Glossary
Plain-English definitions of the restaurant finance terms every operator should know.
- Break-Even Point
- The level of sales at which total revenue exactly covers total costs, so the restaurant makes neither a profit nor a loss.
- Cash Resilience
- How many months of operating expenses a restaurant currently holds in cash, a measure of how long it could withstand a downturn.
- COGS
- Cost of goods sold: the cost of the food and drink you actually sold in a period, not just what you bought.
- EBITDA
- Earnings before interest, tax, depreciation, and amortisation, a measure of operating profit used to compare and value businesses.
- Food Cost Percentage
- The share of sales spent on the ingredients you sold, calculated as cost of goods sold divided by food sales.
- Gross Margin
- Gross profit as a percentage of sales, showing how much is left after the cost of goods sold to cover everything else.
- Labour Cost Percentage
- Total labour cost as a share of sales, including wages, employer taxes, and benefits.
- Net Margin
- Net profit as a percentage of sales, what is left after every cost, including labour, rent, and overheads.
- Prime Cost
- The sum of cost of goods sold and labour, the two largest and most controllable costs in a restaurant.
- Working Capital Cycle
- The number of days between paying your suppliers and receiving the cash from the sales those supplies generate.