Prime cost: the number that decides restaurant profit
If you track one combined number, make it prime cost. It's where the profit fight is won.
4 min read · Updated June 16, 2026
Prime cost = cost of goods sold (food + beverage) + total labour cost. As a percentage: prime cost ÷ total sales × 100. A healthy target is roughly 55–65% of sales; above that, profit gets very hard. Prime cost combines the two biggest, most controllable costs in a restaurant, which is why it's the number owners should watch most closely.
The formula and target
Prime cost = COGS (food and beverage) + labour (wages, including your kitchen and floor staff). Expressed against sales, most operators aim to keep prime cost in the 55–65% range. Push above that and the remaining slice has to cover rent, utilities and everything else before any profit — a tight squeeze.
Example: Rs. 10,00,000 in sales, Rs. 3,20,000 food cost and Rs. 2,80,000 labour gives a prime cost of Rs. 6,00,000, or 60% — in range, with 40% left for fixed costs and profit.
Why it beats watching either number alone
Food cost and labour trade off against each other — cheaper prep can mean more labour, and vice versa. Watching them combined as prime cost stops you winning one while losing the other.
A system that tracks recipe-driven food cost and ties into your P&L lets you see prime cost by shift and day, so a bad week is something you catch and fix, not discover at month-end.
FAQ
- What is a good prime cost percentage?
- Roughly 55–65% of sales for most restaurants. Above that, covering fixed costs and earning a profit becomes difficult.
- Why is prime cost important?
- It combines food cost and labour — the two biggest, most controllable costs — so it's the single best indicator of restaurant profitability.