Understanding Prime Cost in Your Restaurant
- Amiya
- 2 days ago
- 2 min read
Updated: 16 hours ago
If you track only one number in your restaurant, make it prime cost. It combines your two biggest expenses and tells you almost everything about whether your business is set up to make money. Tools like Cactus make it easy by pulling these numbers together accurately and in real time. Here's what you need to know, in plain English.
What is prime cost in a restaurant?
Prime cost is your Cost of Goods Sold (all the food and beverages you buy) plus your total labor cost (wages, salaries, payroll taxes, and benefits). Together, these are the two largest - and most controllable - expenses in any restaurant.
How do you calculate prime cost?
The formula is simple:
Prime Cost = Cost of Goods Sold + Total Labor Cost
To see it as a percentage of sales:
Prime Cost Percentage = (Prime Cost ÷ Total Sales) × 100
For example, $4,500 in food and beverage costs plus $4,000 in labor equals $8,500 in prime cost. On $14,000 in sales, that's about 61%. Instead of piecing this together from different reports, Cactus adds it up for you automatically.
What is a good prime cost percentage?
Most full-service restaurants aim for 55% to 65% of sales, with 60% a common target. Quick-service spots often run a bit lower. If your prime cost climbs much higher, there may be very little left for rent, utilities, and profit.
Why is prime cost so important?
Whatever's left after prime cost has to cover everything else - rent, equipment, marketing, and your own profit. Keeping prime cost in check is often the difference between a busy restaurant and a truly profitable one. Watching it closely with Cactus helps you catch problems before they eat into your margins.
How often should I track prime cost?
Weekly and monthly. Weekly checks help you spot rising food or labor costs early, while monthly numbers show the bigger trend. Cactus updates these figures continuously, so you're never waiting until month-end to find out where you stand.
How can I lower my prime cost?
Cut food waste and tighten portion sizes.
Negotiate better prices with your suppliers.
Schedule staff around your busiest and slowest hours.
Cross-train employees so fewer people can cover more roles.
What's the easiest way to track prime cost?
A single dashboard that combines food cost and labor cost side by side makes it effortless. Cactus brings both into one clear view, so you always know your prime cost at a glance and can act fast.
Bottom line: Track your prime cost percentage regularly, and you'll protect your profits while keeping your restaurant running smoothly.
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DISCLAIMER: This information is provided for general informational purposes only, and publication does not constitute an endorsement. Cactus does not warrant the accuracy or completeness of any information, text, graphics, links, or other items contained within this content. Cactus does not guarantee you will achieve any specific results if you follow any advice herein. It may be advisable for you to consult with a professional such as a lawyer, accountant, or business advisor for advice specific to your situation.
