Restaurant Management & Operations Glossary

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A

Actual Usage

The amount of food product and supplies that are physically used in a given time period.

B

Back of the House (BOH)

The area of the restaurant or food service operation that customers typically do not access, such as the manager’s office, the kitchen area, the storage areas and the employee break room.

Break-even Point

The volume of sales needed to cover all expenses without making a profit; the bare minimum amount of revenue the restaurant operation needs to survive.

Build-to Amount

The amount of a certain product the restaurant should always have on hand. When ordering, managers essentially need to build their up inventory to the appropriate build-to amount. This is another term for par level.

C

Cash Flow

The movement of moneys within a restaurant business, specifically income and expenses.

Casual Dining Restaurant

Full-service restaurants are geared more toward the every-day dining experience. The décor, food and service tends to be more informal and often more family oriented than fine-dining restaurants.

Comp (Compensate)

To offer an item for free, often in the event of a mishap or guest complaint. For instance, a server may comp a dessert if the diner was totally dissatisfied with the entrée.

Cost of Goods Sold (COGS)

The costs associated with producing items or preparing food and selling it off the menu (see usage).

E

Employee Handbook

The essential text documenting restaurant policies, procedures, job descriptions and laws pertinent for restaurant workers to understand once employed on the premises.

F

Fast-Casual Restaurant

The restaurant type that falls somewhere between quick-service and full-service restaurant types. Fast-casual restaurants usually make speed of service a priority, like quick-service restaurants, but have a more upscale dining area and arguably higher food quality. They are typically less expensive than full-service restaurants.

FICA Tax

Federal Insurance Contributions Act tax. Restaurant employers as well as employees are required to pay FICA taxes to fund Social Security and Medicare.

FIFO

The first-in, first-out method of rotation used in restaurants to avoid expiration by using up older products before newer ones.

Fine Dining Restaurant

An establishment with exceptional quality and service in all aspects, including beautiful décor, renowned chefs and special cuisine.

Food Cost


The cost of food and beverage supplies in a restaurant.

Form 8027

An IRS document summarizing a restaurant’s total sales and total reported tips.

Form 4070

An IRS document used to record employee tips, also called the Employee’s Daily Record of Tips.

Front of the House (FOH)

The dining room and other areas of the restaurant that are literally in front of the building. This usually involves any place the guest can access, such as restrooms, dining room, bar and lobby.

Full-Service Restaurant

Operations that offer guests complete table service including seating guests, taking beverage and food orders, delivering food and clearing the table. These restaurants often employ hosts or hostesses, servers and bartenders to deliver full table service.

G

Gross Profit

The amount a business makes in profit after the cost of goods sold has been removed from the incoming sales.

H

Hazard Communication Program

An OSHA standard requiring all food service operations to properly communicate and train employees in order to protect them against any hazardous chemicals used on the premises. This also included Material Safety Data Sheets (MSDS) as well as proper training.

I

Ideal Usage

The amount of food and beverage products used in the restaurant according to the orders entered into the POS. Also known as theoretical usage (see theoretical usage).

Inventory

The physical food, beverages and supplies the restaurant has on the line or in its storage areas.

L

Liquor License

A license to sell or serve liquor, allocated by local or state governing bodies

M

Menu Price

The selling price for a restaurant’s goods, often obtained by taking the food cost of the menu item and dividing by the desired food cost percentage.

N

Net Profit

The actual amount a business makes in profits, after all expenses have been accounted for.

O

Occupancy Cost

The expenses associated with occupying a space, such as rent, mortgage or utilities.

P

Par Level

The amount of a certain product the restaurant should always have on hand for the period of time between deliveries.

PLA

Processed corn starch called poly-lactic acid, used to form biodegradable cups and carry-out containers.

Point of Purchase (POP)

The point at which customers order food at a restaurant, such as at a service counter.

Point of Sale (POS) System

The computer and cash register system that cashiers and servers use to enter guests’ orders and collect cash payments. POS systems can also be used to help run financial and labor reports, record inventory counts and track guest information for marketing purposes.

Profit and Loss (P&L)

The restaurant income statement, detailing all incoming cash and outgoing expenses for the business period.

Q

Quick-service Restaurant (QSR)

The term for restaurants that capitalize on speed of service and convenience. Fast-food restaurants often fall under the umbrella of quick-service restaurants, but not all quick-service places can be considered fast-food restaurants. Quick-service restaurants are characterized by simple décor, inexpensive food items and speedy service.

S

Sales Mix

A chart or list describing how many of each menu item was sold in a given time.

Shelf-life

The length of time until a food or beverage product expires on the shelves.

Sommelier

A trained wine expert who specializes in all aspects of wine service at a fine dining restaurant.

Supplier

A food or beverage vendor from which restaurant owners and managers purchase their food products.

T

Theoretical Usage

The hypothetical food and beverage usage in a restaurant, usually according to the orders entered into the POS. Sometimes known as ideal usage (see ideal usage).

Tips

The money guests customarily pay servers and other restaurant workers for good service during the dining experience. Tips usually supplement restaurant workers’ overall income.

U

Usage

The amount of food and beverage supplies the restaurant uses in a given period to prepare and sell items off the menu.

V

Variance

Typically known as the difference in cost between theoretical usage and actual usage.

W

W2 Form

The IRS form used to report an employee’s annual wages as well as the amount of taxes that have been withheld from the employee’s annual wages.

Waste

The food or supplies that are spilled, burned, incorrectly prepared or otherwise misused or expired and thrown away. High waste will negatively affect food cost.

Workers Compensation

Part of required insurance coverage for restaurants, requiring restaurants to pay lost wages and medical bills to employees who are hurt on the job.

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