Prime cost (restaurant): the one number that decides whether the kitchen is profitable.
Prime cost is food plus beverage COGS plus total labour (kitchen and front-of-house, taxes and benefits included) divided by revenue. It is the single most important controllable cost in a restaurant — if it drifts above the band for your concept, no amount of marketing fixes the P&L.
Prime cost is the sum of your two biggest controllable expenses — food and beverage COGS plus all labour cost — expressed as a percentage of revenue. Rent, utilities, marketing, depreciation are fixed or semi-fixed and you cannot fix them this week. Prime cost you can move tomorrow, in any service, by changing what you portion and who you schedule. That is why every restaurant operator who runs a tight P&L watches prime cost every single day, not at month-end.
Definition
Prime cost = food COGS + beverage COGS + total labour cost (back-of-house wages, front-of-house wages, payroll taxes, benefits, paid breaks), divided by net revenue, expressed as a percentage. The "prime" name comes from these being the two primary, controllable cost categories in any food-service business.
Three details get missed by operators tracking prime cost in a spreadsheet. First: labour means fully loaded — gross wages plus employer taxes plus benefits, not just take-home pay. Second: salaried managers count too, even if you "do not really think of them as labour." Third: the denominator is net revenue (after VAT), not the till total. Use the gross figure and your prime cost percentage looks 10-20% lower than reality.
The formula
Prime cost % = (Food COGS + Beverage COGS + Total Labour) / Net Revenue × 100
Where:
Food COGS = food ingredients used (not purchased) in the period
Beverage COGS = drink ingredients used in the period
Total Labour = gross wages + payroll taxes + benefits (BOH + FOH + managers)
Net Revenue = gross revenue − VAT − card fees − refundsCOGS in this formula is used, not purchased. A €2.000 produce delivery on Monday is not €2.000 of COGS on Monday — it is COGS only as the ingredients leave inventory and become plated food. For daily tracking, the standard shortcut is to use sales-driven COGS: each menu item has a recipe cost, and each sale draws down the cost from a snapshot. That is exactly how nouz handles it.
Worked example
A 60-seat casual bistro in Vienna, Friday service.
| Line | Amount |
|---|---|
| Net revenue (after 10% VAT, card fees) | €3.420 |
| Food COGS (recipe-driven, plates sold) | €908 |
| Beverage COGS (wine, beer, soft drinks) | €312 |
| BOH labour (2 chefs, 1 KP, loaded) | €620 |
| FOH labour (3 servers, 1 host, loaded) | €485 |
| Prime cost total | €2.325 |
| Prime cost % | 68,0% |
At 68% this bistro is above the 55-65% casual-bistro band — by enough that rent, utilities and marketing have to come out of the remaining 32% and there is almost nothing left for EBIT. The diagnostic question is always: which side of the prime cost split is high? Here food and beverage COGS = 35,7% (high — target is 28-32%) and labour = 32,3% (borderline — target is 25-32%). The fix is on the food side first: portion audit, supplier re-tender, menu engineering on the three loss-leading dishes.
Benchmarks by concept
| Concept | Prime cost band | Notes |
|---|---|---|
| Coffee shop / espresso bar | 50-58% | Low food cost (beverage-led), low labour per ticket |
| Quick-service / fast-casual | 55-62% | Higher food cost, lower labour share |
| Casual full-service bistro | 55-65% | The most common band |
| Fine dining | 60-68% | Higher labour (skilled BOH/FOH ratio) offsets food discipline |
| Bar / cocktail-led venue | 50-58% | Beverage COGS low, labour the swing factor |
These bands are observed across European independents — bigger chains run tighter because they negotiate supplier contracts and standardise scheduling. The rule of thumb: if your prime cost is 5 points above the top of your band for two weeks running, you have a structural problem, not a bad week. See the full prime cost mastery playbook for the corrective sequence and the café-specific daily routine for coffee shops.
Why it matters
Rent is fixed for the next year. Utilities track occupancy. Marketing is discretionary. Prime cost is the one big number you can move this week, and it accounts for 50-68% of your revenue. A one-point reduction in prime cost on a €600.000-revenue restaurant is €6.000 a year of pure EBIT — more than most operators net from a "marketing campaign" of equal effort.
The operators who run profitable restaurants check prime cost daily, not monthly. By the time the month-end accounts say "labour was 34% this month" the four bad weeks that caused it are gone. Same-day prime cost — recipe-driven food cost plus actual hours rostered today, divided by today's net revenue — is the operational metric. In nouz this is the headline number on the daily P&L.
Related concepts
- Food cost percentage — the food side of prime cost, isolated.
- Labour cost percentage — the labour side of prime cost, isolated.
- Café labour cost benchmark — sector band for coffee shops.
- Restaurant prime cost mastery — the corrective playbook.
- Daily prime cost for cafés — the every-evening routine.
FAQ
What is a good prime cost percentage for a restaurant?
For a casual full-service restaurant the healthy band is 55-65% of net revenue. Coffee shops and quick-service typically run 50-58%. Fine dining runs 60-68% because skilled labour is higher. Above the top of your concept band for two weeks running is a structural problem — usually food cost or over-scheduling — not a bad week.
Does prime cost include rent or utilities?
No. Prime cost is only food COGS, beverage COGS, and total labour. Rent, utilities, marketing, insurance and depreciation are separate operating expenses. The whole point of prime cost as a metric is to isolate the two large, controllable cost categories so you can act on them this week — the fixed costs are a separate, slower conversation.
Should prime cost be calculated on gross or net revenue?
Net revenue — after VAT, card fees and refunds. Using gross makes your prime cost percentage look 10-20% lower than reality and gives a false sense that the kitchen is in band. Every benchmark in the industry is stated against net revenue. See gross vs net revenue for the full carve-out.
How often should I check prime cost?
Daily for full-service restaurants and cafés. By the time month-end accounts arrive the four bad weeks that caused a high prime cost are gone and unrecoverable. Same-day prime cost — recipe-driven food cost plus actual hours rostered today, against today's net revenue — is what lets you correct on Tuesday rather than learning about Tuesday on the 15th of next month.