Cost of goods sold plus total labor — the single number operators watch most, typically run near 60% of sales.
Prime Cost
Cost of goods sold plus total labor — the single number operators watch most, typically run near 60% of sales.
Prime cost is cost of goods sold (food and beverage) plus total labor (wages, taxes, and benefits), added together and measured against sales. It is the most-watched number in restaurant finance because it captures the two largest and most controllable costs in one figure.
Most operators target prime cost around 60% of revenue (a 55-65% range; full-service often 60-65%, quick-service 55-60%). What is left after prime cost has to cover rent, utilities, marketing, and profit.
- Why combine them: food and labor trade off against each other — more prep labor can lower food waste, and vice versa — so the sum is more stable to manage than either alone.
- How software helps: reporting it live requires POS, payroll, and inventory data joined together, which is why accounting platforms such as Restaurant365 sell on it.
Because margins are thin, holding prime cost near target is often the difference between a profitable period and a loss.