Most restaurant owners look at sales daily and the P&L monthly, which means a bad month is fully baked before anyone sees it. Prime cost sits in between: it moves weekly, you can act on it weekly, and it explains most of the gap between a good month and a bad one.
How prime cost is calculated
Prime cost = cost of goods sold + total labour, divided by sales. Total labour means every dollar — hourly, salaried, payroll taxes, and the benefits that ride along with them. Leaving payroll taxes out is the most common way this number gets quietly understated.
What a healthy number looks like
Full service tends to run in the low-to-mid sixties as a percentage of sales. Quick service tends to run lower because labour is lighter. Those are reference points, not targets — your own trailing average is the number that matters, because it accounts for your rent, your menu and your market.
Running it weekly needs three things in place: an inventory count you actually do, purchases coded consistently, and payroll that lands in the right period. That is bookkeeping work, and it is the reason a restaurant’s books are worth keeping properly rather than reconstructing in April.
Where this comes up
If any of the above describes your situation, it is a twenty-minute phone call to find out what it would take to fix. Call (501) 424-0307 or book a free consultation.
Written by Mo Sliger
Owner of Sliger Bookkeeping in Cabot, Arkansas. Intuit Advanced ProAdvisor, certified in QuickBooks Online Level 2, QuickBooks Workforce and Intuit Enterprise Suite, and a daily Xero user. Nearly thirty years in restaurant management before bookkeeping, and a U.S. Navy veteran (1991–1995).
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