You'll save your restaurant by keeping prime cost between 55-65% of revenue. Prime cost combines your two biggest expenses: food and labor costs. Go higher and profitability disappears fast.
What exactly is prime cost?
Prime cost has two main components:
- Food cost: ingredients and beverages
- Labor cost: wages, payroll taxes, outsourcing
These expenses eat up most of your revenue. Control them, and you control your restaurant's financial future.
💡 Example calculation:
Restaurant with €50,000 revenue per month:
- Food cost: €15,000 (30%)
- Labor cost: €17,500 (35%)
Prime cost: €32,500 (65%)
Benchmarks for starting restaurants
New restaurants typically run higher costs than established ones. Here's what's realistic:
- Casual dining: 60-70% (first year)
- Fine dining: 55-65% (first year)
- Fast casual: 55-65% (first year)
- Delivery/takeaway: 50-60% (lower labor cost)
⚠️ Note:
Your first year prime cost often runs 5-10% higher due to inefficiencies, training costs, and learning curves. Budget accordingly.
Food cost component (25-35%)
For new restaurants:
- Bistro/brasserie: 28-32%
- Fine dining: 30-35%
- Casual dining: 28-33%
- Pizza/pasta: 22-28%
Always calculate excluding VAT. That €25.00 menu price becomes €22.94 excluding 9% VAT.
💡 Example food cost:
Pasta carbonara - menu price €18.50 (incl. VAT):
- Selling price excl. VAT: €16.97
- Ingredient costs: €5.10
Food cost: 30.1% - perfect within range
Labor cost component (25-35%)
Labor typically becomes your largest expense. For starters:
- Kitchen: 15-20% of revenue
- Service: 10-15% of revenue
- Management: 5-8% of revenue
Include everything: gross wages, payroll taxes, outsourcing, your own salary. Based on real restaurant P&L data, most owners forget to account for their own time value.
💡 Example labor cost:
Restaurant €40,000 revenue/month:
- Chef: €3,500 (incl. payroll taxes)
- Sous chef: €2,800
- Service staff: €4,200
- Owner: €2,500
Total: €13,000 = 32.5%
What if your prime cost is too high?
Above 70% spells trouble. Here's how to fix it:
- Lower food cost: optimize recipes, control portions
- Increase efficiency: reduce waste, better planning
- Raise prices: carefully, test customer reaction
- Optimize labor: smarter schedules, cross-training
Monitor prime cost
Check your prime cost weekly. Calculate it this way:
Prime cost % = ((Food cost + Labor cost) / Revenue) × 100
Tools like KitchenNmbrs track food cost automatically, keeping your prime cost calculation current.
How do you calculate prime cost? (step by step)
Gather your food cost data
Add up all ingredient costs from the past week. Don't forget: vegetables, meat, fish, dairy, spices, oil, everything that goes into the dishes.
Calculate your labor cost
Add up all wage costs: gross wages, payroll taxes, outsourcing, your own salary. Also include vacation pay and 13th month bonus (divide by 12).
Divide by revenue and multiply by 100
Prime cost % = ((Food cost + Labor cost) / Revenue) × 100. Do this weekly to see trends and adjust quickly if things get out of hand.
✨ Pro tip
Track your prime cost during your first 30 days of operation specifically. New restaurants often hit 75-80% initially, but you need to see consistent weekly improvement toward 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 if my prime cost is 75% as a starter?
That's dangerously high for long-term survival. Focus first on food cost optimization - it delivers faster results than labor adjustments. Target getting below 65% within 6 months.
Should I include my own salary in labor cost?
Absolutely yes, even if you're not drawing a paycheck yet. Calculate at least €2,500-3,000 monthly for your time, otherwise your numbers lie to you.
Does prime cost vary by season?
Yes, quiet periods push prime cost higher because fixed wage costs remain constant while revenue drops. Expect 5-10% higher prime cost during January/February slowdowns.
How do I handle prime cost spikes during staff training?
Training weeks often push prime cost 8-12% higher due to double coverage and reduced efficiency. Budget an extra €2,000-3,000 monthly for your first 90 days to cover this reality.
📚 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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