How do I calculate my restaurant prime cost?
If you’re an owner/operator, employee, manager, chef, or GM of a restaurant or any food service business Prime Cost is probably the most important number that you can track.
The very simple formula for Prime Cost is: Prime Cost = Total Cost of Goods Sold (CoGS) + Total Labor / Total Sales. You can watch this video about to figure out how to get Total CoGS or the to figure out how to get Total Labor. Those two together divided by Total Sales for a period or a rolling period (which I suggest) divided by the sales for that same period will give you Prime Cost.
What should this target number be? As insurance, the cost of doing business, rent, marketing expenses, and everything else rises, your Prime Cost needs to be less than 60%. There are a few exceptions to this rule and a few more aspects of Prime Cost to understand. I dive deeper into this important restaurant financial number in this free training video: