What is prime cost (restaurant)?
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 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.
It helps to hold the two halves of prime cost against their own rules of thumb, because a healthy blended number can hide a problem on one side. The ranges below are standard hospitality guidelines, not fixed targets — treat them as a place to start a conversation, not a verdict.
| Component | Rule-of-thumb range | What sits at the healthy end |
|---|---|---|
| Food cost % | 28-35% | Recipe-costed menu, portion discipline, quarterly supplier re-tender |
| Beverage cost % | 18-24% | Priced drinks, low spoilage, tight pour control |
| Labour cost % | 25-35% | Roster matched to forecast demand, not to the busiest day |
| Prime cost % (combined) | ≤ 65% | Both halves in band and moving with revenue |
Common mistakes
Most prime cost errors are not maths errors — they are definition errors that make the number look better than the P&L. The five below account for almost every "but my prime cost said 58%" surprise at month-end.
- Using gross revenue as the denominator. Dividing by the till total instead of net revenue (after VAT and card fees) flatters prime cost by 10-20 points. Every benchmark in this article assumes net.
- Leaving salaried managers out of labour. Owner-operators who pay themselves — or work unpaid shifts — routinely exclude their own cost, so the labour half reads artificially low. Attribute a market-rate cost to every hour worked.
- Counting purchases as COGS. A big Monday delivery is not Monday's food cost — ingredients become COGS only as they leave inventory and get plated. Recipe-driven costing fixes this; counting invoices does not.
- Forgetting the loading on wages. Employer payroll taxes, social contributions, paid breaks and benefits add roughly 20-30% on top of gross wages. Track 'fully loaded' or the labour half is a fifth too low.
- Only looking at the blended number. A 63% prime cost made of 36% food and 27% labour is a food problem, not a healthy result. Always split the two halves before deciding what to fix.
How it shows up in your daily P&L
Prime cost is not a separate report you run once a month — it is baked into the same EBIT calculation you see the evening you close. nouz starts from gross revenue, subtracts tax and card fees to get net revenue, then subtracts COGS (the food and beverage half of prime cost, recipe-driven), variable costs, and the day's slice of fixed costs to land on same-day EBIT. The food-and-beverage subtraction and the labour line are exactly the two halves of prime cost, so the moment today's EBIT is thinner than it should be, the daily P&L already shows you which half moved.
That is the whole point of watching prime cost daily rather than at month-end: because the two biggest controllable costs feed straight into today's EBIT, a portion that drifted or a shift that was over-rostered shows up the same evening — while you can still change tomorrow's prep list and next week's roster. Try the restaurant prime cost calculator to see the split on your own numbers before you set it up as a daily habit.
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.
Common questions
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.
Should prime cost be at or below 65%?
65% is the classic full-service rule of thumb — it leaves roughly a third of net revenue to cover rent, utilities, marketing and still land some EBIT. It is a guideline, not a law. Coffee-led and quick-service concepts often run below it; fine dining can sit a little above it because skilled labour is higher. What matters is your band for your concept, held for two weeks, not a single number.
My prime cost looks fine but I am still not profitable — why?
A healthy blended prime cost can still hide a problem on one side, and it says nothing about your fixed costs. If prime cost is genuinely in band, the leak is usually rent, utilities, or an over-large fixed-cost base for your revenue. Split prime cost into its food and labour halves first; if both are in band, the profit problem is on the fixed-cost line, not the controllable one.
Does prime cost include the owner's wages?
Yes, if the owner draws a salary or works shifts. Prime cost measures the real cash cost of running the kitchen and floor, so an owner-operator who works 50 hours a week for free is hiding labour cost and making prime cost look artificially low. Attribute a market-rate cost to owner hours for an honest figure that survives the day you have to hire a replacement.