Glossary
Restaurant operations glossary
36 back office terms, defined plainly. Not culinary vocabulary: these are the words that turn up in your invoices, your inventory sheet and your P&L, where getting one of them slightly wrong costs real money.
Where a term has a longer answer, there is a link to it. Where a term depends on where you operate, that is said rather than glossed over.
Cost and margin
The numbers on this list are the ones that decide whether a busy month is also a profitable one.
- Prime cost
- Cost of goods sold plus total labor, as a percentage of net sales. It is watched more closely than net profit because it is the part of the P&L that responds to decisions made this week. Rent does not move by Sunday. Prime cost does. How to calculate prime cost.
- Cost of goods soldalso called COGS
- The cost of the food and beverage you actually used in a period, not what you bought. Opening inventory plus purchases minus closing inventory. Buying a pallet of something on the last day of the month raises purchases and does not raise COGS, which is why the two get confused.
- Food cost percentage
- Cost of goods sold divided by sales for the same period. Quoted per dish, per category or for the whole business, and those three answers are rarely the same number. The whole-business figure is the one that pays the rent. Free food cost calculator.
- Theoretical food costalso called Ideal food cost
- What your food should have cost, calculated by multiplying every item sold by its recipe cost. Actual food cost is what it did cost. The gap between them is the interesting part: it is waste, over portioning, theft, comps, or recipes that no longer match what the kitchen makes.
- Variance
- The difference between theoretical and actual, in dollars or in units. A variance on one ingredient points at a portion or a recipe. A variance across everything usually points at counting, receiving, or a date range that does not line up.
- Contribution margin
- Menu price minus the cost of the ingredients. What the dish contributes toward fixed costs before anything else is taken out. A low food cost percentage on a cheap item can still contribute less per plate than a pricier dish with a worse percentage, which is why percentage alone makes bad menu decisions.
- Plate costalso called Recipe cost
- The total ingredient cost of one served portion, including the garnish, the sauce, the oil it was cooked in and the packaging if it goes out the door. Most plate costs are understated because the small things are left off. Recipe costing software.
- Yield percentage
- How much of what you bought survives to the plate after trimming, peeling, bones and cooking loss. A case of whole fish does not cost what the invoice says per usable pound. Recipes costed on purchase weight rather than yield weight understate food cost quietly and permanently.
- Net sales
- Sales after comps, discounts and refunds, with sales tax excluded. Sales tax was never your money. Leaving it in inflates the denominator and improves every percentage you calculate, which is a pleasant way to be wrong.
Purchasing and receiving
Most money leaks here, in the gap between what was ordered, what arrived, and what was billed.
- Par level
- The quantity of an item you want on hand at the start of an ordering cycle. You order the difference between par and what you counted. Pars set once and never revisited are the reason a restaurant carries six months of one thing and runs out of another every Friday.
- Purchase orderalso called PO
- The record of what you asked for, at what price, before anything arrives. Without one, the invoice is the only version of the story and there is nothing to check it against.
- Three way match
- Checking the purchase order, the receiving record and the invoice against each other before paying. It catches the three separate problems that look identical on a bank statement: you were billed for something you did not order, something you ordered but did not receive, or something you received at a different price than agreed.
- Credit memo
- A document from a supplier acknowledging they owe you money, usually for a short delivery, a damaged case or a price correction. Credit memos are promises. The one that matters is whether the credit shows up on a later invoice, which is the step most often skipped.
- Pack sizealso called Case pack
- How many units are in the case, and how big each unit is. Two quotes for the same product are not comparable until both are reduced to the same unit. A case of 6 by 32 oz and a case of 12 by 16 oz hold the same volume and almost never cost the same. How to compare vendor prices.
- Unit of measure conversion
- Translating between the unit you buy in, the unit you count in and the unit a recipe uses. This is where costing goes wrong most often, and the errors are large rather than small. Grams entered where ounces were meant is off by about twenty eight times, and nothing on the screen looks unusual.
- Price creep
- Supplier prices rising in small increments that individually never look worth a phone call. No single week is alarming. The comparison worth making is against what you paid three months ago, not against last week. Catching price creep.
- Spec
- The agreed description of exactly what you are buying: grade, size, pack, brand, origin. A spec is what makes a substitution visible. Without one, a cheaper product arriving under the same name on the invoice is invisible until someone tastes it.
