Written by: JJ Tan, Founder, Jelly

Key Takeaways

  • Prime cost is the sum of food cost and labour cost expressed as a percentage of net sales, and is the single most important controllable cost figure in UK hospitality.
  • Food cost and labour cost must be tracked together, because each can appear acceptable in isolation while the combined figure erodes margin.
  • Food cost percentage uses the formula explained below and must always be measured against net sales excluding VAT.
  • Labour cost percentage requires a fully loaded figure that includes gross wages, employer NI, pension, holiday pay, overtime and agency staff.
  • Jelly automates invoice scanning to keep every dish cost live, flags supplier price changes with Price Alert, and saves operators roughly 10–20 hours of admin while adding around 2 percentage points to gross margin.

See Your Prime Cost Live

Why Food Costing And Labour Costs Must Be Calculated Together

Food and labour are the two largest controllable costs in any UK kitchen. Measured in isolation, each can look acceptable while the combined figure quietly destroys margin. A modelled UK mid-market restaurant P&L illustrates the point. A two-point rise in food cost on £600,000 of net sales cuts profit from £30,000 to £18,000. A two-point rise in labour cost does exactly the same damage. When both drift simultaneously, the business is in serious trouble before the monthly accounts arrive.

Prime cost is the joined-up number that prevents this. Paperchase Accountancy, which works with 450+ hospitality brands across the UK, recommends tracking prime cost weekly on the same day each week and comparing it against the previous four weeks. The focus sits on your own trend rather than a published benchmark, so a drifting pattern is visible before the damage compounds.

How To Calculate Food Cost Percentage (UK)

Formula:

Food cost % = (Opening stock + Purchases − Closing stock) ÷ Food sales × 100

Food costing includes purchases from all suppliers, wastage, transfers between sites, and, where relevant, delivery-platform commission. This commission can run at 25–35% of order value and must be modelled separately in unit economics. Always calculate against net sales. Under HMRC VAT Notice 709/1, a £32.00 gross spend per head represents £26.67 of net sales and £5.33 of VAT. Food cost percentages calculated against gross revenue will look flattering and misleading.

Directional UK food cost targets by service style (typical ranges, not guarantees):

  • Pub Food / Gastropub: For UK pubs and gastropubs, food cost typically runs at around 31–34% of ex-VAT food sales (32% for community local and food-led pubs, 33% survey-wide in the UKHospitality × Christie & Co 2022 Benchmarking Report). Some guides put pub targets as high as 32–40%. A 25% food cost is rarely achievable across a whole menu.
  • Casual Dining: Industry benchmarks suggest a food cost percentage of around 28–35% is typical for UK restaurants, with casual dining typically falling in the middle of that range.
  • Full-Service Restaurant: A commonly cited food cost target for full-service restaurants is 28–35% of food sales, though this is a trade convention rather than published UK survey data.
  • Fine Dining: In the UK, fine dining restaurants typically target a food cost of 32–38% of VAT-exclusive food sales, according to 2026 UK restaurant benchmarks.
  • Hotel Restaurant / F&B: For most hotel kitchens the food cost target falls between 25% and 35% of F&B revenue, depending on brand positioning and menu structure, with 28–35% a commonly cited benchmark for restaurant food cost of sales.

Worked GBP Example:

Opening stock: £12,000 | Purchases: £40,000 | Closing stock: £11,000 | Food sales: £110,000

Food cost = (£12,000 + £40,000 − £11,000) ÷ £110,000 × 100 = 37.3%

This figure is accurate only on the day it is calculated. The moment a supplier changes a price, and 88% of UK hospitality operators cited food and drink cost inflation as their biggest non-tax concern in October 2026, the dish costs in a spreadsheet begin to drift. Jelly solves that drift.

How To Calculate Labour Cost Percentage (UK)

Formula:

Labour cost % = Total labour cost ÷ Total sales × 100

What Is Included In Labour Costs?

A fully loaded UK labour cost figure must include all of the following:

Omitting employer NI and pension alone flatters the labour cost ratio by typically six to eight percentage points. That gap is large enough to make a loss-making operation appear profitable on paper.

Worked GBP Example (Building Total Labour Cost):

Gross wages: £32,000 | Employer NI (15% above threshold): £3,800 | Employer pension (3% qualifying earnings): £960 | Holiday pay accrual: £1,240 | Overtime and agency: £2,000 | Total labour cost: £40,000

Against total sales of £110,000: Labour cost % = £40,000 ÷ £110,000 × 100 = 36.4%

Directional UK labour cost targets by service style (typical ranges, not guarantees):

  • Pub / Bar-Led Venue: A commonly quoted labour cost benchmark for pub or bar-led venues is 25–35% of sales, though this is a trade convention rather than measured UK data.
  • Casual Dining: According to Campbell Consultancy benchmarks, UK casual dining and pub restaurants typically target total labour costs of 28–35% of sales, including employer NI and pension.
  • Full-Service Restaurant: For UK full-service restaurants, typical fully loaded labour cost targets are around 28–34% of ex-VAT net revenue for casual dining and 34–42% for fine dining, with the overall full-service range broadly spanning roughly 28–42%.
  • Fine Dining: According to Kokoro’s 2026 UK restaurant labour cost benchmarks, fine dining and tasting-menu restaurants typically target labour cost of 35–45% of net sales, although other UK benchmark sources give lower fine dining ranges of roughly 27–40%.

