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Direct answers
- What is prime cost in a restaurant?
- Prime cost is the sum of total food and beverage cost (cost of goods sold) plus total labour cost for a given period. It represents the two largest and most controllable variable costs in a restaurant. Formula: Prime Cost = Cost of Goods Sold + Total Labour Cost. Expressed as a percentage of revenue: Prime Cost % = (COGS + Labour) / Total Revenue × 100. It is the most important single metric for restaurant profitability — if prime cost is under control, the business usually is too.
- What is a good prime cost percentage for an Italian restaurant?
- Italian industry benchmarks: a well-run full-service trattoria or restaurant should target prime cost below 60–65% of revenue. Breakdown: food cost 28–32%, labour cost 28–35% = prime cost 56–67%. High-volume formats (pizzeria, fast casual) can operate with prime cost 50–58% thanks to lower food cost and higher productivity per employee. Fine dining may have higher food cost but lower labour % if check average is high. A prime cost above 70% almost always indicates the business cannot generate a net profit after rent and overheads.
- What labour costs should be included in prime cost?
- Include all labour costs directly related to operations: kitchen staff wages (chef, cook, plongeur), front-of-house staff (waiter, host, barman), their employer INPS social contributions (~30% of gross wage), accrued TFR (severance pay, ~8.33% of annual gross), paid holidays and sick leave, and any casual/part-time hourly staff. Do not include management salaries if they are categorized as overheads in your accounting. Italian CCNL Pubblici Esercizi contributions are significant — a €1,500/month gross kitchen worker costs the employer approximately €2,050/month total.
- How does prime cost differ from food cost percentage?
- Food cost percentage measures only ingredient costs as a share of revenue, typically 28–35% for Italian restaurants. Prime cost adds the labour dimension, which is equally important. A restaurant can have a 'good' food cost of 30% but a prime cost of 72% if labour is overstaffed — resulting in no profit. Prime cost is the more actionable metric because it reveals the trade-off: you can sometimes compensate for higher food cost with lower labour cost (simpler dishes, better prep efficiency) and vice versa.
- How do I reduce prime cost in my restaurant?
- Food cost reduction: standardize recipes, improve yield tracking, reduce waste, renegotiate supplier contracts, revise menu pricing. Labour cost reduction: improve scheduling efficiency (match staffing to forecasted covers), cross-train staff to reduce total headcount, invest in prep equipment to reduce labour hours, negotiate within CCNL flexibility for part-time contracts. Increasing revenue while holding costs flat is the most powerful lever — even a 10% revenue increase with flat prime costs drops the prime cost % significantly and flows mostly to net profit.
- Should prime cost be calculated weekly or monthly?
- Weekly calculation is ideal for managing a restaurant actively — it catches problems before they compound over a full month. Many Italian restaurateurs review prime cost monthly because full INPS and payroll figures are only available monthly. A practical approach: track food cost weekly (using purchases + inventory counts) and labour cost weekly (using scheduled hours × hourly rate), then reconcile monthly with actual payroll. The 4-week trend line is more useful than any single week, which can be distorted by inventory timing or special events.
Quick answers
Frequently Asked Questions
What is prime cost in a restaurant?
Prime cost is the sum of total food and beverage cost (cost of goods sold) plus total labour cost for a given period. It represents the two largest and most controllable variable costs in a restaurant. Formula: Prime Cost = Cost of Goods Sold + Total Labour Cost. Expressed as a percentage of revenue: Prime Cost % = (COGS + Labour) / Total Revenue × 100. It is the most important single metric for restaurant profitability — if prime cost is under control, the business usually is too.
What is a good prime cost percentage for an Italian restaurant?
Italian industry benchmarks: a well-run full-service trattoria or restaurant should target prime cost below 60–65% of revenue. Breakdown: food cost 28–32%, labour cost 28–35% = prime cost 56–67%. High-volume formats (pizzeria, fast casual) can operate with prime cost 50–58% thanks to lower food cost and higher productivity per employee. Fine dining may have higher food cost but lower labour % if check average is high. A prime cost above 70% almost always indicates the business cannot generate a net profit after rent and overheads.
What labour costs should be included in prime cost?
Include all labour costs directly related to operations: kitchen staff wages (chef, cook, plongeur), front-of-house staff (waiter, host, barman), their employer INPS social contributions (~30% of gross wage), accrued TFR (severance pay, ~8.33% of annual gross), paid holidays and sick leave, and any casual/part-time hourly staff. Do not include management salaries if they are categorized as overheads in your accounting. Italian CCNL Pubblici Esercizi contributions are significant — a €1,500/month gross kitchen worker costs the employer approximately €2,050/month total.
How does prime cost differ from food cost percentage?
Food cost percentage measures only ingredient costs as a share of revenue, typically 28–35% for Italian restaurants. Prime cost adds the labour dimension, which is equally important. A restaurant can have a 'good' food cost of 30% but a prime cost of 72% if labour is overstaffed — resulting in no profit. Prime cost is the more actionable metric because it reveals the trade-off: you can sometimes compensate for higher food cost with lower labour cost (simpler dishes, better prep efficiency) and vice versa.
How do I reduce prime cost in my restaurant?
Food cost reduction: standardize recipes, improve yield tracking, reduce waste, renegotiate supplier contracts, revise menu pricing. Labour cost reduction: improve scheduling efficiency (match staffing to forecasted covers), cross-train staff to reduce total headcount, invest in prep equipment to reduce labour hours, negotiate within CCNL flexibility for part-time contracts. Increasing revenue while holding costs flat is the most powerful lever — even a 10% revenue increase with flat prime costs drops the prime cost % significantly and flows mostly to net profit.
Should prime cost be calculated weekly or monthly?
Weekly calculation is ideal for managing a restaurant actively — it catches problems before they compound over a full month. Many Italian restaurateurs review prime cost monthly because full INPS and payroll figures are only available monthly. A practical approach: track food cost weekly (using purchases + inventory counts) and labour cost weekly (using scheduled hours × hourly rate), then reconcile monthly with actual payroll. The 4-week trend line is more useful than any single week, which can be distorted by inventory timing or special events.