Restaurants, hotels and travel
Prime cost
Food and drink cost plus labour cost, the two biggest restaurant costs.
Last reviewedWhat does Prime cost mean?
Prime cost is a restaurant's cost of food and beverages plus its total labour cost (wages, benefits and payroll taxes), usually shown as a percentage of sales. These are the two largest costs a restaurant can control day to day, so operators track prime cost weekly or even daily. Example: a restaurant with monthly sales of 100,000, food costs of 30,000 and labour of 28,000 has a prime cost of 58,000, or 58 percent of sales. Rent and other occupancy costs come on top. Because restaurant margins are thin, a rise of a few points in prime cost can wipe out a large share of profit.
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Related terms
- COGS (cost of goods sold)The direct cost of making the products that were sold.
- Variable costA cost that rises and falls with how much you make.
- Table turnsHow many times each table is used by a new group in a meal period or day.
- Average unit volume (AUV)Average yearly sales per restaurant or store.
- CoverOne guest served a meal: the unit restaurants count.
- Same-store sales (comparable sales)The US name for like-for-like sales: growth at restaurants or stores open in both periods.
- Franchise royaltyThe ongoing fee a franchisee pays the brand, usually a percentage of sales.
- Master franchiseThe right to develop a brand across a whole country or region, including signing sub-franchisees.