Prime cost is the fastest way to see if a U.S. restaurant is profitable.
Food and labor are your two biggest controllable expenses. Prime cost is simply the total of those two numbers.
When prime cost creeps up, profit disappears. This guide gives you a U.S.-specific prime cost calculator with payroll tax add-ons, CPI context, and a monthly review routine.
Quick Summary
- Prime cost = food cost + labor cost
- Healthy range is usually 55% to 65% of sales
- U.S. payroll taxes (FICA + FUTA) add real cost above the hourly wage
- Use pre-tax sales in the formula
US Inflation Snapshot (Why This Matters)
BLS CPI (December 2025, 12-month change):
- All items: +2.7%
- Food: +3.1%
- Food at home: +2.4%
- Food away from home: +4.1%
- Full-service meals and snacks: +4.9%
- Limited-service meals and snacks: +3.3%
Restaurant prices are still rising faster than groceries. That is why prime cost needs a monthly check.
The Prime Cost Formula
Prime cost = Food cost + Labor cost
Prime cost % = (Food cost + Labor cost) ÷ Net sales × 100Net sales means sales before sales tax. Sales tax is pass-through money. Do not count it as revenue.
What Counts as Food Cost
Include:
- Beginning inventory
- Purchases
- Less: ending inventory
- Staff meals and waste
A simple COGS formula is fine:
COGS = Beginning inventory + Purchases - Ending inventoryWhat Counts as Labor Cost (US)
Labor cost is not just wages. Include all payroll taxes and employer-paid costs.
Required payroll add-ons
- Social Security tax (employer FICA): 6.2%
- Medicare tax (employer FICA): 1.45%
- FUTA: 6.0% (typically 0.6% with full credit)
State unemployment insurance (SUI) varies. Add your local SUI rate to the calculator.
US Prime Cost Calculator (Step-by-Step)
Step 1) Collect the three numbers
- Net sales (before sales tax)
- COGS (food cost)
- Labor cost (wages + payroll taxes + benefits)
Step 2) Calculate prime cost
Prime cost = Food cost + Labor costStep 3) Calculate prime cost percentage
Prime cost % = (Food cost + Labor cost) ÷ Net sales × 100Quick Example (US)
Assume this month:
- Net sales: $100,000
- Food cost: $30,000
- Labor cost: $28,000
Prime cost = 30,000 + 28,000 = 58,000
Prime cost % = 58,000 ÷ 100,000 × 100 = 58%58% is inside a healthy range for most concepts.
Add Payroll Taxes to Labor Cost (Simple Method)
If you only have base wages, add payroll taxes like this:
Loaded labor cost = Base wages x (1 + FICA + FUTA + SUI + benefits)Example with base wages of $25,000:
- FICA: 7.65%
- FUTA: 0.6%
- SUI: 2.0% (example)
Loaded labor cost = 25,000 x (1 + 0.0765 + 0.006 + 0.02)
= $27,558Use the loaded number in prime cost.
Prime Cost Targets by Concept (Rule of Thumb)
These are directional targets, not fixed rules:
- Full-service: 60% to 65%
- Fast casual: 55% to 60%
- QSR: 55% to 60%
- Coffee shops: 45% to 55%
- Catering: 55% to 65%
If you are above target, do not panic. Diagnose whether food or labor is the driver.
Fixing High Prime Cost
If food cost is high
- Tighten portion sizes
- Reprice top 10 items
- Cut low-margin add-ons
- Reduce waste and spoilage
If labor cost is high
- Rebuild prep lists to reduce overproduction
- Trim the slow daypart schedule
- Track labor minutes per dish
- Use cross-training to reduce coverage gaps
Monthly Prime Cost Routine (US)
- Update ingredient costs for your top 10 items
- Recalculate food cost % for those items
- Pull labor hours by role
- Add payroll taxes to wages
- Calculate prime cost and compare to target
- Adjust 1 to 3 menu prices or portions
Repeat monthly to prevent margin drift.
Common Mistakes
- Using gross sales that include sales tax
- Forgetting payroll taxes and employer costs
- Ignoring delivery packaging and waste
- Waiting quarterly to check prime cost
FAQ
Q: Should I include owner pay in labor cost? Yes. If you work shifts, include a market-rate wage.
Q: What about tips? Tips are not employer costs, but they affect staffing decisions. Price with conservative assumptions.
Q: Is 60% always the right target? No. Use your concept and service model as the baseline.
Related Guides
- Prime Cost Guide
- US Restaurant Labor Cost Calculator
- US Food Cost Calculator
- US Menu Pricing Calculator
- Free Recipe Cost Calculator App Guide
- US Restaurant Menu Pricing Guide
- Menu Price Review Checklist
- Food Cost Ratio Guide
- Menu Engineering Guide
- Price Increase Timing Guide
- Pizza Cost Calculator
- Home Baking Pricing Guide
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