What Is Prime Cost? Restaurant Prime Cost Formula Explained
Last updated: July 24, 2026 · Reviewed by the MenuPricer Team
Prime cost is the single most useful number for diagnosing restaurant profitability. It combines your two largest controllable costs — food and labor — into one benchmark that tells you immediately whether your operation has room to be profitable.
Prime Cost Formula
Target: 55–65% for most full-service restaurants
What is prime cost?
Prime cost is the combined total of your cost of goods sold (COGS — food and beverage cost) and your total labor cost (all wages, salaries, payroll taxes, and benefits). Together, these two categories typically represent 55–70% of a restaurant's revenue.
They are called “prime” costs because they are:
- •The largest — together they usually dwarf rent, utilities, and all other costs
- •The most controllable — unlike rent or insurance, you can change them with operational decisions
- •The most immediate — changes show up in your numbers within days or weeks, not months
After prime cost, you still need to cover rent (5–10% of revenue), utilities (1–3%), marketing, insurance, repairs, and other overhead. If prime cost alone is already 70% or higher, there is mathematically no room for everything else plus profit.
How to calculate prime cost: worked example
Monthly prime cost calculation — casual dining restaurant
Cost of Goods Sold
Labor Cost
⚠ Above the 65% target — profit is very tight with this cost structure
Prime cost benchmarks by restaurant type
| Restaurant type | Food cost | Labor cost | Prime cost |
|---|---|---|---|
| Full-service casual | 28–33% | 28–33% | 56–66% |
| Fast casual | 25–30% | 25–30% | 50–60% |
| Fine dining | 28–35% | 32–38% | 60–73% |
| Food truck | 28–35% | 20–28% | 48–63% |
| Bar / gastropub | 22–28% | 28–35% | 50–63% |
Why prime cost beats tracking food and labor separately
Food cost and labor cost trade off against each other in ways that matter for profitability. A restaurant might reduce food cost by switching to cheaper ingredients — but if it requires more prep labor, total prime cost might not improve. Tracking both together prevents these substitution effects from hiding in your numbers.
Dangerous tradeoff (looks good individually)
Low food cost masking a labor problem
Balanced (healthy prime cost)
Both components in range — room for profit
How to reduce prime cost
On the food cost side:
On the labor cost side:
Control the food cost half of prime cost
MenuPricer calculates food cost percentage for every dish and suggests the right menu price to hit your food cost target — the first step to a healthy prime cost.
Open Food Cost Calculator →FAQ
What is prime cost in a restaurant?
Prime cost in a restaurant is the sum of two largest controllable expenses: cost of goods sold (food and beverage cost) plus total labor cost (wages, salaries, payroll taxes, and benefits). It is called 'prime' cost because these two categories typically represent 55–70% of revenue and are the most directly controllable by management. All other costs — rent, utilities, marketing, insurance — are relatively fixed and harder to change quickly. Prime cost is where operational efficiency shows up first.
What is the prime cost formula?
Prime cost = Cost of goods sold (COGS) + Total labor cost. As a percentage: Prime cost % = Prime cost ÷ Total revenue × 100. Example: If your restaurant has $80,000 in monthly revenue, $24,000 in food and beverage cost (30%), and $22,000 in labor cost (27.5%), your prime cost is $46,000 and your prime cost % is 57.5%. Most successful full-service restaurants keep prime cost below 60–65% of revenue.
What is a good prime cost percentage for a restaurant?
A good prime cost percentage is 55–65% for full-service restaurants. Full-service restaurants typically run 28–35% food cost and 28–35% labor cost, totaling 56–70% prime cost. Fast casual and counter-service restaurants can operate at lower prime cost (50–58%) because they have less labor (no servers) and often lower food cost due to standardized menus. Fine dining typically runs higher prime cost (60–70%) because of the premium ingredients and higher staffing ratios required.
How do I reduce prime cost?
To reduce prime cost, work both components separately. For food cost: reprice underperforming dishes, tighten portion controls, audit waste daily, and negotiate supplier pricing on high-volume ingredients. For labor cost: optimize scheduling to match staffing to actual covers, cross-train staff to reduce overtime, and measure labor cost as a percentage of each shift's revenue rather than just total hours. A 2-point reduction in food cost + 2-point reduction in labor cost equals a 4-point drop in prime cost — which on $1M revenue is $40,000 in recovered margin.