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What is prime cost in a restaurant and why is it tracked?
Prime cost is cost of goods sold (food and beverage) plus total labour cost. Prime cost percentage is that sum divided by revenue, multiplied by 100. It captures the two largest controllable costs in a restaurant in one figure.
It matters because food cost and labour trade off: cutting one can raise the other, and the combined figure shows the net effect.
Commonly misread:
- Excluding some labour, such as management or payroll costs, in some periods.
- Using purchases instead of actual usage, which ignores stock movements. Opening stock plus purchases minus closing stock gives true usage.
- Reading monthly figures only; weekly tracking catches problems sooner.
What counts as healthy depends on concept and market, so build your own baseline from history instead of copying a number.
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