Costs
Restaurant formulas: food cost, labor, prime cost and more
By Felix S. Pavel · Updated · 7 min read
Every restaurant number below is a share of the same thing: net sales, after discounts and comps, before tax and tips, for the same dates as the costs. Each formula is plain text you can copy, with what it tells you and a link to the free calculator or guide that works it out with your numbers.
The four to check every week
If you track nothing else, track these on Monday for the week before. Together they show whether food, labor or the schedule is where the money is going.
Prime cost percentage
Prime cost % = (cost of goods sold + total labor cost) ÷ net sales × 100
Your two biggest controllable costs together: food and drink plus your team. Rent isn't part of it.
Aim for: at or under the ceiling for your type of restaurant, from 57% or less for a bar to 70% or less for fine dining (targets RestaurantDoctorAI uses).
Food cost percentage
Food cost % = (beginning inventory + purchases − ending inventory) ÷ food sales × 100
The share of food sales spent on what you actually used, not what you bought. Count drinks separately.
Aim for: the National Restaurant Association's 2024 medians were 32.0% of sales for full-service restaurants and 32.4% for limited service.
Labor cost percentage
Labor cost % = (wages + payroll taxes + benefits) ÷ net sales × 100
What your team costs as a share of sales, counted the full way: managers' salaries and payroll taxes in, tips out.
Aim for: 26–31% at quick service up to 34–38% at fine dining (targets RestaurantDoctorAI uses). The NRA's 2024 median for profitable full-service restaurants was 34.2%.
Sales per labor hour (SPLH)
Sales per labor hour = net sales ÷ labor hours worked
What each clocked hour brings in, the number a manager can check mid-shift.
Aim for: above your cut line (below, under Labor).
Food and drink formulas
Cost of goods sold
Cost of goods sold = opening stock + purchases − closing stock
What you used in the period. If stock stays about the same week to week, purchases alone are a fair stand-in.
Plate cost percentage
Plate cost % = ingredient cost of one plate ÷ its menu price × 100
Whether one dish is priced right, every component on the plate counted at its usable weight.
What each dish leaves you
Contribution per dish = menu price − plate cost
The dollars each sale leaves to pay for labor, rent and profit. A cheap plate isn't always the one that earns most.
Pour cost percentage
Pour cost % = (opening bar stock + bar purchases − closing bar stock) ÷ bar sales × 100
The bar's version of food cost: what you poured as a share of what the bar sold.
Aim for: 18–24% of bar sales, the range RestaurantDoctorAI uses for US bars. It comes from BevSpot's 2016 figures for its customers (a software company); no independent survey publishes one.
Pour cost of one drink
Pour cost % = cost of the pour ÷ drink price × 100
Whether one drink is priced right. Cost per pour = bottle cost ÷ pours per bottle.
What one point is worth
One point = yearly net sales × 1%
What one point of food cost, labor or waste is worth in dollars a year. On $900,000 of sales, one point is $9,000.
Labor formulas
Total labor cost
Total labor cost = gross pay + the employer's payroll taxes + benefits
The full cost of the team, not the pay stub. Gross pay covers hourly and salaried staff, managers included; tips stay out.
Cut line
Cut line = average hourly labor cost ÷ labor ceiling (as a decimal)
The sales per labor hour below which labor runs over your ceiling: the moment to send the first person home. At $17.50 an hour and a 35% ceiling, it's $50.
Sales, profit and break-even
Net sales
Net sales = guests × average check
Whether a slow month is fewer guests or smaller checks: they need different fixes.
Average check
Average check = net sales ÷ guests
What each guest spends. Count guests (covers) for a dining room, orders for a counter.
Break-even sales
Break-even sales = monthly bills ÷ (1 − costs that rise with sales ÷ net sales)
The sales you need just to cover the bills that stay the same each month, after the costs that rise with every sale.
Profit margin
Profit margin % = (net sales − every cost) ÷ net sales × 100
What's left of each dollar after everything, rent and fees included.
Aim for: no single target. In the National Restaurant Association's 2025 Restaurant Operations Data Abstract, the 2024 median before tax was 2.8% of sales for full-service restaurants and 4.0% for limited service.
Rent, delivery apps and card fees
Occupancy cost percentage
Occupancy cost % = (rent + property charges + utilities) ÷ net sales × 100
Whether your space is affordable at your sales. It's separate from prime cost.
Aim for: 6–10% for quick service and fast casual, 7–12% for full service, fine dining and bars (targets RestaurantDoctorAI uses).
Sales your rent needs
Monthly sales needed = monthly occupancy cost ÷ target share (as a decimal)
The sales a lease asks of you before you sign it.
A delivery app's real commission
Real commission rate % = (menu sales before tax and tips − your payout) ÷ menu sales × 100
What an app really keeps, fees and promotions included, from your payout report.
Aim for: nothing to aim for: compare it with the plan you signed. The apps' published US plans run 15–30%.
Break-even app price
Break-even app price = in-house price ÷ (1 − real commission rate)
The app price that leaves you what the same dish earns in-house.
Card fees as a rate
Effective card rate % = total card fees ÷ card sales × 100
What card processing really costs you, every fee in, from your monthly statement.
Aim for: no single target: GAO's review of industry estimates found 1.0% to 4.4% of sales.
Common questions
Does prime cost include rent?
No. Prime cost is food and drink plus labor; rent is occupancy, a line of its own. See why rent isn't in prime cost.
Do food cost and pour cost both go into prime cost?
Yes. Prime cost counts all the food and drink you used, kitchen and bar together. Food cost and pour cost split it so you can see which side is running high.
Should I use net or gross sales?
Net sales, for every formula on this page: what you rang up after discounts and comps, before tax and tips. Gross sales are a bigger number, so every cost looks smaller against them than it is.
Targets are the ranges RestaurantDoctorAI uses, based on published US industry figures. General information, not financial, tax or legal advice.