Prime Cost: The Number That Runs Your Restaurant

Prime cost is your cost of goods sold plus your total labor cost. As a share of sales, it is the biggest group of costs a restaurant can change week to week: rent and insurance are fixed for months, but what you buy, how much you waste and how many hours you schedule change every day. Below: what counts, a calculator, a worked example, what is typical, how to track it weekly and how to lower it.

Prime cost = cost of goods sold + total labor cost

Prime cost % = prime cost ÷ sales × 100

What counts in prime cost

Two details trip people up. Cost of goods sold is what you used, not what you bought: opening inventory plus purchases minus closing inventory. And labor means the full cost of employing people, including payroll taxes and benefits, not just the hourly wage.

Calculate your prime cost

Enter one week or one month from your books. The starting numbers are made up so you can see how it works. Nothing is sent anywhere; the math runs in your browser.

Sales for the periodTotal revenue for the same week or month$Cost of goods soldFood, drink and packaging used: opening inventory + purchases − closing inventory$Total labor costWages, salaries, overtime, payroll taxes and benefits$Benchmark to compare against% of sales: 60 is the 30/30/30 rule; 65 was the 2024 limited-service median; or use your own budget%

Prime cost

65%

$26,000 of $40,000 sales

Against the benchmark

5 pts over

Each point is $400 on these sales

How it splits

Cost of goods 31%

Labor 34%

Use the same period for all three numbers, and count inventory rather than adding up invoices, or the result will swing with your delivery days.

A worked example

These figures are illustrative, made up to show the math, not a real restaurant. One week at a restaurant with $20,000 of sales:

That 65% is exactly the 2024 median for limited-service restaurants, so this restaurant is typical, not broken. Against the 60% that the 30/30/30 rule implies, it is 5 points over: $1,000 for the week, or about $52,000 over a year at the same sales. If your own budget says 60%, that is what each point is worth.

A crate of fresh vegetables loaded in a delivery truck

What is a good prime cost?

The 30/30/30 rule of thumb puts food and labor at about 30% of sales each, so prime cost at about 60%. Limited-service restaurants ran a median of 65% in 2024. What the National Restaurant Association's data shows:

We have not added the full-service food and labor medians together to make a full-service "prime cost median": medians of two separate lines need not add up to the median of their total. The Association's public summaries give a prime cost figure only for limited-service restaurants.

In the same 2024 survey, full-service restaurants that made a profit had a median labor cost of 34.2% of sales; those that made a loss, 42.9%. For what that does to the bottom line, see our guide to restaurant profit margin.

How to track it weekly

Monthly prime cost tells you about a problem four weeks too late. A weekly routine that takes under an hour:

1. Count inventory on the same day and time every week, before deliveries arrive. Value it at your latest invoice prices.
2. Total the week's purchases from your invoices or supplier statements.
3. Work out cost of goods sold: last week's count + purchases − this week's count.
4. Take labor from payroll or your scheduling system for the same seven days, and add payroll taxes and benefits (your payroll provider or accountant can give you the percentage to apply). Our guide to restaurant technology covers what your POS and scheduling tool should report.
5. Divide by the week's sales and write the figure in one sheet, next to last week's and the same week last year.

The trend matters more than any single week. One bad week is usually a delivery-timing quirk; three in a row is a problem.

Restaurant staff on a break near the kitchen, checking a phone

How to lower prime cost

Cost of goods:

1. Price every dish from its cost with our food cost calculator, and recost when supplier prices move.
2. Weigh portions and test yields on your main proteins and produce.
3. Keep a waste log and act on what it shows.
4. Re-engineer the menu to sell more of the dishes that earn the most per plate. See menu engineering.

Labor:

1. Schedule to sales by the hour, using last year's same week and your bookings, not a fixed schedule.
2. Cut a shift early on quiet nights rather than carrying a full team to close.
3. Cross-train so one person can cover two stations in slow periods.
4. Watch overtime weekly; it is the most expensive hour you pay for.
5. Keep good people. Every new hire costs time and money to recruit and train, which shows up in labor even when the wage is the same.

A server carrying a plate to a guest in a bright restaurant

Sources

• National Restaurant Association, "New Resource from National Restaurant Association Provides Insights into Operational Realities" (press release, August 20, 2025): limited-service prime cost median of 65 cents per sales dollar; full-service labor median 36.5%.
• National Restaurant Association, "Restaurant labor costs are well above historical averages" (August 27, 2025): 2024 labor medians and the averages from the 2010, 2013 and 2016 reports.
• National Restaurant Association, "Elevated labor costs had a significant impact on restaurant profitability in 2024" (October 8, 2025): labor medians for profitable and loss-making restaurants.
• National Restaurant Association, "Higher volume restaurants reported lower food-cost ratios in 2024" (October 16, 2025): full-service food cost medians by sales volume.
• National Restaurant Association, "Elevated costs continue to pressure restaurant profitability" (July 8, 2026): pre-pandemic cost breakdown of a typical independent restaurant.
• Cost of goods sold formula: BC Cook Articulation Committee, Basic Kitchen and Food Service Management (BCcampus, CC BY 4.0), "Monthly Food Costs".