How to Calculate Food Cost and Prime Cost (2026)

Two numbers decide whether a restaurant makes money: what the food costs you, and what the people cost you. Food prices move every week, and labor is the biggest bill most restaurants pay. If you only see these numbers when your accountant sends the year-end tax return, it is too late to do anything about them.

This explainer shows how to calculate food cost, food cost percentage, plate cost and prime cost (food, beverage and labor together), with worked examples you can copy into a spreadsheet. It also shows how to take an inventory count that you can trust, because every one of these numbers depends on it.

This is general information, not tax or accounting advice. Talk to your accountant about your own books.

The key terms

Inventory: the food and drink you have on hand, valued at what you paid for it.
Purchases: what you bought from suppliers during the period, at the price you actually paid (after any discounts and credits).
Cost of goods sold (COGS): the cost of the food and drink you actually used up during the period. In a restaurant, it is usually split into food COGS and beverage COGS.
Food cost percentage: food COGS as a share of food sales.
Plate cost: the ingredient cost of one portion of one menu item.
Prime cost: COGS plus total labor cost.

How to calculate food cost

Food cost is not the same as what you bought this month. Some of what you bought is still on the shelf, and some of what you used was bought last month. The inventory counts at the start and end of the period fix that.

Food cost = beginning inventory + purchases − ending inventory

Food cost % = food cost ÷ food sales × 100

Worked example: food cost for one month

A neighborhood restaurant closes its books for September:

Line	Amount
Food inventory on September 1 (last month’s closing count)	$14,200
Plus food purchases in September (invoices, net of credits)	$31,500
Equals food available to use	$45,700
Minus food inventory on September 30 (this month’s count)	$12,900
Equals food cost for September	$32,800

Food sales for September were $104,000.

Food cost % = $32,800 ÷ $104,000 × 100 = 31.5%

So 31.5 cents of every dollar of food sales went to the food itself.

Do the same for beverages

Calculate beverage cost separately, with its own counts, purchases and sales. Drinks usually carry a very different cost percentage from food, and if you mix them, a good bar month can hide a bad kitchen month.

Using the same restaurant: beverage inventory of $6,100 on September 1, beverage purchases of $9,800 and a closing count of $6,400 give a beverage cost of $9,500 ($6,100 + $9,800 − $6,400). On $38,000 of beverage sales, that is a 25.0% beverage cost.

Total COGS for September = $32,800 + $9,500 = $42,300, on total sales of $142,000.

Adjustments that keep the number honest

Transfers between kitchen and bar. If the kitchen sends lemons and cream to the bar, move that cost from food to beverage, or each percentage will be wrong.
Staff meals and comps. Food you give away still leaves your inventory. Many operators record staff meals and comps separately so they can see them, instead of letting them quietly raise food cost.
Credits and returns. Use the price you actually paid. If a supplier credits you for a short delivery, reduce purchases by the credit.

How to calculate plate cost

Plate cost tells you what one portion should cost, based on the recipe. It is how you price a menu and how you spot dishes that quietly lose money.

Write the standard recipe: every ingredient and its portion size, including garnish, sauce and sides.
Find the current cost per unit of each ingredient from your latest invoices (per ounce, per each, per pound).
Adjust for yield. Use the cost of the usable part, not the raw weight. If raw brisket costs $4.80 a pound and only 60% of it is left after trimming and cooking, the cost per usable pound is $4.80 ÷ 0.60 = $8.00.
Multiply and add up: portion size × cost per unit for each ingredient.
Divide by the menu price to get the plate cost percentage.

Worked example: a burger plate

Ingredient	Portion	Cost
Ground beef at $5.20/lb	6 oz	$1.95
Brioche bun	1	$0.45
Cheese	1 slice	$0.30
Lettuce, tomato, onion	1 set	$0.35
House sauce	1 oz	$0.10
Fries at $1.60/lb	6 oz	$0.60
Ketchup and garnish	1	$0.10
Plate cost		$3.85

At a menu price of $15.00, the plate cost percentage is $3.85 ÷ $15.00 × 100 = 25.7%.

