Prime Cost: The Number That Runs Your Restaurant
Food, beverage, and labor are most of your spending. Track them together every week and you can steer before the month gets away.
A busy Saturday feels like a good week. Then the P&L shows up a month later and the margin is thin again. In most restaurants, the gap between a strong week and a profitable one sits in two lines: what you spend on product and what you spend on people.
Prime cost is those two lines together: cost of goods sold (COGS) for food and beverage plus total labor, including payroll taxes and benefits. It is the biggest controllable number on your P&L, which is why experienced operators watch it weekly.
These are rules of thumb, not laws. Full-service places with a bar often run a bit higher, and counter-service concepts with lean staffing often run lower. What matters is your own trend: a prime cost that drifts up two points in a month is a signal, whatever your target.
Calculating it the right way
COGS is not what you bought this week. It is what you used: beginning inventory plus purchases minus ending inventory. If you skip the count, a big delivery makes one week look terrible and the next look great. Labor includes hourly wages, salaried managers, payroll taxes, and benefits. Some operators split out management salary to see hourly labor on its own; just be consistent.
Owner story
Rosa's weekly sales averaged $28,000. Her food and beverage COGS came to $8,960 (32%) and labor with taxes to $8,400 (30%), for a prime cost of 62%. Weekly counts showed the problem was not her menu prices: avocado and protein waste spiked on slow Mondays and Tuesdays. She cut prep pars on those days and trimmed one overlapping shift. Six weeks later she was at 59%, worth about $840 a week.
Illustrative composite, not a real customer.
A weekly prime cost routine
- 1
Count on the same day
Count key inventory at the same time each week, ideally after close on Sunday.
- 2
Total your purchases
Pull every invoice for the week, including produce and liquor deliveries.
- 3
Calculate COGS
Beginning inventory plus purchases minus ending inventory, split into food and beverage.
- 4
Pull labor
Use your payroll report for the same week and add an estimate for employer taxes.
- 5
Divide by sales
Prime cost divided by net sales gives your percentage. Log it next to last week's.
- 6
Pick one fix
If it rose, find the line that moved: a price increase, waste, comps, or an extra shift.
Myth or fact? Tap to flip
Schedule to the forecast
Your POS can show sales by hour for each day of the week. Build next week's schedule from that, not from last week's schedule. Even trimming 30 minutes from a few shifts on slow days moves labor percentage.
Prime cost habits
0/7 doneWords to know
- Prime cost
- Food and beverage cost of goods sold plus total labor cost.
- COGS
- Beginning inventory plus purchases minus ending inventory for a period.
- Contribution margin
- An item's selling price minus its plate cost.
Finished reading?
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