Costs
What is prime cost in a restaurant? Formula and targets
By Felix S. Pavel · Updated · 10 min read
Prime cost is what your food, drink and team cost you: cost of goods sold plus total labor, payroll taxes and benefits included, divided by net sales. It's the biggest cost you control week to week. Rent isn't part of it, and neither are delivery app commissions: each needs its own check.
The quick answer
Keep prime cost at or under the ceiling for your type of restaurant.
Prime cost % = (cost of goods sold + total labor cost) ÷ net sales × 100
| Restaurant type | Prime cost ceiling |
|---|---|
| Quick service | 60% or less |
| Fast casual | 60% or less |
| Full service / casual dining | 65% or less |
| Fine dining | 70% or less |
| Bar, taproom or lounge | 57% or less |
| Café or coffee shop | 60% or less |
Targets RestaurantDoctorAI uses, the same ones its free profit check grades against. Work out yours with the free calculator, no sign-up.
What is prime cost in a restaurant?
Prime cost adds your two biggest controllable costs, what you spend on food and drink and what you spend on your team, and shows them as a share of what you sold. It covers what it takes to run the kitchen and the floor, before rent, marketing, insurance or anything else.
Cost of goods sold is the food and drink you used in the period: opening stock plus purchases, minus closing stock. If stock levels hold roughly steady week to week, purchases alone are a fair stand-in.
Total labor cost is gross pay for everyone on payroll, hourly and salaried, plus the employer's share of payroll taxes and the benefits you pay. Which taxes and benefits apply depends on your state and payroll setup, and your payroll report lists yours. It's the full cost of employing your team, not the number on a pay stub.
Use the same period for every figure, usually a week or a month, and use net sales after discounts and comps.
Does prime cost include rent?
No. Prime cost is food and drink plus labor. Rent belongs to occupancy, with property charges and utilities: a separate line that stays about the same whatever you sell. The occupancy ranges RestaurantDoctorAI uses are 6–10% of sales for quick service, fast casual and cafés, and 7–12% for full service, fine dining and bar or lounge formats.
For comparison, the National Restaurant Association's figures for 2024 put median occupancy at 5.7% of sales for full-service restaurants and 5.2% for limited service. Its figure counts rent, property taxes and insurance, with utilities left out, so it runs lower than ours.
Check the two side by side: prime cost under your ceiling and occupancy inside its range. A good prime cost can't make up for rent that's too high for your sales. See how much rent a restaurant can afford. Delivery app commissions sit outside prime cost too: if apps bring in a real share of your orders, check what those commissions cost you on their own.
What counts in prime cost, and what doesn't
| What | Prime cost? |
|---|---|
| Food and drink you used, alcohol included | Count it |
| Hourly and salaried pay, managers included | Count it |
| The employer's payroll taxes and the benefits you pay | Count it |
| Your own pay, if you're on payroll | Count it |
| Rent, property charges, utilities (occupancy) | Leave out |
| Card fees, delivery app commissions | Leave out |
| Tips guests give your staff | Leave out |
| Packaging: the targets are food and drink only | Leave out |
Some sources count only hourly kitchen and floor staff as labor and leave managers' salaries out. That makes prime cost look lower than counting everyone on payroll, so check how a figure was worked out before you compare yours with it.
Prime cost targets by restaurant type
Prime cost ceilings run higher for service-heavy dining rooms, where both food and labor take a bigger share of each dollar. They run lower for bar-driven concepts, where drinks carry a lower cost of goods per dollar of sales. The figures below are the targets RestaurantDoctorAI uses for each format. Treat the ceiling as a line to aim under, not a hard pass-fail test.
| Restaurant type | Prime cost ceiling | Cost of goods | Labor |
|---|---|---|---|
| Quick service | 60% or less | 26–32% | 26–31% |
| Fast casual | 60% or less | 28–33% | 27–32% |
| Full service / casual dining | 65% or less | 30–34% | 30–35% |
| Fine dining | 70% or less | 32–38% | 34–38% |
| Bar, taproom or lounge | 57% or less | 20–26% | 25–32% |
| Café or coffee shop | 60% or less | 24–32% | 28–34% |
Add the top of the cost of goods range to the top of the labor range. For every format, the total is above the prime cost ceiling. That is why each half can look fine while the combined number runs over.
Where these come from: the 60% and 65% ceilings match the lines RestaurantOwner.com, an independent site for operators, gives for quick service and table service. No independent survey publishes a ceiling for fine dining, bars or cafés, so those three are RestaurantDoctorAI's own. The café ceiling sits at the quick-service line, 60%, and the café food, drink and labor ranges are our own too: no survey covers cafés on their own.
Many restaurants run above their ceiling. In the National Restaurant Association's 2025 Restaurant Operations Data Abstract, the median limited-service restaurant, meaning counter service, ran a prime cost of 65% of sales. That's 5 points over the 60% ceiling for quick service, fast casual and cafés.
