What is Restaurant Prime Cost?

Restaurant for Sale Houston

Restaurant Prime Cost can be described as the most critical number a restaurant owner should know to operate a profitable restaurant. Restaurant Prime cost should get extensive attention on the profit and loss statement because the category is highly volatile.

Today’s restaurant industry is faced with increasing labor wages and an explosion in food costs. These factors stress restaurant owners’ net profits because it’s expanding the Restaurant Prime Cost.

What is Restaurant Prime Cost?

The formula for Restaurant Prime Cost is: COGS + Total Labor = Prime Cost

Restaurant Prime Cost should be reviewed monthly and, at worst quarterly, to monitor any changes that can negatively affect the Profit and Loss statement. Many successful restaurant owners actually calculate and evaluate prime restaurant costs weekly.

Dallas Restaurant Broker Dominique Maddox says, “the first items I review on a profit and loss statement is the Cost of Good Sold “COGS” and the total labor cost total percentage cost. Prime cost should be 55%-65% or less (total sales)”.

Breakdown of Restaurant Prime Cost:

Cost of Goods Sold:

The cost of goods sold (COGS) in a restaurant includes the price of all products, materials, and condiments used to create a dish or drink.

Total Labor Cost:

Total labor cost includes employees’ wages and benefits. This category contains hourly employees, salaried employees, payroll taxes, and employee benefits.

Restaurant Broker Tips:

-Training managers to be proactive in monitoring food loss, employee scheduling, and comps.

– Provide proper training for new employees

– POS System and technology should be up to date with inventory count

-Increase food prices

-Review restaurant numbers weekly

-Owner/operator or General Manager operated

To learn more about EATS Broker consulting services or to receive a complimentary restaurant valuation, contact Dallas Restaurant Broker Dominique Maddox at 404-993-4448 or by email at [email protected]. Visit our website at www.EATSbroker.com.