Prime cost
Restaurant prime cost, the number that decides the rest
Food and labor are the two largest costs you can actually control, and prime cost is what happens when you stop looking at them separately. Here is how to calculate it, why the weekly version is the only one that changes anything, and how to tell which half moved when it climbs.
The formula
Prime cost = (cost of goods sold + total labor) ÷ net sales × 100
A week with $9,600 in COGS and $9,200 in labor against $31,000 in net sales gives (9,600 + 9,200) ÷ 31,000 = 0.606, so 60.6 percent.
Two definitions decide whether this number means anything. Labor has to include employer payroll taxes and the overtime premium, not just base wages, which is covered in restaurant labor cost percentage. And net sales has to be after comps, discounts and refunds, with sales tax excluded.
Why prime cost gets watched instead of net profit
Rent does not change this week. Insurance does not change this week. Prime cost is the part of your P&L that responds to decisions you make between now and Sunday, which is exactly why it is the number operators track closely and everything else gets reviewed monthly.
It also fails loudly. A restaurant with a prime cost creeping past what its rent can absorb will look fine on a busy Saturday and still not have money at the end of the month. The combined figure catches the case where each half looks individually forgivable.
Monthly prime cost is a history lesson
Most independent restaurants find out their prime cost when the books close, often several weeks after the month ended. By then the schedule that caused it has run four more times and the vendor price that moved has been paid four more times.
Weekly is not about precision. A weekly figure that is roughly right and arrives on Monday beats a perfect figure that arrives in five weeks, because only one of them is early enough to change what you do next.
Tracking both halves without a spreadsheet weekend
The reason prime cost gets tracked monthly is that assembling it weekly by hand is genuinely tedious. You need current ingredient prices, current recipe costs, hours worked, payroll burden, and net sales, from four different places.
Smooth Ops covers both halves. Food Cost keeps plate costs current from real invoice prices, so COGS is not a stale estimate. The Schedule module reads shifts and sales from Square and reports labor against sales weekly with overtime and payroll tax counted. Which half moved stops being a research project.
If food is the half that moved, the guide to vendor price creep covers finding it. If labor moved, scheduling to a sales forecast is where it usually starts.
Prime cost, answered
What is prime cost in a restaurant?+
Prime cost is your cost of goods sold plus your total labor cost, expressed as a percentage of net sales. It is the single most watched number in restaurant operations because between them, food and labor are the two largest controllable costs in the business, and they are the two you can actually change this week.
How do I calculate prime cost?+
Add total cost of goods sold to total labor cost, including payroll taxes and overtime, then divide by net sales for the same period and multiply by 100. The period matters: use the same date range for all three figures, and use net sales rather than gross so sales tax is not inflating the denominator.
What is a good prime cost percentage?+
The figure most commonly quoted in the industry is around 60 percent to 65 percent of sales for full service, and lower for limited service where labor is thinner. Treat those as orientation rather than a target. What matters more is whether your prime cost leaves enough behind to cover rent, utilities and everything else and still pay you.
Should I track prime cost weekly or monthly?+
Weekly. Monthly prime cost tells you about a month you can no longer influence, and by the time your accountant closes the books you are often five or six weeks past the decisions that caused the number. Weekly is close enough to the decisions to act on.
My prime cost went up. Which half do I fix first?+
Work out which half moved. If food moved, it is usually vendor prices drifting or portions slipping, and it shows up as specific items rather than everything at once. If labor moved, it is usually a schedule that no longer matches sales, or overtime nobody agreed to. They have different fixes and different timescales, which is why you need both numbers separately rather than only the combined figure.
See both halves of prime cost every week
Food cost from real invoices, labor against real Square sales. $25 a month per module, per location.
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