Most restaurants do not fail because the food is bad. They fail because the cost structure cannot support the rent. The cure is to model the ratios before you sign — especially prime cost, the single number that decides survival.
Prime cost is the master KPI
Prime cost = food cost + labor cost, as a share of sales. It excludes rent and overhead, so it isolates the two biggest costs you actually control day to day. Healthy bands by segment (verified 2026):
| Segment | Food cost | Labor | Target prime cost |
|---|---|---|---|
| Quick-service (QSR) | 25-32% | 25-30% | 45-55% |
| Fast casual | 27-36% | 24-35% | 53-68% |
| Casual / full-service | 28-40% | 28-40% | 58-74% (aim 60-65%) |
| Fine dining | 30-44% | 32-46% | 64-82% (premium model) |
| Cafe & bakery | 22-35% | 26-38% | 50-66% |
Rent and occupancy
Occupancy cost (rent all-in) above ~10% of sales is the widely used red line for small restaurants; full-service often targets 6-10%. At 12%+ it is a structural problem you cannot discount your way out of.
Startup capital by format
| Format | Total opening range | Build-out $/SF |
|---|---|---|
| Food truck | $50K-$200K | n/a (vehicle + kitchen) |
| Bakery | $20K-$100K | $20-$150 |
| Coffee / cafe | $80K-$300K | $50-$450 |
| QSR / fast casual | $150K-$500K | $100-$450 |
| Full-service | $300K-$750K+ | $150-$450 |
| Fine dining | $500K-$1.5M+ | $200-$450 |
Traps that sink openings
- Under-capitalization. Hold 3-6 months of operating cash on top of build-out and first inventory.
- Ignoring employer payroll tax. Wages are not the full labor cost — FICA, SUTA, FUTA, and workers' comp add ~15-25% on top.
- Leasing on base rent only. NNN load adds 20-40%. See the NNN lease guide.
- Weak location math. Walk traffic at different hours before you commit; a pretty corner that cannot clear your daily minimum revenue will not improve.
Use the Startup Viability Calculator to size capital and the daily revenue floor, then stress-test a conservative ramp.