Restaurant & Hospitality
Glossary

ABC analysis sorts inventory items into three categories by value and importance: A (20% of items, 80% of value), B (30% of items, 15% of value) and C (50% of items, 5% of value).

Absenteeism rate measures what percentage of scheduled hours were not worked because of absences. In hospitality it is key to controlling rotas, extra costs, productivity and service quality.

Actual usage is the value or quantity of product a restaurant has really used during a period, calculated from opening inventory, purchases and closing inventory.

ADR, or average daily rate, is the average price an accommodation business charges for each room sold. It measures the quality of the rate achieved, not occupancy.

Allergen management is the set of processes a restaurant uses to identify, document, communicate and control the 14 allergens that must be declared by law, protecting guests and keeping the business compliant.

Average service time measures how long, on average, the full experience of a table or guest lasts: from sitting down or the order being opened until they finish, pay and the table is ready to be sold again.

Average spend (the average ticket) is the average amount each customer (or table) spends in your restaurant. It is a key indicator of commercial performance and of how well your menu works.

Batch cooking is the technique of preparing large quantities of base preparations in one go so they can be used across several dishes and services. It maximises kitchen efficiency and cuts labour costs.

Beverage cost is the percentage of a drink's selling price that goes on what the drink cost to buy. It is the key indicator for measuring the profitability of the drinks, wine and cocktail list.

The break-even point is the level of sales at which a restaurant covers exactly all its costs (fixed and variable), making neither a profit nor a loss. It is the minimum turnover needed to survive.

CAC (Customer Acquisition Cost) measures how much you spend on marketing and promotion to win a new customer. It is key to judging whether your marketing actually pays off.

Restaurant CAPEX is capital investment in long-lasting assets: refurbishments, machinery, furniture, kitchen equipment, installations, technology and improvements that deliver value over several years.

Cash flow in a restaurant is the movement of money in and out of the business. Managing cash well is vital for the restaurant's survival, even if it is profitable on paper.

COGS, or cost of goods sold (CMV in Spanish accounting), measures the value of the products a restaurant has actually used or sold in a period. It is a key metric for understanding the real cost of operations, not just what has been bought.

Contribution margin is the difference between a dish's selling price and its variable cost (mainly ingredients). It shows how much each dish contributes towards fixed costs and profit.

The cost of poor quality is the money a restaurant loses through mistakes, defective product, remade dishes, complaints, refunds, avoidable waste and guests who never come back.

Cost of goods sold is the value of the products actually used to generate a period's sales. In a restaurant it connects inventory, purchasing, recipe costings and gross margin.

Cost per cover is the total cost of serving each guest in your restaurant, including ingredients, staff, utilities and a share of operating expenses. It is key to setting prices and measuring efficiency.

Cost per service measures how much it costs to open and run a specific restaurant shift, including staff, product consumed, utilities and other expenses directly linked to that service.

Cross-selling is the sales technique of offering products that complement the main order: starters, drinks, extra sides, desserts and coffees. It raises the average spend by adding more items.

Days of inventory (DSI, or Days Sales of Inventory) measures how many days of usage your current stock covers. A DSI of 5 means you have enough stock for 5 days of normal trading.

Days payable outstanding shows how many days, on average, a restaurant takes to pay for its purchases and outstanding invoices from the moment it receives the goods or the invoice.

Dead stock is inventory that sits idle for too long because it is not used, does not move or no longer has any operational purpose. In restaurants it ties up cash, space and margin.

Delivery margin measures how much direct profit a delivery order leaves after deducting food cost, commissions, packaging, discounts, refunds and other operating costs linked to the channel.

Delivery take rate is the percentage of each order that the platform or sales channel keeps in the form of commission, service fees, logistics costs or marketing charges.

EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortisation) measures a restaurant's operating profit before interest, tax, depreciation and amortisation. It is the most widely used indicator for judging a business's real profitability.

Economic order quantity is the optimal amount to buy so that the cost of placing orders is balanced against the cost of holding stock. It helps avoid orders that are too small, overstocking and stockouts.

