How to Use the Restaurant Profit Margin
Restaurants run on razor-thin margins, and prime cost — food cost plus labor cost combined — is the single number that determines whether you're actually profitable. This calculator computes your food cost %, labor cost %, prime cost %, and bottom-line net margin so you can spot problems before they show up in your bank balance.
Step-by-Step Guide
- 1
Enter your monthly revenue.
- 2
Enter your monthly food and beverage cost.
- 3
Enter your monthly labor cost, including payroll taxes and benefits.
- 4
Enter your monthly rent.
- 5
Add other overhead — utilities, insurance, marketing, supplies, POS fees.
- 6
Review food cost %, labor cost %, prime cost %, and net margin.
Restaurant Profit Margin Formula
Prime Cost = Food Cost + Labor Cost Prime Cost % = (Prime Cost ÷ Revenue) × 100 Net Profit = Revenue − Food Cost − Labor Cost − Rent − Other Overhead
Worked Example
Revenue: $90,000. Food cost: $27,000. Labor: $29,000. Rent: $8,000. Overhead: $9,000. Food Cost % = $27,000 ÷ $90,000 = 30% Labor Cost % = $29,000 ÷ $90,000 = 32.2% Prime Cost = $27,000 + $29,000 = $56,000 (62.2% of revenue) Net Profit = $90,000 − $56,000 − $8,000 − $9,000 = $17,000 Net Margin = $17,000 ÷ $90,000 = 18.9%
Understanding your result
Calculator results depend entirely on the information entered. For the most useful estimate, use current and accurate figures and include all costs that apply to your specific situation.
Frequently Asked Questions
What is a good prime cost percentage for a restaurant?
Most successful restaurants target a prime cost of 55–65% of revenue. Full-service restaurants often run closer to 60–65%, while quick-service can run lower given less labor intensity per order.
What is a healthy food cost percentage?
Most restaurants target 28–35% food cost, varying by concept — steakhouses tend to run higher due to expensive proteins, while pizza and pasta concepts can run lower given cheaper core ingredients.
What is a healthy labor cost percentage?
Typically 25–35% of revenue, though full-service restaurants with table service tend to run higher than quick-service or fast-casual concepts with leaner staffing models.
What's a good net profit margin for a restaurant?
Restaurant net margins are notoriously thin — 3–9% is typical for full-service restaurants, with well-run quick-service or fast-casual concepts sometimes reaching 10–15%.
How can I lower my prime cost?
Renegotiate supplier contracts, reduce food waste through better portion control and inventory management, optimize your menu toward higher-margin items, and build smarter staff scheduling matched to actual demand patterns.