Getting into a new business is challenging, especially one that’s as competitive as the food industry. But knowing the terms that go around can help. Here’s a basic list of words to keep in mind as you start and go on to run your food business.
Back of house — All areas where customers are not allowed, which includes kitchen, dishwashing area and the wait station
Bottom line — Also “net profit,” this is computed by subtracting operating expenses, wages, taxes and other business costs from the total sales
Backordered — A product that is ordered while not in stock, to be shipped later
Break-even point — The minimum amount a business must reach to cover costs
Bussing — Clearing off tables after customers have left, to be prepared again for the next set of customers to occupy
Cash-in sheet — A sheet used to track money during a shift
COGS — “Cost of goods sold,” which basically refers to the total cost of everything that was used to make the final product. This includes ingredients, packaging and labor.
Company culture — The working environment in your restaurant or business
Cost of goods — Total amount of items in the inventory
Dual-branding — This refers to when a single retail space houses two or more brands
FIFO — First in, first out. This refers to the usage of products in the inventory according to the date of expiration or when these items were received.
Fixed costs — Recurring costs, including rent and leases
Franchising — When you market your business for a fee or percent of sales.
Footfall — This refers to the number of people in your restaurant at a particular period of time. This can be used as a metric to measure the success of advertising campaigns, check trends and even determine how many staff members are needed at any given shift.
Front of house — Area of the restaurant where customers or guests are
Goodwill — Positive reputation or value of your business with your customers
GPM — “Gross profit margin,” or the money left after subtracting COGS from final revenue. This can be indicated as a percentage or as a peso amount. The goal is always to have a higher GPM, which shows that the company is efficient. GPM can be computed by dividing the revenue by the difference of revenue minus COGS. GPM can also be used to determine how to improve profitability of the business.
Margin — Sales minus cost of goods sold
Mark-up — Not to be confused with margin, the mark-up is the amount of increase from the cost, which then determines your selling price. To get this as a percentage, divide the mark-up amount by the product cost.
Net profit — See “bottom line”
Net sales — Amount of all products sold, but excluding sales tax
Outsourcing — A paid job done by someone who is not employed under your business
Par — The amount of an item that should be maintained in inventory between deliveries. If the number is below par, there is a risk of running out of supplies before the next delivery schedule, which ultimately will be detrimental to the business.
Point of purchase or point of sale — Where customers pay for products bought
ROI — “Return on investment,” which also indicates the performance of the business. ROI refers to the money earned compared to the initial investment. To compute for ROI, divide cost of investment by total gain on investment minus cost of investment
Turnover rate — the rate at which tables are emptied and filled during shifts. A slow turnover rate means people stay at the tables for a long time, or tables remain unfilled for long periods
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