Food and labor are the two biggest controllable expenses in any restaurant, and together they make up prime cost. These answers explain how to measure food cost percentage, labor cost, and inventory, and the benchmark ranges operators watch. This is general educational information, not financial or accounting advice; your own targets depend on your concept, region, and menu.
Food cost is what you spend on the ingredients that go into the dishes you sell. It is usually tracked as food cost percentage, which compares ingredient spending to the sales those ingredients generate. Watching it tells you whether your recipes, portions, purchasing, and menu prices are working together. Most full-service operators aim for a food cost in the range of about 28 to 35 percent of food sales, though this shifts with concept and menu.
For a period, take your beginning inventory value, add purchases, then subtract ending inventory to get the cost of goods sold. Divide that by food sales for the same period and multiply by 100 to get food cost percentage. You can also cost a single dish by adding up its ingredient costs and dividing by its menu price. A food cost calculator handles the math for either approach.
The formula is cost of goods sold divided by food sales, times 100. For a single item, divide the plate's ingredient cost by its selling price and multiply by 100. So a plate that costs $4 in ingredients and sells for $14 runs about 29 percent. Track it weekly or monthly to catch waste, theft, or price creep early. Our food cost percentage guide walks through each step.
As a general benchmark, many full-service restaurants target food cost in the range of about 28 to 35 percent of food sales, and some quick-service and pizza concepts run lower or higher. There is no single correct number, because it depends on your menu, portion sizes, pricing, and location. The useful goal is a stable figure that leaves room to cover labor, overhead, and profit rather than hitting one universal target.
Averages are only rough guides, but many operators land somewhere in the range of about 28 to 35 percent of food sales, with steakhouses and seafood often higher and beverage-heavy or quick-service concepts lower. Rather than chasing an industry average, compare your own food cost percentage period over period. A rising percentage usually signals waste, over-portioning, supplier price increases, or menu prices that have not kept pace with costs.
Set your own target by starting from your recipe costs and the price customers will pay, then check that the resulting percentage leaves enough margin after labor and overhead. Many full-service operators use a range of roughly 28 to 35 percent as a starting reference. The right number is the one your menu can sustain while still turning a profit, so build it from your actual costs rather than copying a competitor.
Control comes from consistent habits: standardized recipes with set portions, regular inventory counts, ordering to par levels, and checking invoices against quoted prices. Track waste and spoilage, use FIFO rotation, and review your highest-volume items closely since small savings there add up. Re-cost recipes whenever supplier prices move, and adjust menu prices or portions when needed. Costing every dish with a food cost calculator makes problem items easy to spot.
Focus on the biggest levers first: tighten portion control, reduce waste and spoilage, and negotiate or comparison-shop with suppliers. Use trim and off-cuts in specials, cross-utilize ingredients across the menu, and count inventory often enough to catch shrinkage. Re-engineer or re-price low-margin dishes, and feature high-margin ones. A food cost calculator helps pinpoint your priciest plates. Small, steady improvements in purchasing, prep, and portioning usually move food cost more reliably than one dramatic change.
Food cost usually refers just to the ingredients in the food you sell, while cost of goods sold, or COGS, is the broader accounting figure covering everything consumed to produce sales, often including food, beverages, and sometimes paper goods. In practice many operators calculate food cost using the COGS formula: beginning inventory plus purchases minus ending inventory. The key is being consistent about what you include so your percentages stay comparable over time.
Say a burger uses $3.50 of beef, bun, cheese, and toppings, and sells for $12. Its food cost percentage is 3.50 divided by 12, times 100, or about 29 percent. At the restaurant level, if you had $8,000 beginning inventory, bought $22,000, ended with $7,000, and did $90,000 in food sales, COGS is $23,000 and food cost is about 26 percent. Comparing plate-level and period-level figures highlights where costs drift.
A healthy food cost is one that is stable, predictable, and leaves enough margin to cover labor, rent, and profit after every other expense. For many full-service concepts that falls in the range of roughly 28 to 35 percent of food sales, as our food cost percentage guide explains, but a lower number is not automatically better if it means skimping on quality or portions. Consistency month to month usually matters more than hitting any single benchmark figure.
