The single number that tells you whether a restaurant is working.
Prime cost is cost of goods sold plus total labor, expressed as a percentage of sales. Full service operations commonly target the low-to-mid sixties, and many quick service concepts run lower, though the right number depends on your format, your market, and your rent.
Why it beats watching food cost alone
Food cost and labor trade against each other. Prepping in house lowers food cost and raises labor. Buying prepared product does the reverse. Watching either one alone hides the trade.
Calculate it honestly
- COGS: beginning inventory plus purchases minus ending inventory
- Labor: all wages, plus payroll taxes, benefits, and workers comp, including management
- Divide the total by net sales for the same period
Leaving payroll taxes out is the most common mistake, and it can understate prime cost by several points.
Weekly beats monthly
A month is too long a feedback loop in a business where a bad week is invisible until it is history. Operators who hold the line almost always count key items weekly rather than monthly.
When prime cost drifts, look here first
- Portioning discipline, especially on high-cost proteins and pours
- Waste and comps that never get recorded
- Menu prices that have not moved while costs have
- Scheduling against forecast rather than habit
- Invoice prices creeping up between deliveries
The handful of numbers that actually tell you how the business is doing.
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