Prime cost looks simple, but this is where margin leaks hide in Australian venues. When operators run numbers on GST-inclusive sales or forget to load Super Guarantee into wages, the result looks healthy on paper and weak in bank account reality.
This guide gives you one practical workflow: convert to net sales, load labour correctly, run one local example, then apply a short monthly operating loop.
Quick Summary
primeCost = foodCost + labourCost- Use
net sales (ex-GST)as the denominator. - Load labour with SG and other on-costs before calculating prime cost.
- Review top sellers weekly and full prime cost monthly.
Why the Prime Cost Check Matters More in 2026
ABS reported on 2026-01-28 (December 2025 quarter) that:
Meals out and takeaway food:+3.5%year over yearFood and non-alcoholic beverages:+3.4%year over year
When menu input costs and wage pressure move together, long pricing cycles (quarterly-only checks) usually create avoidable margin drift.
Core Formula (Australia)
Work from GST-inclusive POS sales, then convert:
netSales = grossSales / 1.10
primeCost = foodCost + labourCost
primeCostRate = (primeCost / netSales) x 100What to Include in Food Cost
foodCost = openingInventory + purchases - closingInventory + waste + staffMealsCommon miss in practice: packaging for takeaway/delivery is often treated as “misc” and excluded from menu-level review.
What to Include in Labour Cost (Australia)
Labour should be loaded before you run prime cost:
loadedLabour = baseWages x (1 + SG + payrollTax + workersComp + otherOnCosts)From 1 July 2025, SG is 12%.
If you price only from base wage, labour-heavy dayparts (breakfast/lunch rush) look better than they actually are.
Worked Example: Sydney CBD Casual Venue
Assume this month:
- Gross sales (GST-inclusive):
A$132,000 - Net sales (ex-GST):
A$120,000 - Food cost:
A$38,400 - Base wages:
A$30,000 - SG:
12% - Other on-costs (example):
3%
Step 1) Load labour:
loadedLabour = 30,000 x (1 + 0.12 + 0.03) = A$34,500Step 2) Prime cost:
primeCost = 38,400 + 34,500 = A$72,900
primeCostRate = 72,900 / 120,000 x 100 = 60.75%If this rate moves above your target for two cycles, fix one lever at a time: portion variance, roster minutes, or menu mix.
Local Execution: Sydney CBD vs Regional Queensland
| Location context | Typical margin pressure | First move |
|---|---|---|
| Sydney CBD lunch-heavy trade | Peak-hour labour compression, high packaging volume | Audit labour minutes for top 10 lunch items and move low-margin add-ons behind upsell bundles |
| Regional Queensland family dinner trade | Volume swings by weekday, prep waste on slow nights | Rebuild prep par levels and reduce low-turnover SKUs before repricing entire menu |
20-Minute Monthly Prime Cost Loop
- Pull last month net sales (
ex-GST) and top item volume. - Refresh top ingredient costs from supplier invoices.
- Load wages with SG and current on-cost assumptions.
- Recalculate prime cost rate and compare with last month.
- Adjust
1-3prices or portions with the largest variance first.
Related Guides
- Prime Cost Guide
- Australia Restaurant Labour Cost Calculator
- Australia Menu Pricing Guide
- Australia Menu Pricing Calculator
- Australia Food Cost Calculator
- Australia Restaurant Surcharge Guide
- Australia Delivery App Pricing Guide
KitchenCost helps you run recipe cost, labour loading, and target pricing in one monthly workflow.