Restaurant Prime Cost Calculator
Enter sales, food and beverage cost and every labor line for the same period to get your prime cost, prime cost percentage, the split between cost of goods sold and labor, and how far you are from your target.
Your period
Food and beverage sales for the period, before sales tax and tips.
Results
- Prime cost
- —
- Left after prime cost
- —
- Cost of goods sold
- —
- Labor
- —
Prime cost is a restaurant’s cost of goods sold (food and beverage) plus its total labor cost: wages, salaries, payroll taxes and benefits. Prime cost percentage is prime cost divided by total sales, times 100. A common rule of thumb is to keep it at or under 60% of sales.
Prime cost formula
- Cost of goods sold: beginning inventory + purchases − ending inventory, for food and for beverage.
- Total labor cost: hourly wages + salaries + payroll taxes + benefits.
- Prime cost: cost of goods sold + total labor cost.
- Prime cost %: prime cost ÷ total sales × 100.
What to include in prime cost
Use the same period for every line, and count things the same way every time so the trend means something.
| Line | Include | Notes |
|---|---|---|
| Food cost | Food used in the period | From inventory counts at both ends of the period, not just invoices. |
| Beverage cost | Liquor, beer, wine and soft drinks | Some operators keep it as a separate line; it is still part of prime cost. |
| Hourly wages | Regular pay, overtime, paid time off | Front and back of house. In the US, tips paid by guests are not a labor cost. |
| Salaries | Managers and chefs on salary | Include your own pay if you work a role in the restaurant. |
| Payroll taxes | The employer share | In the US: Social Security, Medicare and unemployment taxes. In Canada: employer CPP (QPP in Quebec) and EI premiums, plus provincial payroll taxes where they apply. |
| Benefits | Health insurance, workers’ compensation, staff meals | Anything you pay because someone works for you. |
Paper and packaging: some operators add them to cost of goods sold, others do not. Either is fine if you do it the same way every period.
How to calculate prime cost
- Pick one period. A week, four weeks or a month, with sales and costs from the same dates.
- Work out cost of goods sold. Count inventory at the start and end of the period, add purchases in between, and subtract the ending count.
- Add every labor line. Wages and salaries from payroll, plus employer payroll taxes and benefits for the same dates.
- Divide by sales. Prime cost ÷ total sales × 100, then compare with your target and with last period.
Worked example
A restaurant sells $85,000 in a month. Food cost is $23,800 and beverage cost $4,250, so cost of goods sold is $28,050 (33.0% of sales). Labor is $16,150 in hourly wages, $5,950 in salaries, $2,125 in payroll taxes and $1,275 in benefits: $25,500 (30.0%). Prime cost is $28,050 + $25,500 = $53,550, or 63.0% of sales. That is 3 points over a 60% target, which at this sales level is $2,550 for the month. $31,450 (37.0%) is left for rent, utilities, other costs and profit.
What is a good prime cost percentage?
The figure you will see most often is 60% of sales or less. Treat it as a rule of thumb, not a standard: table-service restaurants usually carry more labor, counter service more paper and packaging, and a restaurant with low rent can afford a higher prime cost than one with high rent.
The more useful comparison is with yourself. Calculate prime cost every period in the same way, and when it moves, look at which half moved: cost of goods sold or labor.
How to lower prime cost
- Find the food cost gap. Compare actual with theoretical food cost to see how much is waste, over-portioning or missing stock. Food cost variance calculator
- Cost your recipes. Price every dish from yield-adjusted ingredient costs, so menu prices cover what a plate really costs. Recipe cost calculator
- Measure what you throw away. Weigh waste for a few weeks and put a dollar value on it. Food waste calculator
- Schedule to sales. Check labor cost against sales by day and shift, and cut hours where sales do not need them. Labor cost calculator
Prime cost FAQ
What is prime cost in a restaurant?
Prime cost is cost of goods sold (food and beverage) plus total labor cost, including wages, salaries, payroll taxes and benefits. These are usually a restaurant’s two biggest costs, which is why they are tracked together.
How do you calculate prime cost percentage?
Add cost of goods sold and total labor cost, divide by total sales for the same period and multiply by 100. For $53,550 of prime cost on $85,000 in sales: 53,550 ÷ 85,000 × 100 = 63.0%.
What is a good prime cost percentage?
A common rule of thumb is 60% of sales or less. It depends on your concept and your other costs, so track your own number every period and watch which half, cost of goods sold or labor, is moving.
Is prime cost the same as cost of goods sold?
No. Cost of goods sold is only the food and beverage you used. Prime cost adds total labor cost on top.
Are payroll taxes and benefits part of prime cost?
Yes. Prime cost uses total labor cost, so it includes the employer’s payroll taxes, health insurance, workers’ compensation and other benefits, not just wages.
Are tips part of labor cost?
In the US, tips that guests pay go to employees and are not part of your labor cost; wages you pay, including a tipped minimum wage, are. If you add a service charge and pay it out as wages, that pay is a labor cost.
How often should I calculate prime cost?
Every period you close: weekly if you count inventory weekly, otherwise every four weeks or monthly. The count at both ends of the period is what makes cost of goods sold accurate.
Is this prime cost calculator free?
Yes. It needs no sign-up, and the numbers you enter stay in your browser.
Related free tool
Break-Even Calculator
Break-even sales and covers per day from itemized fixed and variable costs, with a profit goal, margin of safety and a what-if for less waste.
Open calculator