Prime Cost Calculator
- Food & beverage
- Wages
- Payroll taxes & benefits
- Left for rent, overhead and profit
You are $2,000 over a 60% target this period. Check food cost first (portioning, waste, prices), then scheduled hours against sales.
How the prime cost calculation works
Use the same period for everything
Take sales, food cost and labor from the same week or month. Here, $80,000 of sales.
Add food and beverage cost
Beginning inventory + purchases − ending inventory. Here, $24,000 (30% of sales).
Add total labor, including taxes and benefits
$22,000 of wages plus $4,000 of payroll taxes and benefits is $26,000 (32.5%).
Divide by sales
$50,000 ÷ $80,000 = 62.5%. Against an example 60% target ($48,000), that is $2,000 too much, and 37.5% of sales is left for rent, other costs and profit.
Worked example. A restaurant with $80,000 of monthly sales, $24,000 of food and beverage cost, $22,000 of wages and $4,000 of payroll taxes and benefits has a $50,000 prime cost, 62.5% of sales: $2,000 over an example 60% target.
Prime Cost FAQ
What is prime cost in a restaurant?
Food and beverage cost plus total labor cost (wages, payroll taxes and benefits). It is usually the largest controllable cost in a restaurant.
What is the prime cost formula?
Prime cost = food and beverage cost + total labor cost (wages, payroll taxes and benefits). Prime cost % = prime cost ÷ sales × 100. In the example: ($24,000 + $26,000) ÷ $80,000 = 62.5%.
What is a good prime cost percentage?
There is no official standard. Work backward from your own costs: what is left after prime cost must pay rent, utilities, other overhead and profit. At 62.5% prime cost, each $1 of sales leaves 37.5 cents for all of that. A restaurant with high rent needs a lower prime cost than one with low rent. For context, US listed restaurant companies had a 32.24% gross margin in January 2026 (NYU Stern), but their cost of sales is defined differently from prime cost, so it is not a prime cost benchmark.
Does prime cost include management salaries?
Yes. Total labor includes salaried managers and chefs as well as hourly staff, plus employer payroll taxes and benefits. Tips paid by guests are not included.
Is restaurant prime cost the same as prime cost in manufacturing?
The idea is the same, the inputs differ. In manufacturing and cost accounting, prime cost is direct materials plus direct labor. Restaurants use food and beverage cost as the materials and usually count all labor, including managers, payroll taxes and benefits.
How often should I calculate prime cost?
Weekly if you can. You need an inventory count to get accurate food cost, and catching a problem after a week is far cheaper than after a quarter.
How do I lower prime cost?
On food: check portions, waste, theft and supplier prices, and re-price low-margin dishes. On labor: schedule against forecast sales by hour, and cut shifts on slow days.
Sources: NYU Stern (Damodaran): Margins by sector, US, January 2026