The numbers

Food cost vs prime cost: the number that really matters

By José, Mise en Profit · Food cost is half the story.

Operators obsess over food cost percentage, and they should care about it, but on its own it can quietly lie to you. I have seen restaurants with a beautiful food cost still losing money every month, because they were watching one number while a bigger one ran away from them. That bigger number is prime cost, and it is the one that actually predicts whether you make money.

Food cost alone can mislead

Say your food cost is a tidy 28 percent. Textbook. But your labor is running 40 percent because the menu is complex and every dish takes skilled hands and time. Add those together and you are underwater before rent, before utilities, before anything else. The food cost number told you everything was fine. It was only ever telling you half the story.

Prime cost = food + labor

Prime cost is your total cost of goods (food and beverage) plus your total labor (wages, taxes, benefits). It is the largest controllable chunk of your P&L, and unlike rent it is something you can actually move week to week. Most healthy independent restaurants keep prime cost somewhere around 60 to 65 percent of sales.

Past roughly 65 percent of sales on food plus labor, profit gets very hard for an independent. That is why prime cost, not food cost alone, is the single number experienced operators watch. It catches the trap food cost percentage hides. (It is the same reason a blended food cost percentage is always a little misleading: one ratio can never tell the whole story.)

Manage them together

The real insight is that food and labor trade off against each other. A dish that is cheap to plate but takes twenty minutes of a skilled cook's time is not actually cheap. A pre-portioned item with a higher food cost might be the better deal once labor is in the picture. You only make that call well when you look at both numbers at once.

Start with the half you can move fastest. Get your food cost honest, dish by dish, then put it next to labor. That is when the numbers start telling you the truth.