Finance & operations · 7 min read
Prime cost: the weekly number that decides restaurant profit
Food, beverage, and labour together are the costs a manager can move this week. Here is how to track and act on them.
In this article:
01
What prime cost includes
Prime cost is cost of goods sold (food and beverage) plus total labour, including payroll taxes and benefits. For most full-service restaurants it sits between 55% and 65% of sales; quick service tends toward the lower end because of lighter labour. Above that range, rent and overheads leave very little room for profit.
02
Close the gap between theoretical and actual food cost
Theoretical food cost is what your recipes say you should have spent given what sold. Actual food cost comes from opening inventory plus purchases minus closing inventory. A gap of more than one to two points usually means waste, over-portioning, unrecorded comps, or theft. Find which category drifts before blaming the whole kitchen.
03
Schedule labour to covers, not to habit
Labour follows the rota you wrote last month unless someone challenges it. Compare scheduled hours to forecast covers by daypart. Measure sales per labour hour and covers per server. The goal is not the leanest floor — understaffing damages service and repeat visits — but a schedule that flexes with the book.
04
Review it weekly, per location
A monthly P&L tells you what already went wrong. A weekly prime cost review, using counted inventory and actual payroll, gives managers four chances a month to correct course. In multi-site groups, compare locations on the same definitions so one site is not measuring labour with managers included and another without.
05
Connect cost decisions to guest outcomes
Cutting a portion or a shift is easy to measure on the cost side and easy to miss on the guest side. Watch review themes, return rates, and average spend after every cost change. A saving that drives regulars away is a delayed loss.
Put this into practice
- Agree one prime cost definition across all locations
- Count key inventory weekly and compare theoretical vs actual
- Compare scheduled hours with forecast covers by daypart
- Check guest feedback after every portion or staffing change
Journey context
This article supports the Back of house stage
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