Why “food is high” isn’t a diagnosis—and how restaurants and taprooms build prime-cost control you can manage weekly
Most owner/operators don’t lose money because they “don’t work hard enough.”
They lose money because prime cost drifts—quietly, consistently, and usually without one obvious smoking gun—until the month closes and the conversation turns into: “How did we end up here?”
In 2025, that drift is harder to absorb than it used to be.
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The National Restaurant Association notes that restaurants generally operate on about a 3–5% pre-tax margin.
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Over the last five years, the Association also reports food and labor costs for the average restaurant have each increased 35%, and menu prices rose 31% between February 2020 and April 2025.
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And on the demand side, traffic remains a headwind: Black Box Intelligence reported September 2025 same-store sales +1.1% YoY while traffic was -1.5% YoY—a real-world example of “busy enough” not necessarily translating into margin.
This post is a deep dive on Pain Point #2: thin margins with no clear picture of prime cost—and what a fractional CFO function does to solve it from our blog post What a Fractional CFO Really Solves for Restaurants & Taprooms.
Angle & Why Now
Angle: Prime cost is your most important controllable number. But it only helps if it’s measured in a way your team can actually run—weekly—without guesswork.
Why now: Operators are still getting squeezed on both inputs and demand. In a midyear 2025 operator survey, 89% reported labor costs increased this year and 91% reported food costs increased this year.
When costs are rising and traffic is volatile, you don’t need more “reports.” You need faster clarity.
First, define prime cost (in operator language)
Prime cost = COGS + Labor.
It’s the combined cost of:
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what you sell (food, beer, liquor, NA beverages, disposables tied to product), and
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the people required to produce and deliver it (kitchen, bar, FOH, management—depending on how you structure).
Prime cost matters because it determines what’s left to cover:
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occupancy, utilities, repairs, marketing, admin, interest, and
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the part that actually builds wealth: profit.
A simple 2025 benchmark reminder: a restaurant benchmark guide published in 2025 frames prime cost as ideally under 65%, with 60% being a strong competitive target for many models. If you are a location with over $1 million and pushing $2 million in sales this should actually be more like 55%-60%.
But here’s the more important point:
If you don’t know your prime cost weekly—and what’s driving it—you’re not managing it. You’re observing it.
The real pain: prime cost is “known,” but not actionable
Most operators can tell you:
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menu prices,
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last payroll number, and
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that “food is running high.”
But the moment you ask:
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Is it purchasing, portioning, waste, or mix?
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Which dayparts drifted?
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Which roles were overstaffed relative to covers?
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Is this a one-week event or a trend?
…prime cost becomes a feeling, not a tool.
That’s the pain point: lack of operational clarity.
Why prime cost drifts (the usual culprits)
Prime cost drift is rarely one big problem. It’s usually a stack of small, fixable issues that compound.
1) Food cost is being measured as “purchases,” not “consumption”
If your “COGS” is basically what you bought that week, your numbers swing based on ordering timing—not performance.
A decision-grade COGS view requires inventory discipline:
Beginning inventory + purchases − ending inventory.
It doesn’t have to be perfect. It has to be consistent.
2) The menu changed, but costing didn’t
Portion creep, vendor substitutions, yield changes, recipe adjustments—these are normal. But if costing doesn’t get updated, you’re making decisions on fiction.
3) Discounting and comps aren’t being treated like a prime-cost lever
Discounting can be a legitimate strategy. But unmanaged discounting is margin leakage.
The kitchen still did the work. Labor doesn’t fall just because the check did.
4) Labor is being judged by “payroll %,” not productivity
When labor costs are rising (and operators report they are), the lever is rarely “cut hours harder.”
It’s “align labor to demand” and manage productivity: sales per labor hour, covers per labor hour, and role design by daypart.
5) Taprooms get complacent about draft yield and pour discipline
Taproom operators often assume the margin is “safe” because beer is inherently profitable at retail pricing.
But small operational issues—foam loss, over-pours, inconsistent comping, line problems—can quietly turn great margin into average margin. If you don’t track yield and comps/voids with intent, prime cost will drift and you’ll feel it as cash pressure, not as a clear metric.
