Prime Cost in F&B: The Most Important Restaurant KPI
Prime cost is the sum of cost of goods and staff costs — the two largest, directly controllable cost blocks of an F&B operation — expressed as a percentage of revenue. It answers the one question restaurant economics hang on: after goods and team, is enough left for rent, energy, marketing and profit? Rule of thumb: prime cost ≤ 60–65% — above that it gets tight, almost regardless of how well everything else runs.
The formula
Prime cost % = (cost of goods + staff costs) ÷ net revenue × 100
Interactive: your prime cost with lever analysis
Prime-cost calculator
Enter monthly figures — prime cost, traffic light and the distance to target appear instantly.
68.3%prime cost 🟡
€41,000prime cost absolute
€2,000distance to the 65% mark
Traffic light: 🟢 ≤ 60%, 🟡 60–65%, 🔴 > 65%. The calculator shows the combined block — for diagnosis, look at the COGS ratio and payroll cost ratio separately.
Why this combination?
It is controllable: rent and depreciation are fixed — purchasing, costing and the rota are decided anew every week. Prime cost thus measures your operational management performance.
It exposes shifting tricks: saving staff by buying convenience products lowers the payroll ratio and raises COGS — prime cost stays honest because it adds both sides.
It is measurable weekly: revenue from the POS, purchases from delivery notes, hours from time tracking — professionals calculate prime cost weekly, not only with the BWA.
Staff side: tie the rota to the revenue forecast (reservations!), use off-peak time productively (mise en place), manage productivity per hour instead of headcount.
Don't forget the revenue side: the ratio also falls via the numerator — raising the check often works faster than the next purchasing discount.
Frequently asked questions
Does the owner's salary count as staff cost?
For honest steering: yes — impute what an employed manager would cost. Otherwise the working owner flatters the ratio, and the rude awakening comes at sale or expansion.
Calculating weekly — isn't that excessive?
It's the difference between steering and accounting: a slipped week can be corrected with next week's rota and purchasing — a slipped month is already in the books.
My prime cost is above 70% — what first?
Measure where it pinches: compare COGS and payroll ratio separately against concept benchmarks. Then tackle the bigger outlier — usually with fast levers (re-costing the top 10 dishes, the rota of weak days), not blanket austerity.
