What is Prime Cost in restaurants?

Prime Cost = Cost of Goods Sold (food + beverage) + Labor Cost (wages + benefits + payroll taxes). Prime Cost is the most-tracked restaurant operating metric — industry benchmark targets keep Prime Cost below 60-65% of revenue. Above 70% generally indicates structural unprofitability without significant volume growth.

How do I analyze restaurant P&L performance?

Restaurant P&L analysis tracks: (1) sales mix and average check trends; (2) Prime Cost (food + labor) as % of revenue; (3) Controllable expenses (R&M, marketing, supplies); (4) Occupancy (rent, taxes, insurance, utilities) — typically fixed; (5) EBITDAR before rent. Ilora’s restaurant agent ingests POS extracts, Toast/Square data, and vendor invoices to surface where prime cost is creeping and which menu items drive margin.

What is the typical Cost of Goods Sold (COGS) for restaurants?

COGS varies by concept: QSR runs 28-32% of revenue (high volume + tight menu), fast-casual 30-35%, casual dining 30-35%, fine dining 35-45% (premium ingredients). Beverage cost typically 18-25%. Total COGS targets: 28-35%. Trends above the band signal yield loss, theft, portion creep, or commodity inflation that needs menu-pricing response.

Restaurant KPIs.

Restaurants span quick-service (QSR) through fine dining, owned-and-operated or franchised. Performance is measured in Prime Cost (COGS + Labor), Sales per Square Foot, Average Check, Table Turnover, and same-store-sales growth. Industry benchmark: Prime Cost should run below 60-65% of revenue. The sector is heavily impacted by labor cost (minimum-wage policy), supply chain (commodity cycles), and consumer-discretionary spending. Comparable public operators: MCD, SBUX, CMG, DRI, BLMN, EAT, TXRH, CAKE, QSR (Restaurant Brands International), and YUM. QSR runs 28-32% COGS, fast-casual 30-35%, casual dining 30-35%, fine dining 35-45% (premium ingredients). Ilora.ai ingests POS extracts (Toast, Square, Aloha NCR), weekly P&Ls, inventory variance, and labor + scheduling reports, then audits prime-cost trends + menu-mix margin. NRA (National Restaurant Association), IFA (International Franchise Association), CHRIE, and FCSI are canonical industry organizations driving accounting standards, training, and franchise-disclosure document compliance.

14 definitions · Sector: FOOD AND BEVERAGE · Used by Ilora.ai specialist AI agents

NOI: Total revenue minus operating expenses (excludes financing and capital costs). The primary measure of property-level profitability.
Cap Rate: Net Operating Income divided by current property value. Expresses unleveraged annual yield as a percentage.
DSCR: Net Operating Income divided by total annual debt service. Lender-required cushion measure; below 1.0 means NOI cannot cover debt.
LTV: Loan amount divided by property value. Lower LTV = lower lender risk.
OER: Operating expenses divided by gross revenue. Lower is better, but varies by property type (hotels run higher than triple-net retail).
GRM: Property value divided by gross annual rental income. Quick valuation shortcut; less precise than cap rate.
IRR: Annualized return on investment accounting for time value of money across the full hold period.
CoC: Pre-tax annual cash flow divided by total cash invested. Measures the cash yield, not total return.
DCF: Valuation method that projects future cash flows and discounts them to present value at a chosen rate.
TTM: A rolling sum of the most recent 12 months. Smooths seasonality for KPI comparisons.
COGS: Cost of food and beverage products sold. Typically 28–35% for full-service restaurants.
Prime Cost: COGS plus labor cost. Industry benchmark target is below 60–65% of revenue.
Avg Check: Total revenue divided by number of checks (transactions). Measures pricing + sales mix.
Turnover: Number of times a table is occupied during a shift. Capacity utilization measure.

Sub-types

Sub-types within Restaurant.

Quick-Service (QSR): Counter ordering, fast prep, drive-thru common. Low avg check, high turnover.
Fast-Casual: Counter ordering, made-to-order, premium ingredients. Mid avg check.
Casual Dining: Full table service, broad menu, family-friendly.
Polished / Upper-Casual: Elevated table service, chef-driven menus, full bar program.
Fine Dining: Reservation-based, multi-course menus, high labor ratios.
Ghost Kitchen / Virtual Brand: Delivery-only, often multiple brands per kitchen.

