Prime cost is the sum of your food cost and labor cost - the two largest expenses of any restaurant. Many new owners think they can wing these calculations, but that's exactly how restaurants burn through startup money in six months. Miss this target by 10%, and you're looking at serious cash flow problems before your first anniversary.
What exactly is prime cost?
Prime cost breaks down into two main pieces:
- Food cost: every penny spent on ingredients and beverages
- Labor cost: total personnel expenses (wages, benefits, payroll taxes)
These two categories typically consume 55-65% of your total revenue in a well-managed restaurant. Everything else has to cover rent, utilities, insurance, equipment, and your profit margin.
💡 Example prime cost calculation:
Restaurant with €40,000 monthly revenue:
- Food cost: €12,000 (30%)
- Labor cost: €14,000 (35%)
Prime cost: €26,000 (65%)
Calculate food cost for your opening
Start by costing out every single dish on your planned menu. You need to break down each recipe to exact ingredient costs per serving - no guessing allowed.
⚠️ Note:
Always work with prices excluding VAT. A €24.00 dish including VAT equals €22.02 excluding VAT (€24.00 ÷ 1.09).
Aim for food cost between 28-35% of revenue. Go beyond that range, and profitability becomes nearly impossible.
💡 Example food cost per dish:
Pasta carbonara - menu price €18.50 incl. VAT:
- Selling price excl. VAT: €16.97
- Ingredient costs: €5.10
- Food cost: 30.1%
This hits our target range perfectly.
Estimate labor cost as a starter
Labor cost includes much more than take-home pay. You've got to account for every personnel expense:
- Gross wages (with holiday pay built in)
- Employer social contributions (roughly 25% of gross wages)
- Pension contributions
- Bonuses and tip pools
Most restaurants see labor costs fall between 25-35% of revenue. Fine dining operations might reach 40%. But one of the most common blind spots in kitchen management is owners who forget to include their own salary in labor calculations.
💡 Example labor cost calculation:
Small restaurant, 2 full-time employees:
- Chef: €3,200 gross + 25% contributions = €4,000
- Server: €2,400 gross + 25% contributions = €3,000
- Owner salary: €3,000
Total monthly labor cost: €10,000
Calculate prime cost percentage
Add your food cost and labor cost together, then divide by your projected revenue.
Formula: Prime cost % = (Food cost + Labor cost) ÷ Revenue × 100
⚠️ Note:
Prime costs above 65% make it nearly impossible to cover rent, utilities, and other fixed expenses. Time to rework your ingredients, staffing, or pricing strategy.
What do you do with this information?
Your prime cost calculation tells you exactly if your restaurant concept can actually turn a profit. Armed with these numbers, you can:
- Redesign menu items before opening day
- Set realistic revenue targets
- Determine if you need additional startup capital
- Right-size your initial team
A food cost calculator automates these calculations and tracks changes over time, giving you control over your biggest expenses from day one.
How do you calculate prime cost for your restaurant? (step by step)
Calculate food cost per dish
Make a list of all planned dishes. For each dish, add up all ingredient costs and divide by the selling price excl. VAT. Aim for 28-35% food cost per dish.
Estimate your total labor cost
Add up all personnel costs: gross wages, social contributions (25% of gross), holiday pay, and your own entrepreneur allowance. This becomes your monthly labor cost.
Calculate your prime cost percentage
Add food cost and labor cost together. Divide this by your expected monthly revenue and multiply by 100. Aim for a maximum of 65% prime cost.
Check if it's feasible
With your prime cost percentage, you know how much is left for rent, energy, insurance, and profit. At more than 65% prime cost, it becomes difficult to be profitable.
✨ Pro tip
Calculate prime cost every single day for your first 90 days of operation. You'll spot patterns between theoretical costs and real-world operations that can save thousands in wasted ingredients.
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's a realistic prime cost target for a new restaurant?
Most successful restaurants keep prime cost between 55-65% of revenue. Food cost should hit 28-35%, labor cost 25-35%. Fine dining can stretch to 70% because of higher labor demands and premium ingredients.
Should I include VAT in my prime cost calculation?
Never include VAT in your calculations. That money goes straight to tax authorities, so it doesn't affect your actual profitability or cash flow.
What if my prime cost exceeds 65%?
You have three options: increase menu prices, reduce ingredient costs, or cut labor expenses. Without addressing this, turning a profit becomes nearly impossible.
How often should I recalculate prime cost after opening?
Monthly at minimum, but weekly works better for new restaurants. Supplier prices change constantly, and you'll need to adjust staffing as you learn your actual customer flow patterns.
📚 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.
Start your restaurant with the right numbers
A business plan without food cost calculation is a gamble. KitchenNmbrs lets you calculate recipes before you open. Start well-prepared. Try it free.
Start free trial →