Prime cost, the ratio that says whether a restaurant holds
Food cost and payroll together make up most of a restaurant's costs. Their sum against turnover — prime cost — is the first figure to look at every month.
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The calculation
prime cost = (food cost used + fully loaded payroll) ÷ net turnover. Payroll is fully loaded: gross wages plus employer contributions. Without the contributions, the line looks much lighter than it is, and the ratio reassures for no reason.
Worked example: one month, two ways of counting
A restaurant taking €45,000 net in the month.
| Opening stock + purchases − closing stock | €6,200 + €14,800 − €7,400 |
|---|---|
| Food cost used | €13,600 · 30.2% |
| Fully loaded payroll | €15,300 · 34.0% |
| Prime cost | 64.2% |
| The same month worked out on purchases | 66.9% |
Worked out on purchases, the same month crosses the 65 % line — without a single dish or shift having changed. Stock simply grew by €1,200 between the start and the end of the month.
On usage, not purchases
usage = opening stock + purchases − closing stock. Taking the month's purchases counts what you put on the shelves, not what you served: a month spent restocking the cellar shows an inflated food cost, the next one a flattering one — without a single dish having changed. The month-end stocktake is what makes the figure right.
The thresholds
Under 65 %, there is enough left to pay rent, energy and insurance, and still show a result. Between 65 and 70 %, it balances, with no room for error. Above 70 %, the problem is no longer in fixed costs: it is in the menu or in the rota.