Costs02/15/2026
Critical Metrics
4 numbers that determine survival
<35% Food Cost %<65% Prime Cost<20% Rent Ratio<6 months Break-even
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25-35%
Food Cost %
= COGS / Revenue. Above 40% = danger zone.
<60-65%
Prime Cost
= (COGS + Labor) / Revenue. The single most important metric.
<15-20%
Rent-to-Revenue
= Rent / Revenue. Above 25% = extremely high risk.
4-8 months
Break-even Point
Time to recoup investment. Over 12 months = reassess.
Benchmarks by Business Model
Coffee ShopFood cost 20-30%Prime cost <55%. High margins but fierce competition.
EateryFood cost 30-40%Prime cost <65%. Needs high volume to offset thin margins.
Bubble TeaFood cost 15-25%Prime cost <50%. Very high margins; marketing costs are significant.
RestaurantFood cost 28-38%Prime cost <60%. Labor takes a large share.
Cloud KitchenFood cost 30-38%No rent, but delivery app fees of 20-30%.
Bar / PubFood cost 15-25%Prime cost <50%. Beverage margins are very high.
Red Flags — Take Action Immediately
Food cost > 40%
Investigate now: ingredient waste, supplier price hikes, over-portioning, theft. Every 1% of food cost equals roughly 10% of net profit.
Prime cost > 70%
Virtually impossible to turn a profit. Must cut costs or raise prices immediately.
Rent ratio > 25%
Rent is consuming all your profit. Consider renegotiating or relocating.
Revenue declining 3 months in a row
Not a seasonal dip? Check for: new competitors, declining quality, negative Google reviews.
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