Prime cost is the single most important number for a restaurant’s profitability. It combines your two biggest costs: the cost of what you sell, and the cost of the people who make and serve it.
Prime cost = Cost of Goods Sold (COGS) + Total Labor
- COGS: everything you spend on food and beverage that becomes a sale.
- Labor: wages, salaries, payroll taxes, and benefits for all staff.
Example
A restaurant does $50,000 in sales in a month. COGS is $16,000 and labor is $15,500. Prime cost is $31,500, which is 63% of sales.
What’s a healthy prime cost?
Most full-service restaurants aim to keep prime cost at or below about 60% of sales. Quick-service can run lower. Above roughly 65%, profit gets very thin.
Why it matters
Rent and most other costs are fixed. Prime cost is where you actually have control week to week. Watching it is how you catch a problem before it eats your profit.
How to track it
Add up COGS and labor for the period, divide by sales, and watch the percentage over time.
Casacabe calculates your prime cost automatically from your sales, expenses, and staff costs, so you always know where you stand.