Restaurants: Prime Cost Is Where Your Money Goes

What prime cost is

Prime cost is your food and beverage cost plus your total labor cost. It is the biggest number on a restaurant's statement, far bigger than rent or anything else, and the one you can move fastest. Full-service and limited-service restaurants split it differently, with labor heavier where there are servers, so compare yourself only with your own kind of restaurant.

Why two points matter so much

Take a full-service restaurant with $1.2 million in sales. If prime cost runs two points higher than it should, that is $24,000 a year gone in food that was over-portioned or wasted and hours that were scheduled but not needed. For a typical restaurant, that is most of what it keeps.

The reverse is just as true. Two points of prime cost brought back under control can be worth more than any price increase the market will bear.

What the more profitable operators do differently

The more profitable operators run leaner labor than the rest, and higher-volume restaurants run lower food cost than smaller ones and keep several times as much of each dollar.

None of that comes from a single big decision. It comes from watching prime cost every week instead of finding out at year end: invoices against sales for food, scheduled hours against covers for labor, and a menu priced from what each plate actually costs today.