With both halves measured on a consistent basis, the next step is to combine them into a single prime cost figure.

How To Bring Food Costing And Labour Costs Together: Your Prime Cost

Formula:

Prime cost % = (Total food cost + Total labour cost) ÷ Total sales × 100

Using the same GBP figures from the sections above, the list below shows how the two halves combine into a single prime cost figure and why that combined number, not either half alone, is the one to act on.

  • Food cost: £41,000 (37.3% of net sales)
  • Total labour cost: £40,000 (36.4% of net sales)
  • Prime cost: £81,000 (73.6% of net sales)

This example sits above the 55–65% target range, which signals a need to investigate both halves. Before cutting either one, it helps to understand the trade-off prime cost exposes. The critical insight prime cost provides is the trade-off between food and labour. A kitchen doing extensive from-scratch preparation will carry a lower food cost (buying raw ingredients) but a higher labour cost (more prep hours). A kitchen buying more prepped product reverses that split. Food and labour costs trade against each other, so optimising them separately misleads. The combined prime cost figure is the one that tells the truth.

How To Allocate Labour To Individual Dishes

Dish-level labour allocation reveals which menu items are genuinely profitable and which are profit killers despite a low food cost percentage. The method is straightforward:

  1. Time the hands-on preparation and cooking minutes for the dish across three normal production sessions. Use a representative middle result.
  2. Calculate a fully loaded hourly rate: base wage + employer NI + pension + holiday accrual. For a kitchen worker aged 22 or over on £12.71/hour, employer NI at 15% above £96/week plus the 3% minimum pension add roughly £1.80/hour, giving about £14.51/hour if the Employment Allowance covers NI, or about £16.00/hour once 12.07% holiday accrual is also included.
  3. Multiply: (minutes ÷ 60) × loaded hourly rate = dish labour cost.
  4. Add to the dish’s food cost to get true dish cost. Subtract from the menu price to get after-labour contribution margin.

Worked GBP Example:

A dish has a food cost of £3.20 and requires 12 minutes of hands-on labour. At a fully loaded rate of £14.00/hour:

Labour cost per dish = (12 ÷ 60) × £14.00 = £2.80

True dish cost = £3.20 + £2.80 = £6.00

If the dish sells for £14.00, the after-labour contribution margin is £8.00. Food cost alone would suggest £10.80.

The same logic explains why a dish with a 22% food cost can still be a profit killer if it requires 45 minutes of skilled prep. Use hands-on time. Passive oven or chilling time should not be charged as direct labour unless it occupies staff. For batch production, time the full session from setup through wash-down and divide by saleable units produced.

How To Keep Food Costing Live (And Why Jelly Is The Best Choice)

Labour cost is measured from payroll as a relatively stable weekly process. Food costing is the half that drifts daily as supplier invoices land with changed prices. UHY Hacker Young data shows the UK’s top 100 restaurant groups saw combined profits fall 44% to £204m. Rising ingredient costs were cited as a primary cause, with olive oil, beef, chocolate, coffee, eggs and pasta among the worst offenders. A spreadsheet updated once a month cannot protect against that pace of change.

Jelly automates the food-costing half of prime cost. Every supplier invoice is captured by photo or email, and every line item, including quantity, SKU, price and tax, is digitised automatically. That digitised data then feeds two features. Price Alert flags every supplier price change the same week it happens, giving operators the hard data to negotiate credits or switch suppliers. The Cookbook uses the same invoice data to update every dish’s GP margin in real time, so a red percentage appears the moment a dish drops below target.

The Flash Report delivers a daily or weekly GP view by combining invoice costs with sales data from the POS. Jelly integrates natively with Square, Lightspeed, EPOS Now and Toast, which feed item-level sales data directly into Jelly’s margin calculations. Invoices push to Xero in one click, with Sage integration coming soon. The flat rate is £129/month per location, and most sites see onboarding value in the first week.

Stuart Noble, Head Chef at Cairn Lodge Hotel, cut food costs by 5% in a month using Jelly. Murat Kilic, Chef-Owner at Amber in East London, saves £3,000–£4,000 per month, approximately 68× ROI, and describes Jelly as the tool that “keeps my business alive.” Across Jelly’s customer base, operators cut food costs by an average of 3% in the first three months and add around 2 percentage points to gross margin.

Spreadsheet-based food costing and heavier all-in-one platforms such as MarketMan and Nory are positioned as alternatives to Jelly, while Kitchen Cut is a legacy, static competitor. This article is a how-to guide rather than a software review, and operators evaluating those options consistently highlight ease of use and speed of onboarding as areas where Jelly leads.

