The short answer
Prime cost is your food cost plus your labour cost, divided by sales. They are the two biggest costs you can change week to week. A common rule of thumb is to keep prime cost at or under 60 to 65 percent of sales; tracking it weekly shows a slide before the month ends.
The formula
Prime cost % = (food cost + labour cost) ÷ sales × 100. Use the same dates for all three numbers. Food cost is what you bought for the kitchen in that period; labour is wages plus payroll taxes and benefits; sales are before tax and tips.
Why weekly
A monthly profit and loss arrives after the month is over, when nothing can be changed. A weekly prime cost tells you in the second week that labour is drifting up, or that food purchases jumped, while there is still time to adjust a schedule or a portion.
Example: two weeks at one store
These figures are an example.
- Week 1: sales CA$14,500, food CA$4,350 (30.0%), labour CA$4,205 (29.0%). Prime cost CA$8,555, which is 59.0% of sales.
- Week 2: sales CA$13,200, food CA$4,224 (32.0%), labour CA$4,488 (34.0%). Prime cost CA$8,712, which is 66.0% of sales.
Sales fell by CA$1,300 but labour rose, so the labour share jumped five points. Food crept up too. Week 2 is over a 65% line, and it shows up a fortnight before the month closes.
A simple weekly routine
- Pick a fixed week, for example Monday to Sunday, and keep it.
- Add up the week’s sales from your end-of-day reports.
- Add up the week’s food deliveries and food bills. Purchases are lumpy, so look at two or three weeks together before you act on one.
- Add up the week’s labour: hours times wage, plus an allowance for payroll taxes.
- Work out food %, labour % and prime cost %, and write them beside last week’s.
What a sensible target is
A common rule of thumb for restaurants is to keep prime cost at or under 60 to 65 percent of sales. Treat it as a starting point, not a rule: a place with low rent can run higher, and one with high rent needs to run lower. Set your own target from what is left for rent, other costs and profit.
How Mezbano helps
Mezbano adds the food cost booked as expenses and the labour you record into prime cost on the Profit and loss page, for the month so far, next to the same days last month. Each brand sets its own levels for prime cost and labour under its settings; until it does, prime cost under 60% is on target and 65% or more is too high, and labour under 30% is on target. Mezbano does not show prime cost by week, so for the weekly routine above, add up the days yourself.
What Mezbano does not do here
- A weekly view: Mezbano shows prime cost for the month so far, beside the same days last month.
- Planning who works when, or time clocks: labour is recorded as hours and payroll after the fact.
- Point-of-sale integrations: each day’s sales are typed in from the end-of-day report.
Questions owners ask
How do you calculate prime cost?
Add food cost and labour cost for the same period, divide by sales for that period, and multiply by 100. CA$4,350 of food and CA$4,205 of labour on CA$14,500 of sales is a prime cost of 59%.
What is a good prime cost for a restaurant?
A common rule of thumb is 60 to 65 percent of sales or less. It depends on your rent and service style. Mezbano marks prime cost as on target under 60% and too high at 65% or more until a brand sets its own levels.
Does labour in prime cost include payroll taxes?
It should. Count wages plus payroll taxes and benefits, because they are part of what an hour of work costs you. Mezbano’s monthly payroll total includes them.
Are delivery app fees part of prime cost?
No. They are a cost of selling, not food or labour. Mezbano adds them to expenses as an other cost, never to prime cost.