All of one type's targets, with an example month: full service, quick service and fast casual, bars, cafés, or every type side by side.
What each cost comes to per $100,000 of sales
The same targets in dollars, with what the typical restaurant reported beside them, so you can see the size of each line next to the others.
| Per $100,000 of sales | Full service / casual dining: RestaurantDoctorAI's target | NRA median, full service |
|---|---|---|
| Food and drink | 30–34% $30,000–$34,000 | 32.0% $32,000 |
| Labor, taxes and benefits | 30–35% $30,000–$35,000 | 36.5% $36,500 |
| Prime cost (the two together) | 65% or less $65,000 or less | Not published free |
| Rent and utilities (occupancy) | Up to 12% Up to $12,000 | 5.7% $5,700 |
| Left for everything else and profit | At least 23% $23,000 or more | Not published free |
| Per $100,000 of sales | Quick service: RestaurantDoctorAI's target | NRA median, limited service |
|---|---|---|
| Food and drink | 26–32% $26,000–$32,000 | 32.4% $32,400 |
| Labor, taxes and benefits | 26–31% $26,000–$31,000 | 31.7% $31,700 |
| Prime cost (the two together) | 60% or less $60,000 or less | 65% $65,000 |
| Rent and utilities (occupancy) | Up to 10% Up to $10,000 | 5.2% $5,200 |
| Left for everything else and profit | At least 30% $30,000 or more | Not published free |
These are targets and typical figures, not results: your own numbers will differ, so work out yours from your own month before you compare.
The NRA's free figures don't give what was left for other bills and profit as one line. Its release says the median full-service restaurant kept 2.8% of sales before taxes, $2,800 per $100,000, and the median limited-service one 4.0%, or $4,000.
How to calculate prime cost: a worked example
Take an example full-service restaurant with $90,000 in monthly sales. Food cost and labor cost each sit inside their range on their own. Watch what happens once you add them together.
- Cost of goods sold (32%)
- $28,800
- + Total labor cost (34%)
- $30,600
- = Prime cost
- $59,400
- ÷ Net sales
- $90,000
32% cost of goods sold and 34% labor both sit inside the 30–34% and 30–35% ranges for full service. Added together, they land at 66%, above the 65% ceiling for the format.
Here the total is one point over. At these sales, one point is $900 a month. Taking that out of either half brings prime cost back to the ceiling.
Work out yours here: your sales, food and drink and payroll for a week or a month, against the target for your type of restaurant.
Free calculator
Work out your prime cost
Works in any currency. Nothing you type is sent to us.
Example numbers. Replace them with yours.
Your POS sales summary: net sales, after discounts and comps, before tax and tips. Add back any service charge you pay out to staff; some POS reports leave it out.
Food and drink invoices, added up by the day they were delivered, minus credits. Leave out packaging: these targets are food and drink only.
Your payroll report: pay for the days worked, managers included (a salary counts as a 52nd of a year). Leave out tips, but keep a service charge paid to staff.
What you pay on top of wages as the employer, such as payroll taxes, health insurance or a pension, with a week's share of any monthly or yearly bill. Leave blank if the number above already includes them.
Add more detail: stock counts and your own pay
Counted your stock? Add both counts, at cost, and food becomes what you actually used: start + purchases − end. Skip this if your stock stayed about the same; purchases are then a fair stand-in.
Your count when the week began: the end count from the week before.
Counted at the same time of day, on the same items your invoices cover (bar stock too, if bar invoices are in).
What you'd pay someone to do your hours, plus the payroll taxes on it. Leave blank if you're on payroll. It shows as a second figure; the main one stays as your books have it.
With the example numbers
Prime cost is 66% of net sales.
Food, drink and labor: 13,200 of 20,000 in net sales.
That's 1 point over the 65% target for full service: about 200 a week, or 10,400 a year. One point of prime cost (1% of your sales) is worth that much at these sales.
- Food and drink · range 30–34%32%: inside the range
- Labor · range 30–35%34%: inside the range
Food and drink cost and labor each sit inside their own range, but together they're over the ceiling. Start with labor, the one nearer the top of its range.
Left after food, drink and labor: 34% of net sales, about 6,800 a week. Rent, card fees and everything else come out of this.
Without stock counts, purchases stand in for what you used, so a big delivery can make one week look worse and the next one better.
How we worked it out
- Food and drink
- 6,400
- Labor
- 6,800
- Prime cost
- 6,400 + 6,800 = 13,200
- Share of sales
- 13,200 ÷ 20,000 × 100 = 66%
- Target
- 65% or less
- Over target
- 13,200 − 65% of 20,000 = 200
- One point
- 1% of 20,000 = 200
- A year
- 200 × 52 = 10,400
prime-cost.csv: your figures and every line of the result, with RestaurantDoctorAI's targets and how each line is worked out. It opens in Google Sheets, Excel or Numbers, and it's made on this device.
Prime cost vs food cost vs labor cost
| Number | What it divides by net sales |
|---|---|
| Food cost % | Food and drink you used |
| Labor cost % | Pay, payroll taxes and benefits |
| Prime cost % | Both of them together |
Prime cost tells you whether the two together are too high; the halves tell you which one to fix. See food cost percentage and restaurant labor cost percentage for each half on its own, or every restaurant formula on one page.
What is the 30/30/30 rule for restaurants?
A rule of thumb for splitting sales, often written 30/30/30/10: about 30% to food and drink, 30% to labor, 30% to everything else (rent, utilities, insurance, repairs, card fees), and the last 10% is profit. Food and labor together make 60%, the prime cost ceiling RestaurantDoctorAI uses for quick service, fast casual and cafés.
We couldn't find a published source for it, and real restaurants rarely split that evenly. In the National Restaurant Association's figures for 2024, labor alone was 36.5% of sales at the median full-service restaurant, and the median counter-service restaurant ran a prime cost of 65%. Use the rule as a quick check on the shape of your costs, then judge your own numbers against the ceiling for your type of restaurant in the targets above.
Why a weekly number beats the monthly P&L
A monthly P&L tells you what already happened, often weeks after the month ends, once invoices are entered and payroll is closed. By the time it lands, the month that hurt your margin is long over.
A weekly prime cost number uses invoices you already have and a time clock you can pull today. It tells you on Monday whether last week ran hot. You still have time to correct it before the pattern repeats for a whole month.
Food cost and labor cost also move on different clocks. A supplier price rise shows up the day it hits an invoice. A scheduling problem shows up the day a shift runs long. Waiting for the P&L means you see both a month too late to act on either.
The Monday routine
This is the same weekly check the RestaurantDoctorAI action plan gives owners who don't track prime cost yet. It needs no new software and no new hires, and the plan allows about 30 minutes a week for it.
- Add up last week's food and drink invoices, Monday to Sunday. If stock levels stayed about the same, purchases are a fair stand-in for what you used.
- Add up last week's labor: gross wages from payroll or the time clock, plus the employer taxes and benefits on your payroll report.
- Divide each total by last week's net sales from your POS. That gives you food cost and labor cost as a share of sales. Add the two and you have your prime cost. Compare it with the ceiling for your format above.
- Write all three numbers, food, labor and prime cost, on a sheet in the office. Repeat every Monday. Four weeks in a row show whether food or labor is the one creeping up.
Last week's net sales are seven nightly closes added up. If you close each night with the free restaurant cash-out sheet, each night's net sales from the POS end-of-day report are already on paper, so you can add up the week on Monday.
Fixing a prime cost that's over target
When prime cost sits above your ceiling, split it back into its two halves before you touch anything. Food cost and labor cost need different fixes. Your Monday sheet shows which one has been rising.
- If food has been creeping up, work out and fix your food cost percentage.
- If labor has been creeping up, bring your labor cost back toward target.
- If drinks are a meaningful share of sales, look at bar pour cost too.
Sometimes neither half is over its own range and only the total runs over, as in the worked example. Then start with the half sitting nearer the top of its range, or the one that has risen over your last few Mondays.
Common questions
What is a good prime cost for a restaurant?
Anything at or under the ceiling for your format in the table above. A result just under the ceiling is fine, but it leaves little room for a supplier price rise or a slow month. Being under is a good sign, not a guarantee of profit. Rent, delivery commissions and every other cost still come out of what's left.
Does prime cost include rent?
No. Rent is occupancy, its own line with property charges and utilities. Check the two side by side.
Is prime cost the same as cost of goods sold (COGS)?
No. Cost of goods sold is the food and drink you used. Prime cost is that plus your total labor cost, which is why it runs about twice as high.
Is labor included in cost of goods sold?
No. Cost of goods sold is the food and drink you used. Labor is the other half of prime cost, so you add them together rather than counting labor twice.
What should prime cost be for a bar?
57% of sales or less for a bar, taproom or lounge, the lowest ceiling of any type, and one of RestaurantDoctorAI's own. Drinks are usually about half of a bar's sales or more, and they cost less per dollar of sales than food, so cost of goods runs 20–26% and labor 25–32%. Watch the drink side on its own with pour cost.
Does prime cost include payroll taxes, benefits and managers' pay?
Yes. Count everyone on payroll, hourly and salaried, including kitchen and floor managers. Then add the employer's share of payroll taxes and the benefits you pay. Leaving any of it out makes prime cost look better than it is.
Do I include my own salary in prime cost?
If you're on payroll, it's already in. If you work in the restaurant without a salary, add what you'd pay someone to do your hours, or prime cost looks lower than the business really runs.
Should I use gross or net sales?
Use net sales: what you rang up for food and drink after discounts and comps, not counting sales tax. Gross sales are a bigger number, so they make both halves look smaller than they are. Use the same sales figure every week so the weeks compare fairly.
Targets are RestaurantDoctorAI's targets: some match published US figures, the rest are our own. General information, not financial, tax or legal advice.