Amenities & features

7 amenities Ilora.ai tracks for Restaurant.

Front-of-House Dining: Main dining room with table service. Drives table turnover + average check.
Avg check
Table turnover
Diners per shift
Bar / Lounge: Beverage program with bar seating. Higher margin than food.
Beverage cost %
Bar revenue mix
Patio / Outdoor Seating: Seasonal expansion of capacity. Weather-dependent revenue.
Patio revenue per occupied seat
Private Dining Room: Bookable space for private events. Premium pricing + minimums.
Private dining utilization
Avg event check
Drive-Thru: QSR-specific. Drives daypart capacity beyond dining-room seats.
Drive-thru tickets per hour
Order accuracy %
Off-Premise (Delivery + Takeout): Third-party platforms (DoorDash, Uber Eats) + own-app pickup.
Off-premise revenue %
Third-party fee %
Kitchen Capacity (Hood/Cooler/Walk-in): Limits maximum throughput. CapEx-significant.
Hood capacity utilization

Industry reference

How the restaurant sector operates.

Market segments

Lunch transient
Dinner transient
Group / private events
Catering
Off-premise (delivery)
Late night

Operating models

Owner-operated single unit
Owner-operated multi-unit
Franchisee-operated
Franchisor-operated company stores
Hospitality group portfolio

Regulatory frameworks

Local food safety codes (FDA Food Code)
Health department inspections
TIPS / responsible alcohol service certification
ADA Title III accessibility
Local minimum-wage + tip-credit rules
COBRA / ACA employee benefits compliance

Industry organizations

NRA (National Restaurant Association)
IFA (International Franchise Association)
CHRIE (hospitality education)
FCSI (Foodservice Consultants)

Comparable public REITs / operators

Public-operator comps (not REITs): MCD, SBUX, CMG, DRI (Olive Garden), BLMN (Outback), EAT (Brinker), TXRH (Texas Roadhouse), CAKE (Cheesecake Factory), QSR (Restaurant Brands), YUM (Yum Brands)

Documents Ilora.ai ingests

Daily sales report
Weekly P&L (sales + prime cost)
Inventory count
Kitchen scheduling labor report
Vendor invoices / 3-way match
Food cost recap
Sales-mix report (SKU level)
Catering / private event BEOs

Industry tools (we integrate with these)

Toast (POS + back-office)
Square for Restaurants
Aloha NCR (legacy POS)
Restaurant365 (accounting + ops)
MarketMan (inventory)
XtraChef (invoice + recipe)
OpenTable / Resy (reservations)
7shifts / HotSchedules (labor)
DoorDash / Uber Eats / Grubhub

Frequently asked

Common questions about restaurant.

What is Prime Cost in restaurants?: Prime Cost = Cost of Goods Sold (food + beverage) + Labor Cost (wages + benefits + payroll taxes). Prime Cost is the most-tracked restaurant operating metric — industry benchmark targets keep Prime Cost below 60-65% of revenue. Above 70% generally indicates structural unprofitability without significant volume growth.
How do I analyze restaurant P&L performance?: Restaurant P&L analysis tracks: (1) sales mix and average check trends; (2) Prime Cost (food + labor) as % of revenue; (3) Controllable expenses (R&M, marketing, supplies); (4) Occupancy (rent, taxes, insurance, utilities) — typically fixed; (5) EBITDAR before rent. Ilora’s restaurant agent ingests POS extracts, Toast/Square data, and vendor invoices to surface where prime cost is creeping and which menu items drive margin.
What is the typical Cost of Goods Sold (COGS) for restaurants?: COGS varies by concept: QSR runs 28-32% of revenue (high volume + tight menu), fast-casual 30-35%, casual dining 30-35%, fine dining 35-45% (premium ingredients). Beverage cost typically 18-25%. Total COGS targets: 28-35%. Trends above the band signal yield loss, theft, portion creep, or commodity inflation that needs menu-pricing response.

Topics