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What To Do When Prime Cost Is Too High

A prime cost above 65% warrants a structured diagnostic with clear steps instead of a blanket cost-cut. The sequence matters:

  • Check food cost % first. Look for supplier price creep (visible in Jelly’s Price Alert), wastage, or portioning inconsistency. Five common causes of food cost running above benchmark are portioning errors, yield loss not accounted for in recipes, ingredient prices not updated after supplier changes, menu complexity driving waste, and untracked staff meals.
  • Then check labour cost %. Check whether the rota matches actual covers by day and hour. Review whether overtime or agency reliance is structural rather than exceptional. Confirm whether the sales line has slipped while the rota stayed put.
  • Then review menu mix. Menu mix alone can move food cost by up to six percentage points between two kitchens run with identical purchasing discipline.

For a deeper guide to reducing the labour cost side, see How To Reduce Labour Costs In UK Hospitality Operations. For a step-by-step food cost calculator, see Restaurant Food Cost Calculator: How To Calculate & Save.

Conclusion: The Three Formulas That Keep Prime Cost Honest

Three formulas govern whether a UK hospitality business makes money:

  • Food cost % using the stock and purchases formula explained earlier
  • Labour cost % = Total labour cost (fully loaded) ÷ Total sales × 100
  • Prime cost % = (Total food cost + Total labour cost) ÷ Total sales × 100

Labour cost is measurable from payroll each week. Food costing is the half that drifts every time a supplier invoice lands, and that drift, compounded across dozens of ingredients and multiple suppliers, erodes margin before the monthly accounts arrive. As the UHY Hacker Young data cited earlier shows, that drift is already eroding margin across the sector.

Jelly is the best food costing and labour cost solution for UK restaurants, pubs and boutique hotels because it keeps every dish cost live from scanned invoices and flags supplier price changes instantly, the two capabilities that address the drift described above.

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Below are answers to the questions operators ask most often about food costing, labour costs and prime cost.

Frequently Asked Questions

How Do You Calculate Food Cost Percentage?

Food cost percentage is the cost of food consumed as a proportion of food sales. The formula matches the food cost calculation explained earlier. Opening stock is the value of food on hand at the start of the period. Purchases are all supplier invoices received during the period. Closing stock is the value remaining at the end. The result is divided by net food sales (excluding VAT) and multiplied by 100. A commonly cited food cost target for full-service restaurants is 28–35% of sales, though this is a trade convention rather than published UK survey data, and the right figure depends on service style, menu mix and concept. The calculation is only as accurate as the ingredient prices used, so live invoice scanning matters.

What Is Included In Labour Costs In A UK Restaurant?

A fully loaded UK restaurant labour cost includes gross wages, employer NI, pension, holiday pay, overtime, agency staff and payroll-treated tips. The full breakdown sits in the labour cost section above. Omitting employer NI and pension alone typically flatters the labour cost ratio by six to eight percentage points.

What Percentage Should Labour Cost Be?

Labour cost percentage varies by service style. Directional UK ranges are: pub and bar-led venues 25–35% of sales, casual dining 28–35%, full-service restaurants 28–42% (with casual dining at 28–34% and fine dining at 34–42%), and fine dining 35–45%. These are planning reference points rather than audited UK survey data, because no official UK body publishes sector-wide labour cost percentages. The more useful discipline is to track your own labour cost weekly against your own previous four weeks, so a trend is visible before it compounds. A prime cost above 65% (food plus labour combined) is the trigger for a structural review, regardless of where each half sits individually.

How Do You Work Out Prime Cost?

Prime cost is the sum of total food cost and total labour cost for a given period, divided by total net sales, multiplied by 100. The formula is: Prime cost % = (Total food cost + Total labour cost) ÷ Total sales × 100. Both food cost and labour cost must be fully loaded, with food cost using the opening stock plus purchases minus closing stock method, and labour cost including gross wages, employer NI, pension, holiday pay, overtime and agency staff. The result should be calculated weekly and compared against the previous four weeks. A commonly cited healthy prime cost for a full-service restaurant is around 60–65% of net sales, though this is a guideline rather than measured UK data, and above 70% makes profitability structurally difficult.

Can Software Calculate Food Costing And Labour Costs Together?

Software can automate the food-costing half of prime cost from supplier invoices and pull sales data directly from the POS, while labour cost is entered from payroll records. Jelly keeps dish-level food costs live by scanning every supplier invoice line item automatically, so when a supplier changes a price, every affected dish’s GP margin updates in real time without any manual re-keying. By integrating with POS systems including Square, Lightspeed, EPOS Now and Toast, Jelly combines live food costs with actual sales data to produce a running GP figure via its Flash Report. Labour cost, drawn from payroll, is added to complete the prime cost picture. The result is a weekly prime cost figure that reflects current ingredient prices rather than the prices that were correct last month.