Prime cost is the one number that tells you whether the restaurant works. Not gross sales. Not covers. Not the Yelp rating. Prime cost. It captures the two largest controllable costs in a single ratio, and the floor is the floor - drop below the industry baseline and you stop making money no matter how busy the dining room looks on a Saturday night.
The trap is obvious once you have seen it run a place into the ground. Owners watch revenue, celebrate a record week, reinvest before the books close, and forget that revenue without prime cost discipline is just turnover. Turnover pays nobody. The ratio does.
The math, in one line.
Prime cost = (food cost + total labor) / revenue, all measured over the same period. Food cost is the COGS for food you actually sold, not what you purchased that week. Total labor is wages plus benefits plus payroll taxes plus tip share - the full loaded number, not just gross pay. Revenue is net sales for that same period, after comps and voids. The period has to match. Weekly food cost over monthly revenue is not a ratio, it is a lie that looks like a ratio.
Where it should sit.
Industry target sits at 55 to 65 percent combined, and the band shifts by service style. Full-service independents typically land between 60 and 65. Quick service runs 55 to 60, because the labor side is lighter. Fine dining pushes 65 to 68, because the labor is heavier and the menu pricing is built to absorb it. Anything above 65 in full service means you are bleeding, even if the bank account still looks healthy this month.
Below 55 in any segment is rare, and when it happens it usually points to a problem - under-paying staff who will turn over by the next season, or under-buying quality that guests will eventually taste. The target is not the goal. The goal is being consistent inside the band, not chasing a lower number every month.
What each component tells you.
Food cost up - investigate purchasing first.
A food cost spike almost always traces back to one of four sources: supplier price creep, a quiet spec swap from the warehouse, theft, or waste in the prep flow. Work the list in order. Check this week's invoices against the last eight weeks (the drill is in how to catch supplier overcharges). Check the spec on what actually arrived. Pull the shrink and waste log. Theft is last because it is rarest and slowest to confirm.
Labor cost up - investigate the schedule first.
A labor spike almost always traces to overtime creep, the wrong staff mix for the daypart, or last-minute callouts forcing premium pay. Pull overtime hours by employee for the last three weeks. Compare scheduled hours against actual clocked hours and find the drift. Then look at sales-per-labor-hour by daypart - the lunch shift may be overstaffed against a covers count that quietly dropped two months ago.
What to do when prime cost spikes.
Before cutting anything, ask three diagnostic questions. One: is this a single bad week or a trend? One week is noise; three weeks in a row is signal. Two: which side moved - food or labor? The fixes are completely different, and cutting staff to solve a food problem makes everything worse. Three: did revenue move? The ratio is sensitive to the denominator - if sales dropped but absolute costs held flat, the ratio looks worse without anything actually changing in the kitchen.
How ORBIS tracks prime cost.
ORBIS reads every invoice for the food side, pulls labor from the scheduling and payroll signal, and computes prime cost daily - not monthly. Set the alert one percentage point above your target, and the WhatsApp ping arrives the day the ratio crosses, not three weeks later in a P&L review. See it watch your margin →
Operators who run by prime cost run profitable restaurants. Operators who run by revenue burn out chasing growth they cannot bank.