To find the price that hits a target cost percentage, divide plate cost by the target: at a 28% target, $3.85 ÷ 0.28 = $13.75. That is the floor; your market, your competitors and how guests value the dish decide the final price.

Not every dish has to hit the same target. In a National Restaurant Association article on menu pricing, one Chicago operator described selling a steak at 40% to 45% food cost while appetizers and salads are costed far lower, and a San Francisco group said it targets 24% to 26% food cost across its concepts. What matters is the blended result across everything you sell.

Compare plate cost with actual food cost

Multiply each dish’s plate cost by how many you sold (your POS sales mix report has this), add it up, and you get your theoretical food cost: what food should have cost if every plate matched the recipe. Your actual food cost comes from the inventory formula above. The gap between them is waste, over-portioning, spoilage, unrecorded comps, theft, or a counting or invoice error. A growing gap is the earliest warning sign you will get.

How to calculate prime cost

Prime cost = total COGS (food + beverage) + total labor cost

Prime cost % = prime cost ÷ total sales × 100

Total labor cost means everything it costs you to staff the restaurant, not just the hourly payroll:

Hourly wages, including overtime
Salaries for managers and chefs
The employer share of payroll taxes. For Social Security and Medicare, that is 6.2% and 1.45% of wages (7.65% together), per the IRS; Social Security stops at the yearly wage base, which is $184,500 for 2026. Add federal and state unemployment taxes.
Workers’ compensation insurance
Benefits you pay for, such as health insurance and retirement contributions

Tips are a special case. The IRS says voluntary tips are not amounts paid to the employer and are not part of its gross receipts, so the tips themselves are not your labor cost. But employers pay the employer share of Social Security and Medicare on the tips employees report, and that tax is your cost. Mandatory service charges are different again: the IRS treats them as your income, and as wages when you pay them out to staff.

Worked example: prime cost for one month

Continuing with the same restaurant in September:

Labor line	Amount
Hourly wages	$34,000
Manager and chef salaries	$12,500
Employer Social Security and Medicare (7.65% × $46,500)	$3,557
Unemployment taxes and workers’ comp (example figure)	$1,400
Health insurance and other benefits (example figure)	$2,100
Total labor cost	$53,557

Prime cost = $42,300 COGS + $53,557 labor = $95,857

Prime cost % = $95,857 ÷ $142,000 × 100 = 67.5%

That leaves 32.5 cents of every sales dollar to pay rent, utilities, card fees, repairs, marketing and everything else, and to leave a profit. This is why prime cost is the number to watch: it is the largest block of costs you can change week to week, by repricing, re-portioning, re-scheduling or renegotiating with suppliers.

The example applies 7.65% to all wages because nobody in it earns near the Social Security wage base. For anyone who does, only wages up to the base carry the 6.2% Social Security share; your payroll provider’s reports give you the exact employer tax figure.

What do other restaurants report?

The National Restaurant Association’s 2025 Restaurant Operations Data Abstract, based on financial and operating data from more than 900 operators, reported these medians for 2024:

Cost, as a share of sales (2024 medians)	Fullservice	Limited-service
Food and non-alcohol beverage costs	32.0%	32.4%
Salaries and wages (including benefits), all respondents	36.5%	31.7%
Salaries and wages (including benefits), operators with a pre-tax profit	34.2%	30.0%
Salaries and wages (including benefits), operators with a loss	42.9%	34.1%

Two things to keep in mind. First, the Association says the data is not intended to represent standards or goals for individual restaurants; it is a tool for gauging your own performance. Second, the labor figures show a pattern worth noting: in both segments, operators that made a profit had lower labor cost ratios than operators that lost money.

Use these figures as context, not as targets. A steakhouse, a pizza counter and a cocktail bar will all land in different places. Your own trend, month after month, tells you more than any industry median.

How to take an inventory count you can trust

Your food cost is only as accurate as your two inventory counts. An error of $1,000 in the closing count moves September’s food cost by about a percentage point in the example above.

