Glossary
Prime cost
Prime cost is a restaurant's total cost of goods sold plus total labor, the two largest controllable expenses combined into one number.
The number operators live by
Prime cost adds food and beverage cost to all labor, including wages, salaries, payroll taxes, and benefits. Because these are the costs a manager can actually move week to week, prime cost is the single clearest gauge of operational health.
Most full-service restaurants target a prime cost at or below 60 percent of sales. Above 65 percent, profit gets very hard to find.
- Cost of goods sold — food and beverage
- Total labor — hourly, salaried, taxes, and benefits
- Target — 60 percent of sales or lower for most concepts
Example
A restaurant does $100,000 in monthly sales with $30,000 in food and beverage cost and $32,000 in labor. Its prime cost is $62,000, or 62 percent of sales, a signal to tighten scheduling or purchasing.
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