- Broadline distributor
- A supplier carrying most of what a restaurant needs across every category, as opposed to a specialty supplier carrying one category well. Broadliners simplify ordering and consolidate deliveries. The cost of that convenience shows up on the items where a specialist would have been cheaper.
Inventory
Counting is only useful if the count is comparable to the last one.
- Physical count
- Actually counting what is on the shelf, as opposed to what the system believes is there. The count is only worth anything if it happens at a consistent point in the cycle, ideally before a delivery and after service, so two counts describe the same kind of moment. Restaurant inventory software.
- Blind count
- Counting without seeing the expected quantity on the sheet. It costs a little more attention and removes the strongest source of bias in inventory, which is a tired person at the end of a shift agreeing with a number already printed in front of them.
- Usagealso called Depletion
- How much of an item left inventory in a period, whether it was sold, wasted, comped or walked. Usage against sales is the check that finds the difference.
- Shrinkage
- Inventory that disappears without a sale behind it. Spoilage, breakage, over portioning, staff meals not recorded, and theft all land in the same bucket until you separate them. Treating all shrinkage as theft is the fastest way to damage a team and fix nothing.
- Commissary
- A central kitchen that produces for more than one location. It changes costing, because a batch produced in one place becomes an ingredient somewhere else, and the receiving location needs to carry that cost rather than the raw ingredients.
Labor and tips
Usually the larger half of prime cost, and the half most operators cannot quote from memory.
- Labor cost percentage
- Total labor divided by net sales. Total labor means wages plus the overtime premium plus employer payroll taxes plus any benefits you pay. Counting base wages only will flatter you by several points and make your figure incomparable to anybody else's. Calculating labor cost percentage.
- Tip pool
- Tips collected together for a shift and redistributed by an agreed rule, most often by hours worked, evenly, or by role weightings. The rule matters less than applying it consistently and being able to show the arithmetic. Free tip pool calculator.
- Tip out
- A share of tips passed from one role to another, typically front of house to bussers, runners or bar. Usually a percentage of sales or of tips received rather than a share of a common pool, which makes it a different mechanism from pooling even though the two often run together.
- Tip credit
- A provision in some jurisdictions letting an employer count a portion of tips toward the minimum wage obligation, paying a lower direct cash wage. It is not available everywhere, several states do not permit it, and the rules around it are specific enough that this is a question for a payroll professional rather than a glossary.
- Split shift
- One employee working two separated blocks in a day with a long unpaid gap between them. Common where lunch and dinner are distinct services. Some jurisdictions require additional premium pay when a shift is split, so it is worth knowing whether yours does before building a schedule around it.
Service floor
Terms that start on the floor and end up in the numbers, usually with the meaning slightly changed.
- 86
- To take an item off the menu because it has run out or cannot be made. As a data point it is more useful than it looks: a repeatedly 86'd item is either underordered, mis-parred, or selling far better than the forecast assumed.
- Comp, void and refund
- Three different things that all reduce sales. A comp is food given away deliberately. A void removes an item before payment, usually a mistake at the till. A refund returns money after payment. They need separating, because comps are a management decision and voids are a pattern worth looking at.
- Cover
- One guest served, not one table and not one check. Sales per cover and labor per cover are more stable comparisons across days than raw sales, because they take out the effect of a quiet Tuesday.
- Sales mixalso called PMIX
- The count of each menu item sold over a period. It is the input to almost everything else: theoretical food cost, purchasing forecasts and menu engineering all start from what actually sold rather than from what you expected to sell.
Money in and out
The two that most often arrive as a surprise on a statement.
- Return itemalso called Chargeback
- A payment that came back after you had already treated it as received, along with the fee for the privilege. Returned checks and disputed card payments both land here. They are easy to miss because the original credit and the later reversal sit on different lines and often in different weeks. Finding return items on a statement.
- Demand charge
- A commercial electricity charge based on your highest short burst of usage, not your total consumption. On a time of use plan a single fifteen minute spike can set a higher rate that then applies across the bill. It is the reason an efficiency effort can lower usage and leave the bill roughly where it was. The demand charge alarm we built.
A note on the ones that depend on where you are
Tip credit, split shift premiums and overtime thresholds are set by state and sometimes by city, and they change. The definitions above describe what the term means, not what you are required to do. For those three, check your own jurisdiction or ask a payroll professional rather than trusting any glossary, including this one.
These numbers, without the spreadsheet
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