Prime cost combines your food expenses and labor costs - your restaurant's two biggest financial drains. Most owners track break-even revenue but ignore break-even prime cost. This leaves them vulnerable to crushing expenses even during busy nights.
What is prime cost?
Prime cost has two components:
- Food cost: all ingredient costs
- Labor cost: all wages, including payroll taxes
Together, these expenses should represent 55-65% of total revenue in a profitable restaurant. Go beyond this range and you're flirting with financial trouble.
💡 Example:
Restaurant with €50,000 monthly revenue:
- Food cost: €15,000 (30%)
- Labor cost: €17,500 (35%)
Prime cost: €32,500 (65%)
The break-even prime cost formula
Calculate break-even prime cost by removing fixed expenses from your total costs:
Break-even prime cost = Total monthly costs - Fixed costs
Fixed costs exist no matter how many customers you serve:
- Rent
- Insurance
- Accountant
- Software subscriptions
- Base energy costs
⚠️ Note:
Energy costs aren't entirely fixed. More customers mean more gas usage, higher electricity bills.
Prime cost as a percentage of revenue
After determining the dollar amount, convert to percentage:
Prime cost % = (Prime cost / Revenue) × 100
Typical ranges by restaurant style:
- Fine dining: 50-60% (more servers, kitchen staff)
- Casual dining: 55-65%
- Fast casual: 60-70% (premium ingredients, streamlined service)
💡 Example calculation:
Restaurant with €40,000 monthly revenue:
- Total costs: €38,000
- Fixed costs: €8,000
- Break-even prime cost: €30,000
As a percentage: (€30,000 / €40,000) × 100 = 75%
This spells trouble! Target 65% maximum.
What do you do if your prime cost is too high?
Above 65%? You've got three moves:
- Boost revenue: attract more diners, increase average ticket
- Trim food costs: negotiate supplier rates, reduce waste, refine recipes
- Streamline labor: smarter scheduling, multi-skilled team members
Revenue growth often delivers the quickest wins since fixed costs remain unchanged. From years of working in professional kitchens, I've seen restaurants transform their margins by filling more seats during slow periods.
💡 Impact of more revenue:
Same restaurant, but €50,000 revenue instead of €40,000:
- Prime cost stays €30,000
- New percentage: (€30,000 / €50,000) × 100 = 60%
Back in the safe zone!
Monthly check-in
Review prime cost monthly using this quick assessment:
- Total last month's food and labor costs
- Divide by last month's revenue
- Above 65%? Time to act
- Between 55-65%? You're on track
- Below 55%? Consider if you're cutting corners on quality
Food cost calculators automatically track these numbers, eliminating manual work and giving you real-time visibility into prime cost performance.
How do you calculate break-even prime cost? (step by step)
Gather all your monthly costs
Make a list of all expenses your restaurant has: food, labor, rent, energy, insurance, etc. Use your accounting from the past 3 months for an average.
Separate fixed from variable costs
Fixed costs stay the same regardless of your revenue (rent, insurance). Variable costs increase with your revenue (food, labor, part of energy).
Calculate your maximum prime cost
Subtract your fixed costs from your total costs. The remaining amount is your break-even prime cost. Divide this by your revenue for the percentage.
✨ Pro tip
Track your prime cost variance for 6 consecutive weeks during your busiest quarter. If prime cost jumps above 67% for two weeks straight, immediately cut discretionary labor hours by 8-10% until you're back under 65%.
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 a healthy prime cost percentage?
Most restaurants should target 55-65% of revenue for prime cost. Fine dining can push to 60% due to higher staffing needs, while fast casual might reach 70% because of premium ingredients and lower labor ratios.
Should I include payroll taxes in labor cost?
Absolutely. Labor cost means total personnel expense - gross wages plus payroll taxes, benefits, and vacation pay. Budget roughly 130-140% of gross wages to cover everything.
How often should I check my prime cost?
Monthly reviews work perfectly. Weekly creates too much noise from normal fluctuations, while quarterly checks miss problems until they're expensive to fix.
What if my prime cost consistently hits 70% or higher?
You're likely bleeding money each month. Start by driving more revenue through marketing, events, or menu optimization since fixed costs stay constant. Then tackle food waste and labor efficiency once you've stabilized cash flow.
📚 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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