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Table of Contents
Prime costs
are combination of the Cost of Goods Sold and Payroll. In more detail,
the percentages look like:
| Food
Cost |
27%
to 33% |
| Wine
Cost |
27%
to 46% |
| Liquor
Cost |
14%
to 31% |
| Beer
Cost |
10%
to 25% |
| Other
Beverage Costs |
10%
to 25% |
| Payroll
|
25%
to 35% |
Total prime
costs should run between 60% to 69% of sales. The closer to 60%, the better.
Realize that each restaurant is different from the next. For example,
a steak house could have a high food cost and low payroll cost. On the
other hand, a pasta house could have a low food cost and high payroll
cost. Prime costs are a very
important ratio for monitoring a restaurant. If an operator consistently
has a prime cost in excess of 69%, the odds are that the operator is losing
money. However, there are some exceptions.
Some restaurants have a high prime cost of 70%-72% and still make
a nice profit. These restaurants
are able to do so because of high volume business and low rent.
Lowering
the cost of running the restaurant is easier said than done. The sooner
an operator can identify a problem, the quicker the problem can be remedied.
Taking the time to run weekly statements will result in significant savings.
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