Restaurant Pricing Glossary
Plain-language definitions for 29 terms restaurant owners run into when costing dishes and setting menu prices. Each links to the full guide when there's more to say than a definition can cover.
Actual vs. Theoretical Food Cost
Theoretical food cost is what your recipes say a dish should cost. Actual food cost is what your P&L reports it cost, once waste, over-portioning, and shrinkage are included. A stable gap between the two is normal; a widening one means something in the kitchen needs investigating.
Full guide →Average Check Size
The average amount a guest spends per visit, calculated as total revenue divided by number of covers. It's one of the fastest ways to see whether upselling or menu changes are moving revenue per table.
Full guide →Break-Even Point
The revenue level at which total costs equal total revenue and profit is exactly zero. Below it you lose money; above it, every additional dollar of revenue drops mostly to profit once fixed costs are covered.
Full guide →COGS (Cost of Goods Sold)
The direct cost of the food and beverage you sold in a period — what you paid suppliers for the ingredients, not what you charged customers. It's the first deduction on a restaurant P&L, before labor and overhead.
Full guide →Contribution Margin
What's left from a dish's price after subtracting its direct ingredient cost — the amount it contributes toward covering labor, rent, and profit. High-contribution dishes are worth pushing even if their food cost percentage looks average.
Full guide →Corkage Fee
What a restaurant charges a guest for opening and serving a bottle of wine they brought themselves, rather than buying from the wine list. It exists to recover the lost bottle margin and the service cost of pouring it.
Full guide →Delivery Commission
The percentage a third-party delivery platform (DoorDash, Uber Eats, Grubhub) keeps from each order. Commission is charged on the listed price, so simply marking up your dine-in price by the commission rate undercharges you.
Full guide →FIFO (First In, First Out)
An inventory costing method where the oldest purchased stock is assumed to be used first. Recipes are costed against the oldest purchase price, which keeps remaining inventory valued closer to current prices.
Full guide →Food Cost Formula
Food cost percentage equals ingredient cost divided by menu price, times 100. It's the single most-used equation in restaurant pricing, and the basis for setting a price from a target margin.
Full guide →Food Cost Percentage
The share of a dish's menu price that goes to its ingredients. Most full-service restaurants target 28–35%; the right number depends heavily on concept, since fine dining and fast casual sit at different ends of that range for good reason.
Full guide →Food Cost Variance
The gap between what your recipes predict food cost should be and what your actual purchase and sales data show. Tracking variance weekly catches pricing and portioning problems before they show up as a bad month.
Full guide →Ghost Kitchen
A food preparation facility built for delivery-only orders, with no dine-in space. Because there's no front-of-house, pricing has to absorb full delivery commission without the offset of higher-margin dine-in sales.
Full guide →Gross Profit Margin
Revenue minus cost of goods sold, expressed as a percentage of revenue. It only accounts for ingredients, so it typically looks healthy — the real test of profitability comes after labor and overhead are subtracted too.
Full guide →Labor Cost Percentage
Total labor cost — wages, payroll tax, benefits — divided by revenue. Paired with food cost percentage, it makes up prime cost, the two largest and most controllable expenses in a restaurant.
Full guide →Net Profit Margin
What's left of revenue after every cost — food, labor, rent, utilities, marketing — is subtracted. Full-service restaurants commonly net 3–6%, which is why small cost shifts have an outsized effect on whether the year is profitable.
Full guide →Par Level
The target quantity of an ingredient to keep in stock between deliveries. Set correctly, it prevents both running out mid-service and over-ordering perishables that spoil before they're used.
Full guide →Plate Cost
The total ingredient cost of everything on the plate for one serving, including garnish and sauce — not just the protein. It's the number you divide by target food cost percentage to get a menu price.
Full guide →Portion Cost
The ingredient cost of a single serving of one component — for example, the cost of the 6oz portion of salmon in a dish, before adding sides and garnish. Portion drift, where actual servings creep above spec, is one of the most common invisible sources of rising food cost.
Full guide →Prime Cost
Food cost plus labor cost combined, as a percentage of revenue. It's the fastest single diagnostic for restaurant health because it captures your two largest controllable expenses in one number, typically targeted at 55–65%.
Full guide →Recipe Yield
How much usable, servable food a recipe actually produces after trimming, cooking loss, and portioning — as opposed to the raw purchased weight you started with. Costing against purchase weight instead of yield is one of the most common recipe-costing errors.
Full guide →RevPASH
Revenue Per Available Seat Hour — total revenue divided by seats multiplied by hours open. It accounts for both how much guests spend and how efficiently seats turn over, which check size or covers alone don't capture.
Full guide →Service Charge
A mandatory percentage added to a bill by the restaurant, distinct from a tip because the guest has no choice about it and the restaurant — not the server directly — decides how it's distributed.
Full guide →Table Turnover Rate
How many times a table is seated with a new party during a service period. Higher turnover increases revenue per seat without raising prices, but pushing it too hard can hurt guest experience and average check.
Full guide →Weighted Average Cost
An inventory costing method that blends all purchase prices for an ingredient into a single average, weighted by quantity. It smooths out price volatility and is simpler to maintain than tracking purchase layers individually.
Full guide →Yield Percentage
The share of an ingredient's raw purchased weight that survives trimming and cooking to become servable food, expressed as a percentage. A 70% yield on a protein means 30% of what you bought is lost before it reaches the plate.
Full guide →Put these numbers to work
MenuPricer calculates food cost, prime cost, and margin for every dish automatically — no need to run the formulas by hand.
Try MenuPricer Free →