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Glossary

Your guide to restaurant inventory terminology

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Confused about calculating COGS? Wish you knew what your manager was talking about when they say to use “FIFO”? In this guide we cover all of the definitions needed to help you keep your restaurant running smoothly - and at a profit!

growyze makes restaurant inventory easy

Fed up with time-consuming, manual stock control processes (or lack of?). growyze is the simple restaurant stock management app for keeping control of your stock, orders and invoices. All in one place.

Restaurant Inventory Glossary

Automation

This is when a task is completed without human input using underlying technology that picks up on behaviours and rules. For example, when growyze matches what you've had delivered vs what you scan in your next stock take and finds discrepancies - this is automation in action!

Back of house (BOH)

All the parts of a restaurant that your customers don’t see such as the kitchen, cellar, staff rooms, and office spaces. Back of house operations are the systems and processes you have in place to ensure everything runs smoothly inside your restaurant.

Cost of goods sold (COGS)

If there’s one number you need a handle on when running a restaurant, it’s the cost of goods sold (aka COGS). This is the total cost of the ingredients needed to make something sellable. In a burger that might be: the beef used to make the patty, the bun, the garnish, the pickles and the sauce. All of these added together = the cost of goods sold. To work out how profitable your restaurant is, you’ll need to be able to calculate the cost of goods sold from the items that you sell.

First in, first out (FIFO)

When you ensure that items in stock are used and sold in the order by which they were bought. Helping you to ensure older items are sold first, before they go out of date and wasted. In stock control, FIFO helps you to organise how you use your stock and what you need to order, to prevent loss.

Food cost percentage

The food cost percentage tells you how much a dish costs you, compared to how much you sell it for. This is to help work out how profitable your menu items are. For example, if a pasta dish costs you £3.00 to make and you sell it for £12.00 your food cost percentage would be 25% (3.00 / 12.00 x 100 = 25). That means, you’re making 75% profit.

Top Tip: did you know you can use the growyze recipe management feature to see the food cost percentage and how much of a profit margin you have on each menu item?

Food inventory management

This is the system a restaurant uses to count and manage all of the food items needed to create the different recipes and dishes on the menu. Successful food inventory management within a restaurant is often the difference between a profitable restaurant, and one that leaks losses!

Front of house (FOH)

This is the area of your restaurant where customers are present. This might include your bar, restaurant, outside space, customer toilets and waiting areas.

Gross profit

Your gross profit tells you how much money your restaurant has made in sales after the cost of the items needed to make those sales has been deducted. You work out gross profit by deducting the cost of goods sold from the sales.

Total sales - cost of goods sold = gross profit

The difference between gross profit and net profit, is that gross profit relates to cost of goods sold and sale price of goods sold only. Whereas net profit also takes into account all other overheads, such as staffing costs and building fees (more on this below).

Top Top: In growyze your gross profit figure is automatically calculated in the GP Analysis Report. Helping you to see, at a glance, how profitable your menu is.

Gross revenue

Your gross revenue is the total of sales before you deduct any expenses. To work out your gross revenue you need to look at all of the sales made over a period of time. Gross revenue is also sometimes referred to as turnover or sales turnover.

Inventory management

This refers to the management of all items and ingredients that you sell within your restaurant. This includes sellable items such as drinks, food, and recipes, as well as waste products.

Kitchen prime cost

Prime cost refers to the cost of goods sold (COGS) as well as the labour costs that incur when running your restaurant and learning your kitchen’s key metrics. As labour and ingredients are two of the biggest costs when running a restaurant (and are the ones that can often be optimised) this makes it an important metric for restaurateurs and owners to consider.

Loss prevention

When you proactively manage the different elements of your restaurant to ensure you’re operating as profitably as possible. In this instance, “loss” may occur in a number of ways; through wasted items, shrinkage, over-ordering, human error, over-staffing or a reduction in sales or menu profitability. Actively reducing losses is one of the best ways to improve a restaurant’s profit margin.

Net profit

Your net profit is the final stage of restaurant accounting. This is where you take your gross profit figure (remember, this is the figure left after you subtract the cost of goods sold from the total sales for the period) and deduct all of the other overheads your restaurant encounters. This could be staffing costs, marketing, electricity, landlord fees, insurances and anything else from that period. The figure at the end is your net profit.

Total sales - cost of goods sold - overheads for that period = net profit

POS restaurant system

Point of sale (POS) system is used by restaurants to manage orders and sales. This may include how your staff take orders, how customers make payments and even how you organise rotas for your team. Most POS systems used today are cloud-based, meaning everything is stored remotely, but they can also include (or integrate with) hardware such as physical sales tills or payment devices.

Profit margin

To calculate your profit margin you’ll need to know your net profit and your gross revenue (see definitions above). Profit margin usually refers to a percentage figure. This is handy as you can aim to increase your margin percentage to improve the overall profitability of your restaurant.

Net profit / gross revenue = profit margin

Recipe management

Recipe management, also called “menu engineering” is the process of designing, creating and pricing items on a restaurant’s menu. It may also involve the standardisation and training around how a recipe is created, for example the ingredients and quantities needed for each recipe on the menu. This can be used for food and/or drink items (for example, to calculate a recipe for a new cocktail).

Good recipe management ensures you know the profit margin on each menu item, and can order ingredients appropriately based on what’s needed to create that recipe.

Shelf to sheet inventory

Shelf to sheet inventory describes a method of stock control, where you match products on a shelf to a record of stock items. This is often referred to by those using paper systems for stock control, but can also be implemented when using stock control software such as growyze.

Simply find the item on the shelf, scan its barcode and you can enter it into your inventory list - without having to manually write the item down or look through paper documents. In growyze, users can replicate this “shelf to sheet” method, as well as scanning items.

Shrinkage

The difference between the amount of food and drinks you buy, and the amount you’re able to sell. In many menu recipes there is an element of shrinkage as you discard part of the item, for example the head of a piece of fish, or the peel of a lemon.  

Stock control method

This is the process by which you count and manage how many food or beverage items you have within your restaurant, how many you sell and how many you purchase from suppliers. A good stock control method means you’ll always have an accurate picture of what you have available, and what you need to order.

Stock management software

Stock management software is a type of technology that helps you to move from paper and pen methods of stock control, to a single cloud-based stock management system that keeps track of all of your items and data historically.

Good stock management software comes with a range of benefits, from ensuring you can access your data on the go, to automated ordering of items and the ability to complete stock takes more easily by scanning items and having them instantly logged in your records.

Stock take

The process of counting items such as food ingredients and drinks to see what you have available.

Sustainability

Within restaurants sustainability refers to how you operate and the impact this has on the environment. Improving sustainability often means considering areas such as how much food you discard, how much energy you use to operate and how you dispose of waste and packaging.

Waste

Food waste within a restaurant refers to how many items you have to throw away because they haven’t been sold. This can be due to inefficient ordering systems (where you order more food than you can actually sell), not having a good stock control system or wasting items due to errors made while taking or delivering orders.

Need help getting inventory under control?

growyze helps busy restaurant owners and operations teams to manage processes all in one place.

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