Understanding where every dollar goes is the first step to running a profitable restaurant. Here is every cost category with industry-standard targets.
The most important benchmark
Prime Cost (Food + Labor) < 60% of revenue
Everything else — rent, utilities, marketing — must fit into the remaining 40% to leave a profit margin.
| Category | Target % of Revenue | Type | Notes |
|---|---|---|---|
| Food Cost | 28–35% | Variable | Raw ingredients for all menu items. The most directly controllable cost. |
| Labor Cost | 25–35% | Variable | Wages, salaries, taxes, benefits for all front and back of house staff. |
| Rent / Occupancy | 5–10% | Fixed | Base rent, CAM charges, property taxes. Higher for urban/high-traffic locations. |
| Utilities | 3–5% | Fixed | Electricity, gas, water. Kitchen equipment drives most consumption. |
| Marketing & Advertising | 1–3% | Variable | Social media, email, promotions, delivery platform fees. |
| Supplies & Smallwares | 1–2% | Variable | Takeout containers, cleaning supplies, gloves, paper goods. |
| Technology & POS | 0.5–1% | Fixed | POS system, reservation software, ordering platforms. |
| Insurance | 0.5–1% | Fixed | General liability, workers' comp, property insurance. |
| Repairs & Maintenance | 1–2% | Variable | Equipment servicing, facility upkeep, unexpected breakdowns. |
| Credit Card Fees | 2–3% | Variable | Processing fees on card transactions, typically 1.5–3.5% per transaction. |
Here is how a typical casual dining restaurant allocates $50,000 in monthly revenue:
Understanding which costs are fixed (stay the same regardless of sales) vs. variable (scale with revenue) is critical for forecasting and break-even analysis.
Incurred regardless of how much you sell. Cannot be reduced quickly.
Scale with your sales volume. Easier to control in the short term.
Food cost is the most directly controllable line item. Unlike rent, you can reduce food cost this week through better purchasing, tighter portion control, and reduced waste.
| Restaurant Type | Food Cost Target |
|---|---|
| Fast food / QSR | 25–30% |
| Fast casual | 28–32% |
| Casual dining | 28–35% |
| Fine dining | 30–38% |
| Bakery / café | 28–35% |
| Catering | 25–35% |
Labor is often the largest single cost in a full-service restaurant. It includes wages, salaries, payroll taxes (7.65% for FICA), workers' compensation, and benefits.
Labor cost % formula:
Labor Cost % = Total Labor Dollars ÷ Total Revenue × 100
Include all front-of-house, back-of-house, management, and owner draws in the labor number.
Many operators track back-of-house (BOH) and front-of-house (FOH) labor separately. BOH typically runs 12–18% of revenue; FOH 10–15%.
| Type | Food | Labor | Prime Cost | Net Margin |
|---|---|---|---|---|
| QSR / Fast Food | 25–30% | 25–30% | 50–58% | 6–9% |
| Fast Casual | 28–32% | 25–30% | 53–60% | 5–8% |
| Casual Dining | 28–35% | 28–35% | 56–65% | 3–6% |
| Fine Dining | 30–38% | 30–35% | 60–68% | 3–7% |
| Bar / Nightclub | 18–24% | 30–35% | 50–58% | 7–12% |
| Bakery | 28–35% | 25–35% | 55–65% | 3–5% |
What are the main costs in a restaurant?
Food (28–35%), labor (25–35%), rent (5–10%), utilities (3–5%), marketing (1–3%), and supplies (1–2%) are the main categories. Prime cost (food + labor) is the key metric — target under 60% of revenue.
What is the biggest cost for a restaurant?
Labor is typically the largest single cost for full-service restaurants at 30–35% of revenue. Food cost is second at 28–35%. Together they form prime cost.
What is a typical restaurant profit margin?
Net margins are typically 3–9%. Full-service restaurants average 3–5%; fast casual averages 6–9%. Margins are thin, so every point of cost reduction matters.
What is restaurant prime cost?
Prime cost = food cost + labor cost. The most important cost benchmark for restaurants. Target under 60% of revenue. Full-service restaurants targeting good profitability aim for 55–58%.
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