Business
Prime cost
Prime cost is the sum of cost of goods sold (COGS) and labor cost, expressed as a percentage of revenue. It's the single most important financial metric in café and restaurant operations. Healthy specialty cafés run 55–65% prime cost; above 70% sustained signals trouble.
Prime cost is the operations metric to watch. COGS and labor together account for the majority of variable costs in a café; everything else (rent, utilities, software) is relatively fixed. If prime cost is healthy, the café usually generates real profit.
Healthy prime cost targets: 55–65% for specialty cafés. Below 55% often means quality or service is being cut. Above 70% sustained is unsustainable — either pricing is too low, COGS is bloated, or labor is mismatched to revenue. Most prime-cost problems are 60% COGS issue, 40% labor issue.
Tracking prime cost weekly catches drift fast. Owners who look at prime cost monthly notice problems 30 days late; weekly review catches them in time to fix. Most modern café POS reports include prime cost calculation; if yours doesn't, add it manually.
FAQ
Frequently asked questions
What's a healthy prime cost percentage for a café?
What's the fastest way to improve prime cost?
Should I focus on lowering COGS or labor first?
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