What prime cost should I target?

Sixty to sixty-five percent for full service. Above that there is too little left to cover rent, utilities and any profit.

Businessoperations

Labor Cost Percentage Calculator

Labour cost percentage and prime cost. Prime cost, labour plus food, is the figure that decides whether a restaurant works, and sixty to sixty-five percent is the ceiling.

Also called: restaurant labour cost, prime cost calculator.

Labour cost percentage

26.41%

26.41% labour cost. Together with food at 26.03%, prime cost is 52.44%, which is comfortably inside the workable range.

Total labour cost

₹8,98,000

Food cost percentage

26.03%

Prime cost

52.44%

Left for rent, utilities and profit

₹16,17,000

Value of one percentage point

₹34,000

On prime cost

which is comfortably inside the workable range.

How this is calculated

Method and background

How this is calculated

Labour cost includes taxes and benefits, not just wages, which is a chunk people leave out and which shifts the percentage by several points. Adding food gives prime cost, the two costs an operator can actually control. Above sixty-five percent there is not enough left for rent, utilities and profit, which is why prime cost rather than either component is the number to manage.

the two controllable costs together, which is the number operators actually manage

L: Labour cost

Worked examples

Each of these is asserted on every build. If a change to the engine ever moved one of these answers, the build would fail before the page could print it.

a full service restaurant

Wages in the period: ₹7,80,000
Payroll taxes and benefits: ₹1,18,000
Revenue in the period: ₹34,00,000
Food cost in the period: ₹8,85,000

Labour cost percentage26.41%

8.98L labour plus 8.85L food over 34L

Open this example

no labour cost leaves food alone

Wages in the period: ₹0
Payroll taxes and benefits: ₹0
Revenue in the period: ₹34,00,000
Food cost in the period: ₹8,85,000

Labour cost percentage0%

boundary

Open this example

Method and limits

What it assumes

All labour, including management, is in the wage figure.

What it deliberately does not model

Owner labour taken as drawings rather than wages understates this considerably.
The benchmark varies with service model: quick service runs lower labour than full service.

Formula version 1.0.0 · definition 1.0.0 · India · Report a problem with this calculator

Frequently asked questions

What prime cost should I target?: Sixty to sixty-five percent for full service. Above that there is too little left to cover rent, utilities and any profit.