Prime Cost

Category: science

The combined total of a restaurant’s total cost of goods sold (food and beverage) and its total labor costs.

Prime cost represents the largest chunk of a chain restaurant’s controllable operating overhead, calculated as: $Prime\ Cost = Cost\ of\ Goods\ Sold\ (COGS) + Total\ Labor$. Institutional operations target a prime cost baseline of 60% or less of gross sales. Because these numbers fluctuate daily, multi-unit managers monitor this combined metric to evaluate store-level manager performance.

Common Examples

• The regional director flagged the Orlando location because its prime cost spiked to sixty-seven percent due to unmanaged overtime scheduling.
• Automating our ingredient procurement pipelines allowed us to stabilize our COGS and maintain a highly predictable prime cost matrix across the group.