![]() ![]() Not bad! If this was your restaurant, you’d want to make some adjustments to shave off that extra 3%. Prime Cost Ratio = (Prime Cost / Total Sales) x 100 To get the full story, let’s turn prime cost into a percentage against sales, to get prime cost ratio. Let’s say you have a CoGS of $12,000 and a labor cost of $8,000. A number below 55% means you could be sacrificing quality or running your staff into the ground. Above 70% means your costs are too high, and you could quickly find yourself in financial trouble. It affects your entire operations, including how you price your menu, schedule your staff, create your budget, and establish your goalsįull service restaurants try to keep their prime costs at about 60%.You have control over it (though it can quickly and easily get out of control).Prime cost is important to calculate (and monitor with a parent’s eye for fibs) because: Your prime cost is the total sum of your labor costs and your cost of goods sold (CoGS), including all food and liquor costs. Likewise, the executive chef can do the same for the BOH staff to really create a well-oiled machine. Your FOH manager can then compare the scheduled hours of FOH staff to the actual hours, with the goal to improve these numbers on a weekly basis. To obtain an even better handle on your labor costs, break out your front of house (FOH), back of house (BOH), and even managerial salaries so that you can control those elements even more closely. Labor Cost Percentage = 25% Improving Your Labor Cost Percentage During that same time period, the business brought in $22,000 worth of revenue. Let’s say you’ve added all money paid out to salaried employees and hourly employees over a week, including expenses like workers’ compensation, benefits, taxes, and insurance. How to calculate your labor cost percentage Together they should make up about 60% of a healthy restaurant’s total costs, with a healthy labor cost percentage of about 20%–35% of sales. Labor cost percentage is one of two key components of your prime costs (the other is cost of goods sold). Why labor cost percentage is important to measure Labor cost percentage is the percentage of your revenue that pays for labor. HOW TO CALCULATE YOUR COST OF GOODS SOLD 2. Now that you know your CoGS was $4,000, you can compare this number to what should have happened – also known as theoretical CoGS – and work to narrow the gap. At the end of the week, you had inventory worth $4,000.ĬoGS for the period = $6,000 + $2,000 – $4,000 You purchased $2,000 in inventory at the beginning of the week. Let’s say you began with an inventory valued at $6,000. (Beginning Inventory of F&B) + (Purchases) – (Ending Inventory) By calculating CoGS weekly, you can order inventory more accurately and take measures to control inventory costs before they start biting into your profit. Industry standards dictate restaurant CoGS fall between 20% and 40%, usually higher on food and lower at the bar. This number represents the total amount you need to spend on inventory and materials to produce your food and beverage (F&B) sales over a period of time.Ĭalculating CoGS helps you determine whether: Cost of Goods Sold (CoGS)Ĭost of goods sold, or CoGS, is the cost required to make each menu item you sell. Sell more treats in less time and streamline operations with the POS bakeries love.Ĭonquer the rush, maximize margins, and boost loyalty with a powerful cafe POS. Keep lines moving and drive repeat business with an intuitive POS made for coffee shops. ![]() Serve drinks faster and sell more top-shelf upgrades with the POS built for bars.ĭeliver quality and convenience at speed with the POS built for fast casual needs.Įxecute large orders on tight deadlines with an intuitive platform built with catering in mind. Reach more customers and keep them coming back with a POS built to run at QSR speed. Manage your dining room and your wine shop with the all-in-one solution wineries prefer. Increase beer sales and reduce spillage with an intuitive POS breweries love.ĭeliver elevated experiences and exceptional service with a seamless POS platform. Turn more tables and delight guests with a POS built for family style restaurants. Turn long lines into large profits with a fast and reliable POS for food trucks. Turn more tables, upsell with ease, and streamline service with a powerful system built for FSRs. From food trucks to FSRs, get the POS built for restaurants. ![]()
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