Here's what most restaurant owners don't realize: they're tracking the wrong numbers. Prime cost - your food expenses plus labor costs combined - tells you more about profitability than any other metric. Once it climbs above 65%, you're fighting an uphill battle.
What exactly is prime cost?
Prime cost breaks down into two main pieces:
- Food cost: every ingredient and beverage that goes out your door
- Labor costs: wages, payroll taxes, benefits, sick pay, the works
These expenses scale directly with your business volume. More customers means more ingredients consumed and more hands on deck.
💡 Example:
Restaurant pulling €50,000 monthly:
- Food cost: €16,000 (32%)
- Labor costs: €15,000 (30%)
Prime cost: €31,000 (62%)
The formula for prime cost
Nothing fancy here:
Prime cost % = (Food cost + Labor costs) / Revenue × 100
Stick to the same timeframe for everything - weekly or monthly works fine.
⚠️ Note:
Don't forget the hidden labor costs: payroll taxes, worker's comp, vacation accruals, and temp agency fees all count.
What are normal prime cost percentages?
Your target depends on what you're running:
- Fine dining: 55-65% (higher labor, expensive ingredients)
- Casual dining: 58-68% (middle ground on service intensity)
- Fast casual: 50-60% (streamlined operations)
- Cafés: 55-65% (varies with food complexity)
💡 Real numbers from December:
Neighborhood bistro:
- Revenue: €45,000
- Food purchases: €13,500
- Total labor (gross + taxes): €18,000
Prime cost: (€13,500 + €18,000) / €45,000 × 100 = 70%
Red flag territory - time to make changes.
What if your prime cost is too high?
Above 70% and you're bleeding money. Three ways to fix it:
- Cut food costs: rework recipes, negotiate with vendors, eliminate waste
- Trim labor: smarter scheduling, cross-train staff, kill dead hours
- Bump prices: strategic menu adjustments for better margins
Labor usually offers the biggest opportunity. Most owners obsess over ingredient costs while payroll spirals out of control. Based on real restaurant P&L data, labor inefficiencies often account for 5-8% of revenue waste.
💡 Success story:
Restaurant drops from 72% to 62% prime cost:
- Food cost: 32% → 30% (smarter purchasing)
- Labor: 40% → 32% (tighter scheduling)
Net result: 10% more profit on every dollar.
How do you track prime cost?
Excel spreadsheets work but they're a pain. You'll need:
- Revenue reports from your POS
- Every single food invoice
- Complete payroll records
- Hours of number-crunching each month
Modern systems pull everything together automatically. Tools like a food cost calculator make the math disappear - you get real-time percentages without the manual headache.
Calculate prime cost in 3 steps
Gather your food cost figures
Add up all purchase invoices for ingredients, beverages, and packaging from the past month. Don't forget: oil, spices, garnishes - everything that goes on the plate.
Calculate total labor costs
Add up: gross wages, employer contributions (roughly 25% on top of gross), holiday pay, temporary staff, and any bonuses. This is more than just net pay.
Divide by your revenue
Prime cost % = (Food cost + Labor costs) / Revenue × 100. If you're above 65%, it's time to look at where you can optimize.
✨ Pro tip
Track your prime cost separately for your 3 busiest days versus your 3 slowest days each month. Slow periods often spike to 80%+ due to fixed staffing, revealing where you're hemorrhaging money.
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 VAT in the prime cost calculation?
Skip the VAT completely. Use revenue and purchase costs excluding tax for accurate comparisons.
How often should I check my prime cost?
Monthly minimum, but weekly gives you real control. You'll catch purchasing mistakes and scheduling problems before they compound.
What if my prime cost is 75% - is that always bad?
Unless your rent is practically free, 75% leaves almost nothing for utilities, marketing, and actual profit. Time for emergency measures.
Do cleaning costs count toward prime cost?
Nope, cleaning falls under operating expenses. Prime cost only covers food ingredients and direct labor - your kitchen and service teams.
📚 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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