The math that should sober you up quickly
When margins are thin, prime cost is leverage.
If you do $100,000/week in sales:
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1% of sales = $1,000/week
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2% of sales = $2,000/week
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Over a year, 2% drift = ~$104,000 (52 weeks)
That’s the difference between:
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“We’re busy but broke,” and
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“We can pay ourselves, invest, and breathe.”
This is why prime cost is not an accounting concept. It’s an operating system number.
Prime cost benchmarks aren’t the goal—prime cost control is
Benchmarks are useful for orientation. They aren’t a plan.
A better plan is:
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Set targets that fit your concept and volume
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Measure weekly with consistent definitions
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Diagnose variances by driver (COGS vs labor; mix vs waste; schedule vs demand)
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Make 1–2 deliberate moves weekly
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Repeat until results become predictable
Many operators are already leaning into this kind of control behavior. Midyear 2025 survey data shows operators responding to rising food costs with actions like menu price increases, supplier/vendor changes, and more frequent inventory/waste tracking.
The Wednesday Prime Cost Test
If you want a simple self-diagnostic, ask whether your team can answer these by mid-week:
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What was prime cost last week (COGS + labor)?
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Was the variance driven by COGS or labor?
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If COGS: was it purchasing, portioning, waste, or mix?
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If labor: was it staffing templates, schedule discipline, sales surprise, or role design?
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What are the one or two moves you are making this week to correct it?
If you can’t answer these until the end of the next month, the business is steering you—not the other way around.
The fix: build a weekly prime-cost system your team can run
This is where a fractional CFO function becomes real: not advice, but infrastructure.
Step 1: Separate what matters on the chart of accounts
If your P&L has:
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one big “COGS” line, and
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one big “Payroll” line,
…you’ll never manage prime cost well.
A usable structure typically separates:
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food vs beer vs liquor vs NA beverages (at minimum), and
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FOH vs BOH vs bar vs management (at minimum)
This isn’t complexity. It’s visibility.
Step 2: Make COGS a consumption number
A weekly inventory process can be lightweight and still be effective.
What matters most:
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the same key items counted weekly (your biggest drivers),
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consistent receiving and credits, and
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consistent categorization.
Step 3: Shift labor conversations from “percentage” to “productivity”
Labor % is a lagging indicator. Productivity is a steering wheel.
Operators are openly saying labor pressure is not going away: 73% in a midyear 2025 operator survey expected labor costs to keep increasing through the rest of the year.
That reality demands a better lens than “what did payroll come out to?”
Step 4: Build a one-page weekly prime cost bridge
A prime cost bridge answers:
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Prime cost % last week vs target
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Change drivers (in dollars and points):
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food variance
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beverage variance
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labor variance
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A short note: what happened, and what you’re doing this week
This is the moment where numbers become plays.
Step 5: Assign owners to the levers
Prime cost is shared, so ownership must be shared.
A common ownership map:
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Chef/Kitchen lead: food purchasing, yield, portioning, waste
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Bar lead: pours, comps, beverage costing
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GM: schedule discipline, comp policy, weekly rhythm
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Owner: pricing strategy, vendor terms, guardrails
Where the fractional CFO function fits
Prime cost control is not just tracking. It’s designing a weekly system that makes tracking lead to action.
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Ensure the numbers are clean, timely, and structured in a way that makes prime cost measurable (not just “reported”).
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A working operating system: weekly scoreboards, variance reviews, and decision rhythms that translate prime cost into real operational moves.
That’s what “fractional CFO” support looks like in the real world: fewer surprises, faster correction, and a business that gets more predictable over time.
Bottom line
You don’t have to be wildly inefficient to feel squeezed. With traffic trends softening in many periods and input costs still rising, prime cost drift can quietly erase the only margin you had.
Prime cost benchmarks (like “under 65%”) are helpful.
But the real win is prime cost control: a weekly system your team can run, where variances get diagnosed early and corrected deliberately.
