Prime cost (coste primo in Spanish) is food cost plus staff cost. It is the most complete measure of a restaurant's direct operating cost and should stay between 55% and 65% of turnover.
Prime cost (coste primo in Spain) is the most important financial metric for judging whether a restaurant is operationally viable. It is the sum of the business's two big variable costs: the cost of raw materials (food cost and beverage cost) and the total cost of staff. Together, these two items typically account for between 55% and 65% of a restaurant's turnover, and they are the only costs the manager has direct, short-term control over. A prime cost of 55% or less is excellent and points to a very efficient operation; between 55% and 60% is good and typical of well-run restaurants; between 60% and 65% is acceptable but needs watching; and above 65% is dangerous, meaning the business leaves very little margin for rent, utilities, marketing and profit.
The make-up of prime cost varies with the type of restaurant: a fine-dining venue will have a high food cost (35-40%) but a relatively lower staff cost as a share of sales (25%) because of its high prices; a restaurant serving a set lunch menu (menú del día) will have a moderate food cost (28-32%) but a high staff cost (30-35%) because its prices are lower. Prime cost should be tracked weekly, not monthly, so that corrective decisions can be made in time.
Prime cost = Food cost + Staff cost = (Raw material cost + Total staff cost) / Turnover (excl. VAT) × 100
Prime cost is calculated by adding the total cost of raw materials (the food and drink ingredients consumed in the period) to the total cost of staff (gross wages + employer's Social Security + extras), dividing by turnover excluding VAT for the same period and multiplying by 100. If your restaurant turns over €60,000 in a month (excluding VAT), spends €18,000 on raw materials and €19,500 on staff, its prime cost is ((18,000 + 19,500) / 60,000) × 100 = 62.5%. For the weekly calculation, which is more useful for day-to-day management, you use the week's purchases adjusted for the change in inventory, plus staff cost spread across the weeks.
Your restaurant turns over €55,000 a month (excluding VAT). Food cost is 30% (€16,500) and staff cost 32% (€17,600). Your prime cost is 62%: acceptable, but it could be better. Looking at the data, you spot two opportunities: food cost on the fish dishes is at 38% (because of a seasonal price rise), and on Tuesdays you have the same staff as on Fridays with half the turnover.
Actions: renegotiate prices with the fish supplier and adjust the menu price of two fish dishes (bringing their food cost down to 28%); reorganise the rota so staff take their day off on Tuesdays (bringing staff cost down to 30%). Result: food cost falls to 28.5% and staff cost to 30%. New prime cost: 58.5%. You have freed up 3.5 percentage points, equivalent to almost €2,000 a month of extra profit.
Prime cost is the indicator that determines a restaurant's economic viability. The other costs (rent, utilities, insurance, marketing, depreciation) are relatively fixed and hard to change in the short term. Prime cost, on the other hand, is variable and manageable: you can adjust menu prices, renegotiate with suppliers, optimise recipes, reduce wastage and reorganise staff rotas. A restaurant with a prime cost of 60% and rent of 10% has 30% left for its other costs and profit.
If prime cost rises to 68%, that margin shrinks to 22%, and the business is very likely to slip into losses. That is why the most profitable restaurants track their prime cost every week and have automatic processes to spot deviations quickly.
Zindra calculates your prime cost automatically by combining your purchasing, inventory, sales and payroll data. The dashboard shows the weekly trend and alerts you when prime cost goes above the threshold you have set as your target.
Tools and content to go deeper into this concept.
Food cost is the percentage of a dish's selling price that goes on the cost of its ingredients. It is the single most important indicator of how profitable your menu is.
Average spend (the average ticket) is the average amount each customer (or table) spends in your restaurant. It is a key indicator of commercial performance and of how well your menu works.
A recipe costing sheet (escandallo in Spanish) is the technical document that breaks down every ingredient in a dish with its exact quantity, unit cost and total cost per portion. It is the foundation of cost control in a restaurant.
The staffing ratio is the relationship between the number of employees and the restaurant's customers, tables or revenue. It tells you whether you have the right team to give good service without costs running away.
Every hospitality term with formulas, examples and benchmarks in a handy PDF.
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