Prime cost

Prime cost is the single most useful number on your P&L because it captures the two biggest controllable costs together: what you spend to buy the food and drink you sell (Food cost percentage) plus what you spend on labor (Labor cost percentage). Everything else on the statement (rent, utilities, insurance, marketing) is either fixed or small by comparison. Most full-service operators aim to keep prime cost at or below 60% to 65% of sales, because on a typical 3-5% net margin there is almost no room for it to drift higher.

The reason to track prime cost as one figure, not two, is that the two halves trade against each other. Cut labor too hard and food waste and errors climb; over-buy inventory and you carry cost you never sell. With food running around 32.0% / 32.4% of sales and full-service labor at a median of 36.5% of sales, the gap between a profitable and an unprofitable kitchen is thin and measured weekly, not monthly. Profitable operators held labor to 34.2% vs 42.9%, which is a prime-cost discipline problem before it is a sales problem.

This is where AI earns its keep for an indie operator who does not have a full-time controller. Platforms that read your invoices and POS together (MarginEdge, Restaurant365) rebuild food cost daily instead of once a month, and demand forecasting (Lineup.ai, 7shifts) sizes labor to the covers you will actually do, so both halves of prime cost stay tight without you doing the math by hand every night.