Prime cost combines your two largest and most controllable expenses — the food and drink you sell, and the people who make and serve it. Rent is fixed the day you sign the lease, but prime cost moves every single week, which is why seasoned operators treat it as the health check for the whole business.
Prime cost = COGS (food + beverage) + total labor
Prime cost % = (prime cost ÷ total sales) × 100
COGS is your cost of goods sold — see food cost percentage. Total labor is fully loaded pay — wages plus payroll taxes and benefits — from labor cost percentage. Add the two, divide by sales, and you have the figure to track weekly.
| Line | Amount | % of sales |
|---|---|---|
| Total sales | $105,000 | 100% |
| COGS (food + beverage) | $32,000 | 30.5% |
| Total labor (fully loaded) | $31,500 | 30.0% |
| Prime cost | $63,500 | 60.5% |
That leaves about 39 cents of every dollar to cover rent, utilities, marketing, insurance and profit.
A widely cited industry rule of thumb is to keep prime cost around 55-65% of sales, with many operators drawing the line at 60% or below. The logic: whatever prime cost consumes, everything else — occupancy, overhead and profit — has to fit in the rest. Full-service restaurants tend to run at the higher end of the range and quick-service toward the lower end. These are general benchmarks, not rules; a concept with cheap rent can survive a higher prime cost, and one with expensive rent cannot. What matters is that prime cost plus your fixed costs still leaves a profit.
Because prime cost has two halves, you have two sets of levers — and the trick is pulling them without shifting cost from one side to the other. On the food side: tighten portions, cut waste, recost recipes as supplier prices move, and engineer the menu toward higher-margin items (see how to price a menu). On the labor side: schedule to a sales forecast, kill avoidable overtime, cross-train, and improve retention. Watch for the trap: buying pre-cut or pre-made product lowers labor but raises food cost, and doing everything from scratch does the reverse. Judge every such change by its effect on the combined number, not on either half alone.
Monthly statements arrive too late to fix a bad month. Because food and labor both move fast, counting inventory and pulling labor weekly lets you catch a creeping number while you can still act — tighten portions, adjust the schedule, or re-price. Prime cost also nets out the noise of chasing food or labor in isolation: a kitchen can trim food cost by adding prep labor and end up no better off. The combined figure keeps you honest, and it feeds directly into your break-even analysis.