FIFO (First In, First Out) and LIFO (Last In, First Out) are stock rotation methods. In hospitality, FIFO is compulsory: what comes in first goes out first, keeping produce fresh and reducing waste.

Food cost is the percentage of a dish's selling price that goes on the cost of its ingredients. It is the single most important indicator of how profitable your menu is.

Food cost variance is the difference between the food cost expected from recipe costings and sales, and the actual cost consumed according to inventory, purchases and adjustments.

The shelf life of a food is the period during which it can be stored, handled and served safely and at acceptable quality. In restaurants it must be controlled by date, batch, temperature, opening and preparation.

Food traceability is the ability to follow a food through every stage of production, processing and distribution. It has been mandatory for hospitality businesses since 2005 and is key to food safety.

Food waste is food intended for human consumption that is thrown away at any point in the chain. In Spain, Law 7/2022 requires restaurants to take measures to prevent it.

GOP (Gross Operating Profit) measures the profit generated by the restaurant's operations before deducting fixed costs the operator can't control, such as rent, insurance and taxes. It is the preferred indicator in international hospitality.

Gross margin is the difference between sales and the direct cost of what was sold, mainly food and drink. It measures how much money is left to cover staff, rent, utilities and profit.

HACCP (Hazard Analysis and Critical Control Points, known in Spain as APPCC) is a mandatory preventive system in hospitality that identifies and controls food safety risks to make sure the food you serve is safe.

Cycle counting is a stock-checking method that counts a different portion of products each day or week, instead of carrying out a full periodic stocktake. It reduces errors and frees up operational time.

Inventory turnover measures how many times a restaurant completely renews its stock over a period. The better it is tuned, the less cash is tied up and the lower the risk of expired products or stock-outs.

Inventory variance is the difference between the theoretical stock a restaurant should have according to purchases, sales and recipe costings, and the physical stock it actually finds when counting the stockroom or cold room.

The kitchen order ticket (comanda in Spanish) is the document that records a guest's order in a restaurant. It is the communication channel between the floor and the kitchen, and managing it well is key to operational efficiency and guest satisfaction.

Kitchen production capacity measures how many portions, dishes or preparations a kitchen can produce in a given period with the resources available: staff, equipment, space, mise en place and ingredients.

Labour cost is the percentage of turnover that goes on staff. In restaurants, a healthy benchmark ranges from 25% to 35% depending on the type of venue.

Labour productivity measures how much operational output a restaurant generates for every hour its team works, usually in sales, covers, tickets or dishes produced.

LTV (Lifetime Value) measures the total revenue a guest generates over their whole relationship with your restaurant. It is the key metric for weighing the value of retention against the cost of acquisition.

Management by exception is a management approach that focuses the manager's attention only on meaningful deviations from targets, instead of manually reviewing every piece of restaurant data every day.

Supplier lead time is the time that passes from when a restaurant places a purchase order until it receives the goods and they are ready to use in the kitchen or bar.

Menu engineering is a menu analysis and design technique that classifies each dish by popularity and profitability in order to optimise the sales mix and maximise overall profit.

The menu item popularity index measures how much each dish weighs in total unit sales across the menu. It helps you identify star dishes, invisible dishes and menu engineering opportunities.

Mise en place (French for 'put in place') is the principle of organising and preparing all the ingredients, tools and equipment in advance, before service or a recipe begins.

NPS (Net Promoter Score) measures how likely your customers are to recommend your restaurant. It is the most widely used satisfaction indicator because it is simple and closely linked to business growth.

Occupancy cost covers all the expenses tied to the restaurant's physical premises: rent, property tax, insurance, service charges and structural maintenance. It should stay between 8% and 12% of revenue.

The occupancy rate measures the percentage of available seats actually filled during a service. It is a key indicator of a restaurant's efficiency and the basis for working out its revenue potential.

Restaurant OPEX is the recurring operating expenditure needed to keep the business running: staff, rent, utilities, purchases, software, maintenance, marketing and outside services.

