Prime cost · pillar
How to calculate restaurant prime cost
Prime cost is your cost of goods sold plus your total labour cost, divided by net sales. If you spent $221,125 on food and $209,460 on labour against $857,985 of net sales, your prime cost is 50.2%.
The formula
Prime cost % = (COGS + total labour cost) ÷ net sales × 100
Every term needs defining precisely, because this is where most calculations quietly go wrong.
| Term | Include | Exclude |
|---|---|---|
| Net sales | Gross sales less discounts, comps and voids | Sales tax. Always. It was never your money |
| COGS | Food, beverage, packaging, condiments — anything that leaves with the guest | Cleaning supplies, uniforms, smallwares |
| Labour | Wages, overtime, payroll taxes, benefits, salaried managers | Contractor maintenance, agency fees for non-operational roles |
Leaving sales tax in net sales. It inflates the denominator and flatters your prime cost by two to three points.
Leaving salaried managers out of labour. They are a labour cost. Excluding them makes a well-managed store look identical to an over-managed one.
Why prime cost and not any other ratio
Prime cost is the only large cost in a restaurant that is controllable this week. Rent is fixed by a lease. Insurance is fixed by a policy. Food and labour move with every decision a manager makes between now and Sunday.
It also captures the trade-off operators actually face. Cutting labour usually raises food cost through waste and error; cutting food quality usually raises labour through remakes and complaints. Watching either number alone hides the trade; prime cost catches it.
What is a good prime cost percentage?
These bands are useful for orientation and almost useless for management. The benchmark that matters is your own best location, because it already proves what is achievable on your menu, your suppliers and your labour market.
Why your prime cost is probably understated
Here is the failure that affects most multi-unit groups and almost nobody checks for.
Your point of sale knows every person who has clocked in on it. Your roster knows every person you employ. These lists are never identical — staff get added at the till during a rush, names differ between systems, old logins linger. Anyone on the POS list who is not linked to a roster record has their hours and cost reaching no report at all.
In a twelve-store group measured in August 2026, only 67.9% of worked hours carried a cost. Their labour showed as 24.4% of sales. With every hour costed, the real figure was closer to 35% — and their prime cost was understated by roughly ten points.
Check yours before trusting any prime cost figure: total hours worked from the POS, divided into the hours that appear in your labour report. If the answer is not near 100%, your prime cost is fiction.
The group average is the wrong number
A group-level prime cost is an average, and averages hide the store that is losing money. That same twelve-store group ran a perfectly respectable 50.2% overall. Underneath it:
| Location | Prime cost |
|---|---|
| Parkview | 23.60% |
| Eastway | 29.51% |
| Hillcrest | 47.25% |
| Cedarfield | 61.29% |
| Riverbend | 72.22% |
| Millbrook | 75.84% |
Same brand, same menu, same suppliers, eleven miles apart. The gap between your best and worst location is almost always a larger opportunity than the gap between your average and your target.
How often to calculate it
Weekly, at minimum. Monthly prime cost tells you what happened after every shift in the month has been worked, which makes it a post-mortem rather than a control. Operators who review it weekly can still change staffing, ordering and scheduling inside the period being measured.
Work out yours
The free prime cost calculator takes net sales, COGS and labour and returns your prime cost, the split between food and labour, what is left to cover everything else, and the dollar gap to your target. No account needed.
If the result looks unusually good, run the labour blind spot auditor before you plan against it.
Nexora computes prime cost per location from your point of sale, reports the labour coverage percentage alongside it so you know how much to trust the figure, and ranks every store on identical definitions. Uncosted hours are excluded rather than priced at an assumed rate — because a tidy number built on an assumption is worse than an untidy one you can act on.