Prime Cost Calculator

What is restaurant prime cost?

Restaurant prime cost is the combined cost of goods sold and total labor cost for a period. The prime cost calculator shows that amount in dollars and as a percentage of sales. It also separates the food and beverage cost percentage from the labor cost percentage.

Cost of goods sold, often called COGS, is the cost of the food and beverages sold during the period. Total labor cost includes wages as well as related taxes and benefits. To get a meaningful restaurant prime cost percentage, use sales, COGS and labor figures from the same period.

Why prime cost matters

Prime cost helps you see how much of your sales goes to the food and labor needed to serve customers. The amount left is not profit: it still has to cover rent, utilities, supplies, debt payments and other expenses. But tracking prime cost gives you a useful view of two major operating costs before you make decisions about prices, purchasing or staffing.

Compare the result with your own past periods and with published data for your industry. If the percentage rises, look at the food and labor shares separately. A change in food cost may lead you to review supplier prices, portion sizes, waste or menu pricing. A change in labor cost may prompt you to review schedules, overtime, training or staffing needs. Consider the full effect on service and sales before changing a menu or schedule.

How to use this prime cost calculator

1. Choose a period and use the same dates for every input. The period could be one you already use for reviewing restaurant performance.
2. Enter total sales for that period. Use the sales figure that matches how your business tracks results, and apply the same approach consistently.
3. Enter food and beverage cost of goods sold for the period. Use the cost of items sold, rather than treating all purchases as items sold if your inventory records show a difference.
4. Enter total labor cost, including taxes and benefits. Include the labor costs that belong to the selected period.
5. Review prime cost in dollars and as a percentage of sales, then check the separate food and labor percentages. Compare them with your own records to identify which cost is driving a change.

Prime cost calculator example

How to read your prime cost results

Prime cost combines the two inputs in dollars. Prime cost percentage shows their combined share of sales. Food and labor percentages use the same sales figure, so they add up to the prime cost percentage, allowing for rounding.

The amount left after prime cost shows what is available for rent, other operating costs and profit. It does not account for those costs, so do not treat it as take-home income. A percentage can also move because sales changed, even when costs did not. Check the dollar amounts alongside the percentages and compare matching periods before deciding what to change.

How to improve your restaurant prime cost

1. 01

   Review purchasing and waste

   Compare supplier invoices with your records, check that deliveries and prices match what you agreed to, and review which ingredients are being discarded. Consider renegotiating supplier terms or changing orders to better match demand.

2. 02

   Check portions and menu pricing

   Review recipes and serving portions so staff prepare dishes consistently. Look at ingredient costs alongside menu prices. If a dish no longer covers its costs, consider adjusting its price, recipe or place on the menu while keeping customer expectations in mind.

3. 03

   Match labor schedules to service needs

   Compare schedules with customer demand and review overtime, shift overlap and time spent on required tasks. Consider changing shift timing or cross-training staff, but avoid cuts that undermine service or safe working conditions.

4. 04

   Track costs consistently

   Use the same period definitions and accounting approach each time. Keep sales, inventory and labor records current so you can investigate a change while the details are still clear.

Common prime cost mistakes

• Using figures from different periods

  Sales from one period and labor or COGS from another can produce a misleading percentage. Match the dates before comparing results.

• Leaving labor costs out

  Entering wages alone can understate labor cost when taxes and benefits are also part of the business's labor expense. Use the total labor cost for the period.

• Confusing purchases with cost of goods sold

  Purchases made during a period may not be the same as the cost of items sold during it. Use your inventory records and the COGS figure that matches your accounting method.

• Treating the remainder as profit

  The amount left after prime cost still needs to cover rent and other expenses. Review those costs before judging whether the restaurant made money.

The prime cost formula

Key terms

Cost of goods sold

The cost of food and beverages sold during the period.

Total labor cost

Labor expense for the period, including wages, taxes and benefits.

Prime cost percentage

Prime cost divided by total sales, expressed as a percentage.