Pick a fixed time. Count at the same point every period, for example after close on the last day of the month, before any deliveries arrive.
Use a count sheet in shelf order. List items in the order they sit in the walk-in, freezer, dry storage and bar, so counters move through the space once and nothing is skipped.
Count in purchase units. Count cases, pounds, bottles or each, the same unit the invoice uses. Count partial units (half a case, a part-used bottle) in a consistent way, such as tenths.
Count everything that is food or drink. Include prep in progress and sauces if they are significant. Leave out cleaning supplies, to-go packaging and smallwares, or track them in separate accounts.
Count in pairs. One person counts, one writes. Spot-check high-value items, such as proteins and liquor, a second time.
Price with recent invoices. Value each item at its latest invoice price (or the method your accountant uses), and use the same pricing method every period.
Record transfers and receiving. Note any delivery that arrives during the count so it is not counted in inventory but missed in purchases, or the other way round.
Enter the total in your books the same day. The closing count becomes next period’s opening count. If they do not match, find out why.

Common mistakes

Using purchases as food cost. A big delivery on the 30th makes the month look terrible, and a light week makes it look great. Without opening and closing counts, the number is noise.
Mixing food and beverage. Separate sales, purchases and counts, or neither percentage means anything.
Leaving taxes and benefits out of labor. Wages alone understate labor cost, so prime cost looks healthier than it is.
Counting tips as sales. Voluntary tips belong to your staff. If they run through your sales accounts, your sales, food cost percentage and prime cost percentage are all distorted.
Using old prices for plate cost. Re-cost your top sellers whenever a key ingredient moves; a recipe card priced last year can be far off.
Ignoring yield. Costing a dish on raw weight instead of usable weight understates plate cost, sometimes by a lot.
Counting at a different time every month. Inconsistent timing creates swings that have nothing to do with how the kitchen performed.
Reviewing it once a quarter. By then, three months of over-portioning or a supplier price hike has already happened. Weekly is better.

Tools that do the math for you

You can do all of this in a spreadsheet. As you grow, accounting software with separate food, beverage and labor accounts, plus an inventory or invoice-processing tool, cuts the manual work and gives you food and prime cost weekly instead of monthly. We compare the options, including restaurant-specific tools, in our guide to the best accounting software for restaurants.

Because labor is half of prime cost, it also helps when payroll data flows cleanly into your books. See our guide to the best payroll software for restaurants. For other businesses that hold stock, our explainer on how to calculate COGS for an online store covers the IRS inventory rules in more depth.

Frequently asked questions

What is the formula for food cost?

Food cost for a period = beginning food inventory + food purchases − ending food inventory. To get food cost percentage, divide that figure by food sales for the same period and multiply by 100. For example, $32,800 of food cost on $104,000 of food sales is a 31.5% food cost.

What is prime cost in a restaurant?

Prime cost is your cost of goods sold (food and beverage) plus your total labor cost: wages and salaries, the employer share of payroll taxes, and benefits. Prime cost percentage is prime cost divided by total sales. It is the largest block of costs a restaurant can control week to week.

What is a good food cost percentage?

There is no single right number; it depends on your concept, menu and prices. For context, the National Restaurant Association reported that food and non-alcohol beverage costs were a median of 32.0% of sales for fullservice and 32.4% for limited-service operators in 2024. The Association says these figures are not standards or goals for individual restaurants.

How often should a restaurant take inventory?

At least at the end of every month, because you cannot calculate food cost without a closing count. Many operators count weekly so they catch problems while they can still fix them. What matters most is counting the same way, at the same time, every period.

What is the difference between food cost and plate cost?

Food cost is a period number from your books: what the food you used actually cost over a week or a month. Plate cost is a recipe number: what the ingredients in one portion of one dish should cost. Comparing the two shows how much waste, over-portioning or theft sits between your recipes and your results.

Sources and updates

Facts in this article were last checked against the official sources below on Oct 6, 2026. Rules and thresholds change, so confirm anything you act on with the official source or a qualified professional. Spot something out of date? Tell us and we will re-check it. How we work: editorial policy.