prime cost for better decisions?
Prime cost analysis drives multiple operational decisions:
- Menu engineering: identify truly profitable dishes
- Staff scheduling: match labor hours to expected volume
- Price setting: establish minimum viable selling prices
- Process improvement: eliminate time waste in prep and service
Tools like KitchenNmbrs can help track both components simultaneously. By monitoring food cost and labor expenses together, you'll understand your true operational efficiency.
How do you calculate prime cost? (step by step)
Calculate your food cost percentage
Add up all ingredient costs from last month and divide by your revenue excl. VAT. Multiply by 100 for the percentage. For example: €15,000 ingredients on €50,000 revenue = 30% food cost.
Calculate your labor cost percentage
Add up all wages, social contributions and temp agency costs from last month. Divide by your revenue excl. VAT and multiply by 100. For example: €12,500 labor costs on €50,000 revenue = 25%.
Add food cost and labor costs together
Prime cost = food cost % + labor cost %. In the example: 30% + 25% = 55% prime cost. This means 55% of your revenue goes to ingredients and staff.
✨ Pro tip
Track your prime cost against a 13-week rolling average instead of month-to-month comparisons. This smooths out seasonal fluctuations and gives you clearer trends to act on.
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
Should I include temp agency costs in prime cost?
What if my prime cost exceeds 70%?
Can I calculate prime cost per individual dish?
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
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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