What is a Good Prime Cost Percentage for Restaurants

What prime cost is and why it matters more than profit margin

Prime cost is the sum of your cost of goods sold (food and beverage) and your total labor cost (wages, salaries, payroll taxes, and benefits). It is the largest controllable expense in any restaurant, bar, or cafe.

The formula is:

Prime Cost = COGS + Total Labor Cost

To express it as a percentage of sales:

Prime Cost % = (Prime Cost ÷ Total Sales) × 100

Prime cost percentage is the single best predictor of profitability. You can have a full dining room and still lose money if your prime cost is too high. Rent, utilities, and insurance are mostly fixed. Prime cost is where you have control.

Industry benchmarks by segment

Full-service restaurants should aim for 60 to 65 percent prime cost (Restaurant365, accessed 2026). Quick-service restaurants run slightly lower, 55 to 60 percent, because labor is lower and food cost is tightly controlled.

Bars should target 55 to 65 percent prime cost (Backbar Academy, 2019). Bars with low pour cost and efficient staffing sit at the low end. Bars serving full food menus or running high labor hours sit at the high end.

Cafes and food trucks should aim for prime cost around 60 percent or below (Prima Coffee Equipment, 2021). The benchmark source gives 60 percent as a ceiling, not a range, so operators should treat anything above 60 percent as a red flag.

If your prime cost is above 65 percent, you are leaving little room for rent, utilities, marketing, repairs, and profit. Most operators in that situation are either underpricing their menu, over-staffing, or losing food and beverage to waste or theft.

Breaking down prime cost: COGS and labor

Prime cost has two pieces. Understanding each piece helps you know where to focus.

Cost of goods sold (COGS) includes food cost and beverage cost. For restaurants, food cost should run 28 to 35 percent of food sales (MarginEdge, 2026). For bars, beverage cost (pour cost) should run 18 to 24 percent of beverage sales (Backbar Academy, 2019). For cafes, coffee and food COGS combined should stay between 25 and 35 percent of sales (Zest Specialty Coffee Roasters, 2025).

Total labor cost includes hourly wages, salaried managers, payroll taxes, health insurance, paid time off, and any other benefits. For full-service restaurants, labor cost should run 34.2 to 36.5 percent of sales (National Restaurant Association, 2025). For bars, 25 to 35 percent is the target range (Sculpture Hospitality, 2025). For cafes, 30 to 35 percent (Zest Specialty Coffee Roasters, 2025).

Add COGS and labor together, and you get prime cost.

Example: calculating prime cost for a full-service restaurant

A 70-seat restaurant reports the following for April:

• Total sales: 95,000 dollars
• Food sales: 78,000 dollars
• Beverage sales: 17,000 dollars
• Food COGS: 25,740 dollars (33 percent of food sales)
• Beverage COGS: 3,740 dollars (22 percent of beverage sales)
• Total labor cost (wages, taxes, benefits): 34,200 dollars (36 percent of total sales)

Prime cost = 25,740 + 3,740 + 34,200 = 63,680 dollars

Prime cost % = (63,680 ÷ 95,000) × 100 = 67.0 percent

The restaurant is above the 60 to 65 percent target. Food cost at 33 percent and labor at 36 percent both look acceptable in isolation, but together they squeeze margin. The operator should look at menu pricing, portion control, and scheduling efficiency.

What to do when prime cost is too high

If your prime cost percentage is above 65 percent, start with these four checks:

Check food and beverage cost separately. A high prime cost might be driven by one category. If food cost is 38 percent and labor is 34 percent, the problem is food cost. Fix portion sizes, reduce waste, or raise menu prices. If food cost is 30 percent and labor is 40 percent, the problem is labor. Cut hours, cross-train staff, or adjust scheduling.

Check menu pricing. Pull the recipe cost for your top ten sellers. Divide each cost by your target food cost percentage (30 percent is common). If the math says you should charge 26 dollars and you are charging 22 dollars, you are underpricing. Raise prices on high-volume items first — they have the biggest impact on total COGS.

Check labor scheduling. Compare scheduled hours to actual sales by day and by shift. If you are staffing for 120 covers on a Tuesday and only serving 80, you are over-staffed. Use historical sales data to build a staffing matrix: covers per labor hour by position.

Check waste and theft. Run a full inventory count at the beginning and end of the week. Compare the calculated COGS (beginning inventory + purchases − ending inventory) to the theoretical COGS from your POS (every item sold, multiplied by recipe cost). The difference is your variance. Variance above 2 to 3 percent signals waste, theft, or over-portioning.

Prime cost vs profit margin

Prime cost percentage is not the same as profit margin, but it determines how much room you have left for profit.

After prime cost, you still have to pay rent, utilities, insurance, marketing, repairs, and debt service. Those expenses typically add another 25 to 30 percent of sales. That leaves 5 to 10 percent for profit in a well-run operation.

Full-service restaurants report net profit margins of 3 to 9 percent (ChowNow, 2025). Bars report 7 to 15 percent (Small Business Trends, 2024). Cafes report 10 to 15 percent (Bellwether Coffee, accessed 2026).

If your prime cost is 68 percent and your other expenses are 28 percent, you are left with 4 percent. One bad month — a broken walk-in, a slow week, a supplier price increase — and you are in the red.

Keeping prime cost at or below 65 percent gives you a buffer.

How often should you calculate prime cost

Monthly is the minimum. Weekly is better if you have the systems in place.

Most operators get their prime cost number 30 to 45 days after the month ends, when the accountant closes the books. By then, it is too late to fix the problem. Calculating prime cost weekly — or even mid-month — lets you adjust before the damage compounds.

You do not need accounting software to calculate prime cost. You need four numbers: food COGS, beverage COGS, total labor cost, and total sales. Pull food and beverage COGS from an inventory count (beginning inventory + purchases − ending inventory). Pull labor cost from your payroll report. Pull sales from your POS.

Plug the numbers into a spreadsheet, calculate the percentages, and compare to benchmarks. If you are trending high, adjust immediately.

Prime cost is the number that matters

Revenue is vanity. Profit is sanity. Prime cost is the lever.

You can be busy every night and still lose money if your prime cost is out of control. You can have a slow month and still stay profitable if your prime cost is tight.

Track prime cost every month. Compare it to the benchmarks for your segment. When it drifts above target, dig into food cost and labor cost separately, fix the piece that is broken, and measure again.

Prime cost is the number that tells you whether your restaurant, bar, or cafe is built to last.

Track your prime cost percentage every month with the free Food Cost & Prime Cost Calculator. Enter your inventory, purchases, labor, and sales — see your numbers vs industry benchmarks in under 5 minutes. https://finoutils.gumroad.com/l/free-food-cost-calculator