Most restaurant owners think food cost alone tells the profitability story - but that's completely wrong. Prime cost combines your food expenses with labor costs, giving you the real picture of operational efficiency. Staff wages often dwarf ingredient costs, making this combined metric crucial for survival.
What exactly is prime cost?
Prime cost consists of two components:
- Food cost: all ingredients you purchase
- Labor costs: wages, payroll taxes, holiday pay
The formula is straightforward:
Prime Cost % = (Food Cost + Labor Costs) / Revenue × 100
💡 Example:
Restaurant with €50,000 monthly revenue:
- Food cost: €16,000 (32%)
- Labor costs: €18,000 (36%)
- Prime cost total: €34,000
Prime cost ratio: 68%
Healthy prime cost benchmarks
A healthy prime cost ratio varies by restaurant type:
- Fine dining: 65-70% (more staff, premium ingredients)
- Casual dining: 60-65% (average service level)
- Fast casual: 55-60% (less table service)
- Delivery/takeaway: 50-55% (minimal staff)
⚠️ Watch out:
If your prime cost exceeds 70%, you're probably bleeding money. That leaves too little for rent, utilities, depreciation, and actual profit.
Why prime cost beats food cost analysis
Many business owners obsess over food cost alone. But that creates blind spots:
- You can have low food cost but be overstaffed
- Or the reverse: high food cost but efficient labor usage
- Prime cost reveals your true operational efficiency
💡 Comparison example:
Restaurant A: 28% food cost, 40% labor = 68% prime cost
Restaurant B: 35% food cost, 28% labor = 63% prime cost
Restaurant B operates more efficiently despite higher ingredient costs!
How to improve your prime cost ratio?
There are two levers you can adjust:
Reduce food cost:
- Optimize recipes for lower cost
- Negotiate better supplier deals
- Cut food waste ruthlessly
- Control portion sizes
Streamline labor costs:
- Smarter scheduling (avoid over-staffing)
- Better forecasting of busy periods
- Cross-training staff for multiple roles
- Seasonal staffing adjustments
💡 Practical example:
By scheduling one fewer person on slow Tuesdays:
- Savings: €120 per Tuesday
- Per year: €120 × 50 weeks = €6,000
- At €300,000 revenue: 2% improvement in prime cost
Tracking prime cost in practice
Most restaurants calculate prime cost monthly. That's too late for course corrections. Weekly tracking works better:
- Weekly revenue: pull from your POS system
- Weekly purchases: sum all supplier invoices
- Weekly labor costs: hours × hourly rate + payroll taxes
Ignoring weekly prime cost tracking is a mistake that costs the average restaurant EUR 200-400 per month in missed optimization opportunities. Food cost calculators can automate ingredient tracking, though you'll still need to log labor hours manually for accurate calculations.
How to calculate your prime cost ratio? (step by step)
Gather your food cost data
Add up all ingredient invoices from last month. Don't forget: meat, fish, vegetables, dairy, beverages, spices, oil - everything you buy for the kitchen. This is your total food cost in euros.
Calculate your total labor costs
Add up: gross wages for all kitchen and service staff, payroll taxes (roughly 25% of gross wage), holiday pay, and any bonuses. Temporary staff also counts.
Divide by revenue and multiply by 100
Prime cost % = (Food Cost + Labor Costs) / Revenue × 100. Use revenue excluding VAT for a fair comparison. If your result is above 70%, action is needed.
✨ Pro tip
Calculate your prime cost every Tuesday morning for the previous week's performance. This 15-minute weekly habit can save you €300-500 monthly by catching cost creep early.
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 is an acceptable prime cost for a bistro?
For a bistro, aim for 60-65% prime cost. This leaves adequate room for rent, utilities, and profit. Above 70% makes profitability nearly impossible.
Should I include payroll taxes in labor costs?
Absolutely. Payroll taxes typically add 25% to gross wages. Excluding them severely underestimates your true labor costs and skews your prime cost calculation.
How often should I calculate prime cost?
Weekly is ideal, monthly is minimum. Weekly tracking lets you spot problems early and adjust quickly. Waiting until month-end often means it's too late to fix issues.
What if my prime cost is too high?
Identify the bigger culprit first: food cost or labor. High food cost? Audit portions and recipes. High labor costs? Optimize scheduling and cross-train staff for efficiency.
Do managers count in labor costs for prime cost?
Only operational managers like head chefs or floor managers count. Owner salaries don't count - that's profit, not operational expense.
Can I have different prime cost targets for lunch vs dinner?
Yes, and you should. Dinner service typically runs 3-5% higher prime cost due to more complex dishes and higher service ratios. Track them separately for better insights.
📚 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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