Labor cost is the total you spend on your team, including hourly wages, salaries, payroll taxes, benefits, and sometimes bonuses. It is typically tracked as labor cost percentage, which compares that spending to total sales over the same period. Because labor is one of your two largest controllable expenses, watching it closely is essential. Many restaurants run labor in the range of about 25 to 35 percent of sales, depending on service style.
Add up all labor spending for a period, wages, salaries, payroll taxes, and benefits, then divide by total sales for the same period and multiply by 100 to get labor cost percentage. For example, $9,000 in labor on $30,000 in sales is 30 percent. You can also track labor as a share of hours or by shift to schedule more precisely. A labor cost calculator speeds this up.
As a general benchmark, many restaurants aim for labor cost in the range of about 25 to 35 percent of sales, with quick-service often at the lower end and full-service or fine dining higher because of larger teams. The right figure depends on your menu, service model, and local wages. The goal is enough staffing to serve guests well while keeping labor and food together within a sustainable prime cost. See our labor cost percentage guide.
There is no single average, but many operators land in the range of roughly 25 to 35 percent of sales, as our labor cost guide details. Counter-service and fast-casual concepts often run lower because they need fewer staff per guest, while full-service and fine dining tend to run higher. Wages, local minimum-wage laws, and how much prep you do in-house all shift the number, so compare your own trend over time rather than to a national figure.
The ideal is the lowest labor cost that still delivers the service quality your concept promises, not simply the smallest possible number. For many restaurants that lands within a range of about 25 to 35 percent of sales. Cutting too deep hurts speed, consistency, and guest experience, which can cost more in lost sales than it saves. Aim for efficient scheduling matched to your sales patterns rather than a fixed target.
Build schedules from your sales forecasts so staffing matches demand hour by hour, and track sales per labor hour to spot over- or under-staffing. Cross-train employees for flexibility, control overtime, and reduce no-shows and early clock-ins. Review labor cost percentage weekly against sales, and adjust prep, shift lengths, and starting times as patterns change. Small scheduling improvements repeated every week usually produce the steadiest results.
Start by matching schedules tightly to forecasted sales and trimming slow-period overstaffing. Control overtime, cross-train staff so fewer people cover more roles, and streamline prep and menu steps that eat labor hours. Reduce turnover, since hiring and training are expensive, and use technology like scheduling and ordering tools to boost efficiency. Protect service quality while trimming, because understaffing that slows service or hurts reviews can cost more than it saves. Track the impact with a labor cost calculator.
Most operators use a general reference range of about 25 to 35 percent of sales, but the right figure varies by service style, menu complexity, and local wage laws. Quick-service tends to run lower and full-service higher. Rather than fixing on one number, look at labor together with food cost, because both feed into prime cost, which many restaurants try to keep in the range of roughly 55 to 65 percent of sales.
Prime cost is your total cost of goods sold plus your total labor cost, meaning the combined spend on food, beverages, and staff. It captures your two largest controllable expenses in one figure, which is why many operators watch it as the single most important cost metric. Many restaurants target prime cost in the range of about 55 to 65 percent of sales. Our prime cost guide explains how to use it.
Prime cost includes two buckets: cost of goods sold, which is food and beverage ingredients, and total labor, which covers wages, salaries, payroll taxes, and benefits. It deliberately leaves out rent, utilities, marketing, and other fixed overhead, because those are harder to change day to day. By combining your most controllable expenses, prime cost gives a fast read on operational health that food cost or labor cost alone cannot.
Add your cost of goods sold for a period to your total labor cost for the same period. To express it as a percentage, divide that sum by total sales and multiply by 100. For example, $25,000 COGS plus $28,000 labor on $90,000 sales is a prime cost of about 59 percent. Tracking it weekly gives you an early warning system that combines both of your biggest controllable costs into one number.
Many operators aim for prime cost in the range of about 55 to 65 percent of sales, with full-service often near the higher end and quick-service sometimes lower. It is a benchmark, not a rule, because the split between food and labor varies by concept. What matters is that food and labor together leave enough of each sales dollar to cover rent, overhead, and profit. Our prime cost guide shows how to track it and watch the trend.