Opportunity cost is the revenue or margin a restaurant misses out on when it chooses one option over another, such as accepting a booking, leaving a table empty or giving kitchen capacity to a low-profit channel.

Controlled overbooking is the practice of accepting more bookings than there are seats, anticipating that a percentage of guests won't turn up (no-shows). Calculated well, it maximises occupancy without creating conflicts.

Par stock (or par level) is the optimal quantity of each product to have in storage at the start of each period, calculated to cover expected demand plus a safety margin without building up excess.

Perpetual inventory is a stock control system that updates stock levels in real time with every movement in and out, unlike periodic inventory, which is only checked at set points in time.

Portion control is the practice of standardising the exact quantity of each ingredient in a dish. Strict portion control can cut food cost by 3-5% without customers noticing any difference.

The pricing multiplier is the factor by which a dish's ingredient cost is multiplied to get its selling price. A multiplier of 3.5 means a dish costing €5 in ingredients sells for €17.50.

Prime cost (coste primo in Spanish) is food cost plus staff cost. It is the most complete measure of a restaurant's direct operating cost and should stay between 55% and 65% of turnover.

In the US restaurant management model, prime cost is the core KPI: food cost + labour cost. The standard benchmark is to stay below 60-65% of sales.

The profit and loss statement (P&L) is the financial report that shows all of a restaurant's income and expenses for a period, revealing whether the business is making an operating profit or a loss.

The purchase unit is the format in which the restaurant buys a product from the supplier; the usage unit is the actual measure the kitchen uses to cook, cost recipes, deduct stock or calculate costs.

The purchases-to-sales ratio measures what percentage of revenue is being spent on buying ingredients in a period. It is a quick signal for spotting food cost variances, excess stock or planning problems.

The purchasing budget is the forecast of how much a restaurant should buy in food, drink and consumables over a period to meet demand without tying up cash or creating waste.

Recipe costing is the systematic process of calculating the exact cost of every dish by analysing all its ingredients, quantities, wastage and sub-recipes. It is the basis for setting profitable prices.

A recipe costing sheet (escandallo in Spanish) is the technical document that breaks down every ingredient in a dish with its exact quantity, unit cost and total cost per portion. It is the foundation of cost control in a restaurant.

The reorder point is the stock level at which a new order should be placed with the supplier to avoid running out. It covers usage during the delivery lead time plus safety stock.

Repeat customer rate measures what percentage of guests come back to the restaurant within a given period. It is a key KPI for assessing loyalty, the guest experience and how dependent the business is on constantly acquiring new customers.

Reservation cancellation rate measures what percentage of confirmed bookings are cancelled before service. It helps you understand how reliable demand is and adjust forecasts, rotas, purchasing and booking policy.

Reservation conversion rate measures what percentage of people who check availability, call, click or start a booking end up confirming it. It helps you spot friction in the booking process before you lose covers.

Demand forecasting is the prediction of the sales, covers or usage a restaurant will have in a future period. It helps you buy better, plan staff and prepare production with less waste and fewer stockouts.

A restaurant's fixed costs are the expenses that stay relatively stable even when sales change, such as rent, insurance, licences, software or part of the core staff.

KPIs (Key Performance Indicators) are the key metrics that measure a restaurant's performance in its critical areas: sales, costs, productivity, guest satisfaction and profitability.

Margin of safety measures how far a restaurant's sales can fall before reaching the break-even point. It shows the distance between current revenue and the threshold below which the business starts losing money.

A restaurant's net profit margin is the percentage of sales left as final profit after deducting all costs: ingredients, staff, rent, utilities, commissions, operating taxes and other expenses.

A no-show is when a guest with a booking neither turns up nor lets you know. No-shows affect 10–20% of bookings in Spain and cost restaurants thousands of euros a year in empty tables that could have been re-let.

The staffing ratio is the relationship between the number of employees and the restaurant's customers, tables or revenue. It tells you whether you have the right team to give good service without costs running away.

