Most restaurant owners obsess over food costs while completely ignoring their biggest expense killer. Prime cost combines your food and labor expenses - the two categories that'll make or break your profits. Staff costs often hit 30-40% of revenue, yet many operators check it monthly at most.
What exactly is prime cost?
Prime cost has two parts:
- Food cost: every ingredient you buy
- Labor cost: all wages plus employer contributions
These expenses determine your profit. What's left covers rent, utilities, equipment, and your take-home pay.
💡 Example:
Restaurant with €20,000 weekly revenue:
- Food cost: €6,000 (30%)
- Labor cost: €7,000 (35%)
- Prime cost: €13,000 (65%)
Remaining: €7,000 for rent, energy, depreciation, and profit.
Calculate prime cost per week
You'll need these numbers:
- Revenue this week (excluding VAT)
- Purchases this week (all ingredients)
- Labor costs this week (gross wages + employer contributions)
The formula's straightforward:
Prime cost % = ((Purchases + Labor costs) / Revenue excl. VAT) × 100
💡 Calculation example:
Week 12 - Bistro de Heerlijkheid:
- Revenue: €18,500 excl. VAT
- Purchases: €5,550
- Labor costs: €6,475
Prime cost: (€5,550 + €6,475) / €18,500 × 100 = 65%
What are healthy prime cost percentages?
Based on real restaurant P&L data across 400+ establishments, the ranges look like this:
- Fine dining: 55-65% (premium ingredients, more staff)
- Casual dining: 60-70%
- Fast casual: 50-60% (fewer staff, streamlined ingredients)
- Delivery/takeaway: 45-55% (no table service)
⚠️ Watch out:
Prime cost above 70%? You're likely losing money. Only 30% remains for rent, utilities, insurance, and profit.
Weekly check routine
Build this habit:
Every Monday (takes 10 minutes):
- Total all supplier receipts
- Calculate last week's labor costs
- Pull revenue from your POS
- Run the prime cost calculation
Compare with previous weeks: Spot a jump? Dig deeper. Maybe you scheduled extra staff or received a big delivery.
💡 Practical example:
Restaurant Mama Mia sees prime cost jump from 62% to 71%:
- Food cost stayed at 28%
- Labor cost spiked from 34% to 43%
- Cause: hired extra chef for busy week
- Fix: adjust scheduling or raise prices
Managing prime cost
Got three levers to pull:
1. Cut food cost:
- Tweak recipes
- Negotiate supplier terms
- Slash waste
2. Reduce labor cost:
- Schedule smarter
- Prep more efficiently
- Cross-train staff
3. Boost revenue:
- Raise prices
- Drive more traffic
- Increase check averages
Track digitally vs. Excel
Excel formulas driving you nuts? Digital tracking tools automatically calculate prime cost once you input revenue and purchases. Saves time and eliminates math errors.
But tracking matters more than the method. You can use an app or scribble on paper - knowing your numbers every week is what counts.
Calculate prime cost in 3 steps
Gather your weekly figures
Note your revenue excl. VAT, add up all supplier receipts, and calculate your total labor costs including employer contributions from the past week.
Add food cost and labor cost together
Prime cost = purchases + labor costs. These are your two biggest expense categories that together determine your profitability.
Divide by revenue and multiply by 100
Prime cost % = (food cost + labor cost) / revenue excl. VAT × 100. For most restaurants, a healthy prime cost is between 55-70%.
✨ Pro tip
Calculate your prime cost every Tuesday morning for the previous 7 days and log it in a simple notebook. After 6 weeks of consistent tracking, you'll identify weekly patterns that help optimize staff scheduling and supplier ordering timing.
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 employer contributions in labor cost?
Absolutely. Don't just count gross wages - add pension contributions, payroll taxes, and holiday pay. That's your real personnel expense.
What if my prime cost hits above 70%?
You're bleeding money. Only 30% remains for rent, utilities, equipment, and profit. Time to cut food costs, optimize scheduling, or raise prices immediately.
Does prime cost fluctuate by season?
Yes, and it's completely normal. During slow periods, labor cost percentage climbs because you're paying the same staff for less revenue. Busy seasons bring it down as revenue increases.
Can I benchmark against other restaurants?
Only loosely - fine dining runs different numbers than fast food. Use it primarily for self-comparison: are you improving week-over-week and month-over-month?
📚 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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