Does your restaurant feel busy but your bank account tells a different story? Prime cost - the sum of food cost and labor costs - might be eating your profits week after week. Here's how to diagnose and fix this cash flow killer.
What exactly is prime cost?
Prime cost = food cost + labor costs. These are your two largest cost items. For a healthy restaurant, prime cost should sit between 55% and 65% of your revenue.
? Example:
Restaurant with €20,000 weekly revenue:
- Food cost: €6,500 (32.5%)
- Labor costs: €5,800 (29%)
- Prime cost: €12,300 (61.5%)
This is healthy. Above 65% becomes problematic.
Signs that your prime cost is too high
You'll spot a too-high prime cost through these warning signals:
- Weekly prime cost above 65% of your revenue
- Rising trend over multiple weeks
- No money left despite a packed dining room
- Struggling to pay fixed costs (rent, insurance)
Analyze your food cost first
Start with your food cost because it's the easiest to control. Check these three things:
? Example food cost check:
Your best seller: steak à la carte
- Ingredients: €11.50
- Menu price: €32.00 incl. VAT = €29.36 excl. VAT
- Food cost: (€11.50 / €29.36) × 100 = 39.2%
Too high! Aim for max 33% for this type of dish.
Common food cost leaks:
- Portions too large: Chef gives 250g meat, you calculate on 200g
- Prices not updated: Supplier raised 15%, you didn't
- Trimming loss not calculated: Whole fish €18/kg becomes €32/kg fillet
- Waste: Too much prep, poor planning
Check your labor costs
Labor costs are trickier to tackle, but can be analyzed. Common percentages:
- Fine dining: 28-35% of revenue
- Casual dining: 25-32% of revenue
- Fast casual: 20-28% of revenue
⚠️ Note:
Labor costs are more than just wages. Also include: payroll taxes, vacation pay, sick leave, training.
Direct action plan for high prime cost
If your prime cost is structurally above 65%, tackle these three areas:
Week 1-2: Emergency food cost reduction
- Check your 5 best-selling dishes for exact cost price
- Raise prices of dishes with food cost >35%
- Reduce portions where possible (200g instead of 250g meat)
Week 3-4: Optimize labor scheduling
- Analyze staffing per day/hour
- Adjust schedules to actual busy periods
- Train staff for multi-tasking (server who can also work the bar)
? Example impact:
Restaurant reduces prime cost from 68% to 62%:
- Weekly revenue: €20,000
- Savings: 6% = €1,200 per week
- Per year: €62,400 extra profit
Structural solutions
For long-term stability you need systems. Based on real restaurant P&L data, establishments that track these metrics weekly maintain healthier prime costs:
- Weekly prime cost tracking: Calculate every Monday
- Document recipes: Exact portions and cost prices
- Supplier monitoring: Update price changes immediately
- Labor scheduling on data: Schedule based on occupancy history
A system like KitchenNmbrs helps calculate prime cost automatically and see trends, without having to do the math yourself in Excel.
How do you analyze a high prime cost? (step by step)
Calculate your actual prime cost percentage
Add up food cost + labor costs from last week. Divide by revenue excl. VAT and multiply by 100. Above 65% requires action.
Split out food cost and labor costs
Determine what part of your prime cost comes from food cost (>33%) and what part from labor (>32%). Tackle the biggest problem first.
Check your top 5 dishes for cost price
Calculate exactly what your 5 best-selling dishes cost in ingredients. These determine 80% of your food cost problem.
Adjust directly what is too high
Raise prices of dishes with food cost >35%, or reduce portions. For labor: optimize schedules based on actual occupancy.
✨ Pro tip
Track your prime cost every Monday morning for the previous 7 days and compare it to the same week last month. If it's risen more than 2% consistently for 3 weeks, implement emergency cost controls immediately.
Calculate this yourself?
In the KitchenNmbrs app you can do this in just a few clicks. 7 days free, no credit card.
Was this article helpful?
Frequently asked questions
What if only my labor costs are too high?
Can I lower prime cost without losing quality?
How often should I check prime cost?
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
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.
More in this category
Related questions
- → What do you do when you see waste costs piling up in a...
- → How do you decide which scenarios to review each quarter?
- → What steps do you take when your food cost percentage is...
- → What do you do when labor costs go up, but your prices...
- → How do you balance what the service staff wants and what...
Explore more topics
Make better decisions with real numbers
Should you change your menu? Raise prices? Test a new concept? KitchenNmbrs simulates scenarios with your own data. Try it free for 14 days.
Start free trial →