A restaurant's variable costs are the expenses that change directly or proportionally with the level of sales or production, such as ingredients, drinks, delivery commissions or consumables used per service.

RevPAR measures revenue per available room in a hotel or other accommodation. It combines occupancy and average rate to show whether capacity is being monetised well, not just whether a lot of rooms are being sold.

RevPASH (Revenue per Available Seat Hour) measures the revenue generated by each available seat per hour. It is the most complete indicator of a restaurant's operational efficiency and real profitability.

Safety stock is the minimum quantity of each product that should always be kept in storage to absorb unexpected swings in demand or supplier delays, avoiding stock-outs.

Sales mix is the actual breakdown of what a restaurant sells, by dish, category, channel or time of day. Analysing it shows not just how much you sell, but exactly what you sell and how it affects your margin.

Sales per square metre measure how much revenue each usable metre of the restaurant generates. They help you see whether the premises, dining room, terrace, bar or kitchen are producing enough revenue to justify their cost.

Seated capacity is the maximum number of diners a restaurant can seat at the same time. It sets the restaurant's revenue potential and is governed by occupancy and safety regulations.

A split shift is a working day divided into two blocks separated by a long break (typically 3–5 hours), common in hospitality to cover both lunch and dinner service.

SPMH (Sales Per Man Hour, or sales per labour hour) measures how many euros of revenue each hour worked by the team generates. It is the key labour productivity indicator in restaurants.

The staff rota is the document that plans and assigns each restaurant employee's working hours by day and time slot, making sure service is covered and the law is complied with.

Staff turnover measures the percentage of employees who leave the restaurant in a given period. In Spanish hospitality it exceeds 70% a year, creating hidden costs that can reach 150% of the salary of each leaver.

Standard cost is the expected cost of producing a dish, service or period using recipes, agreed prices, yields and expected usage. It acts as a benchmark against which actual cost is compared.

A standardised recipe card (in Spain, the ficha técnica) is the operational document that standardises a recipe, setting out ingredients, quantities, method, presentation, allergens and cost. It is the guide that lets a dish be reproduced exactly the same every time, with a controlled margin.

Stock cover shows how many days a restaurant can keep operating with the inventory it has before it needs to restock, based on its real rate of usage.

A stockout happens when a restaurant runs out of a product it needs to sell a dish, serve a drink or keep operations running as planned. It causes lost sales, pressure during service and damage to the guest experience.

Suggestive selling is the art of recommending dishes, drinks or extras to guests in a natural, personalised way, raising the average spend while improving their dining experience.

Supplier lead time is the time between a restaurant placing an order and the goods being ready to use. It is a key variable for calculating safety stock, reorder points and purchasing.

The opportunity cost of a table is the revenue or margin a restaurant misses out on when a table is taken by an unprofitable booking, a no-show, an overly long stay or a poor allocation of capacity.

Table turnover measures how many times each table is occupied during a service. It is a key operational efficiency indicator which, combined with average spend, determines the restaurant's revenue potential.

Theoretical usage is the amount of product a restaurant should have used according to its sales and recipe costings. Comparing it with actual usage reveals cost and inventory variances.

Time recording is the legal obligation to record each worker's start and finish times every day. It has been mandatory in Spain since 2019, and non-compliance can lead to fines of up to €225,018.

Upselling is the sales technique of offering the guest a superior or upgraded version of the item they have chosen, increasing the value of the order and the average spend per guest.

Wastage is the product lost between buying a raw ingredient and the customer finally eating it. It covers natural losses, processing losses and service losses.

The waste rate measures what percentage of the product bought or produced is lost before it becomes a useful sale, through expiry, trimmings, mistakes, breakages or waste.

Weighted average cost is the average unit cost of a product, calculated according to the units bought at different prices. It is used to value inventory and usage without relying only on the last purchase price.

Yield management is the strategy of adjusting prices and availability according to expected demand in order to maximise the restaurant's total revenue.

Yield percentage is the usable share of an ingredient after cleaning, trimming, cooking or portioning. It tells you how much usable product you actually get from what you buy, and what it really costs.