Prime cost is the control number most owners skip until margin is already under pressure.
It combines food cost and labor cost, the two expenses that move fastest in day-to-day service. If you track only one of them, your pricing decisions can look correct on paper but fail in cash flow.
This guide gives you a practical way to use prime cost weekly, with examples you can adapt for U.S., UK, Australia, and Canada operations.
Quick Summary
- Prime cost is the sum of food cost and labor cost.
- A 60% target is a useful operating benchmark for many concepts, not a universal law.
- Use loaded labor cost, not headline wage only.
- Check prime cost weekly and diagnose by cause before changing menu prices.
- Run country-specific assumptions for payroll and inflation context.
Prime Cost Formula
Use both forms every week:
Prime cost = Food cost + Labor cost
Prime cost % = (Food cost + Labor cost) / Total sales x 100Example:
- Weekly sales: $48,000
- Food cost: $15,200
- Labor cost (loaded): $13,100
Prime cost % = (15,200 + 13,100) / 48,000 x 100
= 58.96%At 58.96%, this store is still inside a common control zone. The job now is to keep it stable as supplier and staffing conditions move.
Why Operators Use the 60% Rule
The 60% rule is popular because it leaves room for rent, utilities, marketing, and debt service without forcing emergency price hikes every month.
Use it as a decision trigger:
- Under target: protect consistency, avoid unnecessary discounting.
- 2 to 3 points above target: investigate food and labor variances immediately.
- Persistently above target: redesign recipes, staffing patterns, or price architecture.
Country-Aware Reality Check
Prime cost math is universal, but operating pressure differs by market.
United States
A fast-casual operator in Austin may keep food cost steady but lose margin through overtime and shift mismatch. Weekly labor hour control often matters as much as supplier negotiations.
United Kingdom
A neighborhood cafe in Manchester can see margin compression around wage policy updates and seasonal utility spikes. Recalculate loaded labor assumptions before each menu review cycle.
Australia
A brunch shop in Melbourne may face higher volatility in both labor and input pricing by season. Tracking trend by week, not only monthly P and L, is critical.
Canada
A takeout-heavy store in Toronto can experience regional differences in costs and customer price tolerance. Prime cost should be tracked per store, not by a single national assumption.
Diagnose Before You Cut
When prime cost rises, split the problem first.
Case A: Food Cost Drift
Symptoms:
- theoretical food cost is stable, actual food cost rises
- top sellers show portion drift
- spoilage increases on prep-heavy items
Actions:
- reweigh top 10 recipes this week
- update yield assumptions for proteins and produce
- tighten prep batching on low-turn SKUs
Case B: Labor Cost Drift
Symptoms:
- labor percentage rises while sales are flat
- overtime appears on low-volume days
- prep and service tasks overlap inefficiently
Actions:
- rebuild schedule by demand blocks, not fixed habits
- assign one owner to labor variance review
- convert recurring overtime into planned prep windows
Weekly and Monthly Operating Rhythm
Weekly:
- Pull sales, food spend, and loaded labor numbers.
- Calculate prime cost percentage.
- Flag any variance above target by 2 points.
- Assign one operational action with owner and date.
Monthly:
- Close inventory-adjusted food cost.
- Recompute loaded labor by role.
- Review 4-week trend, not single-week noise.
- Decide whether operational fixes are enough or menu prices must move.
One Practical Example (Four-Week Turnaround)
A 60-seat casual concept started at 64.2% prime cost:
- week 1: portion re-standardization on two high-volume entrees
- week 2: schedule alignment for peak and shoulder hours
- week 3: prep waste log by station
- week 4: minor price architecture update on add-ons, not broad base prices
After four weeks, prime cost reached 60.8%. The key was sequence: operations first, menu changes second.
Do This Now
- Calculate last 4 weeks of prime cost from actuals.
- Confirm labor is fully loaded (taxes and employer on-costs included).
- Audit portions on top 10 menu items.
- Identify one food leak and one labor leak this week.
- Set your next monthly pricing review date.
FAQ
What is a good prime cost target for most restaurants?
Many operators use 60% as a practical control point, but the right target depends on rent, service model, and concept.
Should labor include payroll taxes and employer on-costs?
Yes. Prime cost is only useful when labor reflects real employer cost, not just headline hourly wages.
How often should I calculate prime cost?
A weekly check catches drift early, and a monthly close confirms trend and root causes.
If prime cost is high, should I raise prices immediately?
Not always. First identify whether the issue is food waste, portion drift, scheduling, or mix. Correct operations before broad price changes.
Country-Specific Calculators
- US Restaurant Prime Cost Calculator
- UK Restaurant Prime Cost Calculator
- Australia Restaurant Prime Cost Calculator
- Canada Restaurant Prime Cost Calculator
Related Guides
- Food Cost Ratio Guide
- Restaurant Labor Cost Percentage Guide
- Menu Engineering Guide
- US Restaurant Menu Pricing Guide
- UK Restaurant Menu Pricing Guide
- Australia Menu Pricing Guide
- Canada Menu Pricing Guide
KitchenCost helps you track recipe cost, loaded labor, and price changes in one workflow so prime cost decisions are based on current numbers, not month-old spreadsheets.
Sources (checked on 2026-02-12)
- USDA ERS - Food Price Outlook (Summary Findings)
- U.S. Department of Labor - Minimum Wage
- GOV.UK - Minimum wage rates for 2026
- ONS - Inflation and price indices
- ABS - Price indexes and inflation
- ABS - Labour: Earnings and working conditions
- Statistics Canada - Consumer price indexes
- Statistics Canada - Labour