Restaurant owners manage by sales. The survivors manage by prime cost. Sales tell you how much came in; prime cost tells you how much of it you kept — and which half (food or labor) is drifting.
Prime cost by segment — your master gauge
| Segment | Target prime cost | Warning |
|---|---|---|
| QSR / counter | 45-55% | above 55% |
| Fast casual | 50-60% | above 60% |
| Casual / full-service | 55-65% | above 65-70% |
| Fine dining | 64-82% (premium model) | structurally different — check AOV |
Prime cost = food + labor, both as % of sales. Everything else — rent, utilities, marketing, insurance — must fit in the remaining 35-45%. At 70% prime cost you have only 30% left to cover all of that and profit, which is almost never enough.
The food-vs-labor trade-off
They move in opposite directions. Making pasta in-house lowers food cost but raises labor; buying pre-prepped raises food cost but lowers labor. Managing food cost alone lets you "improve" one while the total doesn't fall. Prime cost stops that game.
Red lines to post
- Prime cost > 65-70% (full-service) — serious warning.
- Rent > 10% of sales — structural; compress prime cost toward the low end of its range.
- Labor > 35-45% by segment — usually a rostering problem, not a wage problem. Match staffing to covers by day-part before touching headcount.
Weekly, not monthly. Track prime cost every week from food received and payroll. Small drifts compound; monthly reviews reveal damage that has already accumulated.
Sources (retrieved 2026-08-13): costlab.ai prime-cost targets; papaya restaurant margin benchmarks by segment; TheFoodyGram 30/30/30 framework and prime-cost guidance; happychef prime-cost analysis (fine-dining nuance).