Restaurant prime cost: the famous 70% is not the barrier — it's the edge of the cliff

Prime cost is the sum of consumed product cost and total labour cost, expressed as a percentage of sales excluding VAT.

They are read together because they trade off. If you buy ready-made, food cost rises and kitchen labour falls.

That is why food cost alone misleads. A 29% food cost with labour at 42% is a 71% prime cost. One at 34% with labour at 28% is 62%.

The second site — the one with the «high» food cost — is the one that makes money. We unpack the first half of the sum in why food cost is not a single number.

The 70% figure has been around for years and there is some truth in it. Above 70%, except at very high sales volumes, almost no restaurant makes money.

What does not hold is reading it backwards. The most-cited US industry reference says a full-service restaurant should not go past 65%.

That is where the trouble starts. At 70% the problems are already almost certain.

70% is the edge, not the target. The alarm line is 65%.

First: the number comes from a country where tips pay wages. In the United States, federal law allows paying a server $2.13 an hour if tips bring them up to the minimum wage.

Part of front-of-house is paid by the guest outside the ticket. Not here — so for a similar site, labour should weigh more in Spain.

Second: gross pay is not what a worker costs you. Order PJC/297/2026 sets for the employer 23.60% common contingencies, 5.50% indefinite unemployment, 0.60% training, 0.20% FOGASA and 0.75% MEI.

That is 30.65% on top of gross, before workplace accident cover. If you only add gross wages, you are missing almost a third of labour cost.

Third: VAT in the denominator. If you invoice €30,000 ex-VAT, you take €33,000 with 10%.

A 60% prime cost becomes 54.5% if you divide by cash collected. Five and a half points of false calm.

What prime cost does not take pays rent, utilities, accounting, insurance, card fees, maintenance and tax. What is left is profit.

According to the INE Structural Business Statistics, Spanish foodservice turned over €61,074 million in 2022 with a gross operating surplus of €5,373 million, reported in the Fundae sector study.

That is 8.8% of sales, before depreciation and tax. And that 8.8% includes what owner-operators take who are not on payroll.

Meanwhile labour already weighs in: according to Hostelería de España, wages average 31% of annual sales.

Your prime cost ceiling is calculated like this:

A site at €30,000 a month with €3,000 rent, €1,800 utilities and €1,500 other costs has 21% left for the rest. To earn 8%, its ceiling is 71%.

With €5,000 rent, the rest rises to 27.7% and the ceiling falls to 64.3%.

Same menu, same team, seven fewer margin points because of the lease. Example figures, not sector averages.

In food and drink there are about 148,000 employers with staff and 119,000 without employees, per the 2023 LFS as reported by Fundae. Their work does not appear in any labour line.

The clue: in foodservice, firms with 0–1 employees generate €3.37 of value added per euro of labour. Those with 2–9, €1.29.

It is not that the small site is two and a half times more efficient. Our reading: the owner's work is not on the books.

A restaurant turns over €30,000 a month ex-VAT. Product, €9,000. Labour at employer cost, €9,000. Other costs, €6,300.

Prime cost: 60%. €5,700 left. The accountant is right.

But you are in the kitchen 60 hours a week. Paying someone to do your job, at €2,500 gross over 14 pays, would cost about €3,800 a month. Our calc: head-chef wage plus 2026 employer social charges.

With that cost inside, real prime cost is 72.7%. The other side of the edge.

The business makes €1,900 a month beyond your work — 6.3% — before depreciating the kitchen.

The other €3,800 was not lost: it is your wage. You just need to know that it is.

If with your wage inside you clear 65%, the problem is no longer food cost. It is how many people you need per service and at what price you sell.

If you want that number from your invoices, not an example, do it with Tipi: tell us and we will put numbers on it.

70% belongs to someone else. You set your own line — with your wage inside.