Restaurant Finance
What is prime cost in a restaurant?
Direct answer
Prime cost is food and beverage cost plus labor cost. It is one of the best restaurant health metrics because those costs usually consume the largest share of sales and move fastest when margins deteriorate.
Key points
- Prime cost combines cost of goods sold and labor.
- A strong sales week can still be weak if prime cost rises faster than revenue.
- Prime cost should be reviewed weekly, not only at month end.
What to do next
- 1Add food cost, beverage cost, and labor cost for the period.
- 2Divide by total sales and multiply by 100.
- 3If prime cost is high, split the problem into menu pricing, purchasing, scheduling, and productivity.