There is no universal figure, but a widely used reference range is about 55 to 65 percent of sales. Set your own ceiling based on your rent and overhead: the higher your fixed costs, the tighter your prime cost needs to be to stay profitable. Because it combines food and labor, prime cost is where most cost problems show up first, so review it regularly and act when it drifts upward.
Prime cost matters because it captures the two expenses you can actually change from week to week: what you spend on ingredients and what you spend on staff. Fixed costs like rent are locked in, but food and labor respond to your daily decisions. Watching prime cost as one number, rather than food and labor separately, keeps you from cutting one while the other quietly climbs, and it is the fastest read on operational health.
Prime cost is not a fixed dollar amount; it is the sum of your food and beverage costs plus your labor costs, which differs for every restaurant. Operators usually express it as a percentage of sales and aim for a range of roughly 55 to 65 percent. To find yours, add cost of goods sold to total labor, divide by sales, and multiply by 100, then track that figure over time.
Inventory is all the food, beverages, and supplies you have on hand at a given time, along with their value. Counting it regularly lets you calculate cost of goods sold, spot waste or theft, and order more accurately. Most operators track inventory by category, using consistent units and prices so counts are comparable. Reliable inventory numbers are the foundation for accurate food cost, because the standard COGS formula depends on beginning and ending counts.
Count physical stock consistently, usually weekly or monthly, at the same time in the cycle, ideally before deliveries or after close. Organize by storage area and category, use the same units each time, and record quantities and current prices. Multiply counts by unit cost to get a total value. Two people counting together improves accuracy. That ending value then feeds your cost of goods sold and food cost calculations for the period.
Set par levels for each item so you know when to reorder, count on a regular schedule, and use FIFO rotation so older stock sells first. Track usage against sales to catch waste, over-portioning, or shrinkage, and reconcile deliveries against invoices. Many operators use inventory or POS software to automate counts and flag variances. Consistent units, timing, and pricing matter more than any particular tool for keeping the numbers trustworthy.
Food inventory management is the process of ordering, storing, counting, and using your ingredients efficiently to minimize waste and control cost. It covers setting par levels, rotating stock with FIFO, tracking usage against sales, and reconciling counts to spot loss. Done well, it keeps enough product on hand to serve guests without tying up cash or letting food spoil. It is also the data source for accurate food cost and cost of goods sold.
Count each item, multiply the quantity by its current unit cost, and add the results across all categories to get total inventory value. For example, 40 pounds of chicken at $3 per pound is $120, added to every other line. Use consistent units and up-to-date prices so counts stay comparable period to period. That total is what you plug into the cost of goods sold formula as beginning or ending inventory.
Inventory value varies widely with your menu, size, and how often you order, so there is no standard figure. Many operators try to hold only enough stock to cover a few days to about a week of sales, keeping cash free and reducing spoilage. Carrying too much ties up money and increases waste, while too little risks running out. Track your inventory turnover to find the right level for your operation.
Restaurants cut waste with accurate forecasting and ordering to par, tight portion control, and FIFO rotation so older stock is used first. Repurposing trim and off-cuts into specials, prepping to demand rather than in bulk, and tracking what gets thrown away all help. Storing food properly extends shelf life, and donating safe surplus reduces disposal. Less waste directly lowers food cost, so waste tracking is really a cost-control tool.
Every ingredient you throw away was purchased but generated no sales, so it inflates cost of goods sold without adding revenue. Trimming waste, spoilage, and over-portioning means more of what you buy actually turns into sold dishes, which pulls your food cost percentage down. Measuring waste by category shows where the losses are, whether over-prep, spoilage, or plate waste. Small, steady reductions there often move food cost as much as renegotiating prices.
It depends on how you want to analyze the business. Many operators track food and beverage costs separately, because beverages, especially alcohol, usually carry very different cost percentages than food. Beverage cost is often lower as a share of its own sales, so blending them can hide problems in either category. Whatever you choose, be consistent so your percentages stay comparable over time, and know which items each figure includes.