Most restaurant owners think prime cost is just food cost - but that's only half the story. Prime cost combines your food expenses with labor costs, typically hitting 55-65% of revenue. Track this daily and you'll control your two biggest expense categories.
What exactly is prime cost?
Prime cost has two components:
- Food cost: every ingredient you purchase
- Labor cost: total wages plus employer taxes
Combined, they typically represent 55-65% of revenue. Go above 65% and you're likely bleeding money.
💡 Example daily calculation:
Restaurant with €1,200 revenue yesterday:
- Ingredient purchases: €360 (30%)
- Staff costs: €300 (25%)
- Prime cost total: €660 (55%)
That's a solid prime cost.
How do you calculate labor cost per day?
Labor cost extends beyond base wages:
- Gross wages: staff earnings
- Employer contributions: roughly 25-30% additional
- Holiday pay: 8% of gross wages
- Pension: if provided
⚠️ Watch out:
Many operators calculate only gross wages. Real costs run 25-30% higher due to employer contributions.
Daily prime cost calculation
For precise daily tracking, you need these numbers:
💡 Real example:
Tuesday October 15 - revenue €980:
- Ingredients used: €294 (check delivery receipts + inventory)
- Chef 8 hours × €18: €144
- Service staff 12 hours × €14: €168
- Employer contributions 30%: €94
Food cost: €294 (30%)
Labor cost: €406 (41%)
Prime cost: €700 (71% - danger zone!)
What are healthy percentages?
Prime cost targets vary by restaurant type:
- Fine dining: 60-65% (higher staffing, premium ingredients)
- Casual dining: 55-60%
- Fast casual: 50-55%
- Delivery/takeaway: 45-50% (reduced staffing)
Based on real restaurant P&L data, operators who maintain these ranges show consistent profitability month over month.
Signs that your prime cost is too high
Red flags to monitor:
- Prime cost exceeding 65% for consecutive days
- Labor cost outpacing food cost (fine dining excluded)
- Upward trend without explanation
- Major weekday variations
💡 Quick check:
If your prime cost consistently exceeds 65%:
- Review menu pricing - possibly underpriced
- Examine staff scheduling - potentially overstaffed
- Audit food cost - maybe excessive purchasing
Tools for daily tracking
Systems like KitchenNmbrs streamline tracking by:
- Automated daily food cost calculations
- Shift-based labor cost monitoring
- Prime cost dashboard with trend analysis
- Deviation alerts
This gives you immediate visibility into prime cost issues rather than discovering problems at month-end.
Calculate prime cost in 4 steps
Gather yesterday's revenue
Check your POS system for yesterday's exact revenue. Take the revenue excluding VAT for a clean calculation.
Calculate yesterday's food cost
Add up all ingredients you used yesterday. Check delivery receipts and estimate what you took from inventory. This is your daily food cost.
Calculate labor cost including contributions
Add up all hours worked, multiply by hourly wage and add 25-30% employer contributions. Don't forget yourself if you're working as owner-chef.
Calculate prime cost percentage
Prime cost % = (Food cost + Labor cost) / Revenue × 100. Aim for 55-65%. Higher means you're not earning enough on that day.
✨ Pro tip
Calculate prime cost within 2 hours of opening each day. If it hits 67% or higher for 3 consecutive days, immediately adjust either menu pricing or next week's staff schedule.
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 myself as owner in labor cost?
Yes, if you're working the line or managing shifts. Calculate your hours at market chef wages. Otherwise your prime cost calculations won't reflect true operational costs.
What if my prime cost is above 70%?
You're likely operating at a loss. First examine menu pricing - it's often too low. Then review staff scheduling and purchasing patterns. Quick action prevents deeper losses.
How do I estimate ingredients from inventory?
Count high-value items (proteins) precisely, estimate smaller items (seasonings, oils). Track delivery receipts daily. Your accuracy will improve with practice, and even rough estimates beat no tracking.
📚 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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