Entering the world of culinary and hospitality, one is immediately drawn to the endless opportunities it presents. From authentic farm-to-table humble bistros to high-end restaurants in five-star properties, restaurant and hotel operators must constantly be customer-oriented to ensure the sustainability of their business.

Aside from providing genuine customer service and the finest delicacies to guests with the best quality ingredients, culinary business owners and hospitality operators must also be up-to-date with the terms and trends in the industry.

Here are some professional terms that will help them navigate and analyze the business to achieve the ultimate goal – high profit and business growth:

1. Margin

Margin, also usually known as gross margin, is sales minus the cost of goods or services sold. For example, if an item sells for $100 and costs $60 to manufacture, its margin is $40. Or, stated as a percentage, the margin percentage is 40% (calculated as the margin divided by sales). The larger the margin, the higher the profit.

2. Upselling

Upselling is a common selling technique where restaurant employees attempt to sell a guest something more expensive than the items they first ordered, or which is in addition to that item. Restaurant upselling should be executed by front-of-house staff with subtlety to avoid overwhelming customers or appearing overly pushy.

Learn more: Restaurant upselling: Strategies, tactics, dos and don'ts

3. Cross-selling

Cross-selling is another selling technique of encouraging customers to purchase products or services in addition to the original items they intend to purchase. Oftentimes the cross-sold items are complementary to one another, so customers have more of a reason to purchase both. For example, the attempt to sell wine pairings to customers who book for a set menu.

4. FIFO LIFO

FIFO otherwise called the First In, First Out, and Last In, First Out rule is commonly used to track and organize the inventory at a restaurant or hotel. Using a FIFO system for the inventory ensures that food or perishable items don’t get pushed to the back of the shelf and rot. Items are rotated to the front, so that inventory is used chronologically, oldest to newest, and usually also labeled with the date they get stored in or produced. The restaurant industry would rarely use LIFO, as most of its items are perishable.

5. ROA

Return on Assets or ROA is one of the ways of determining the profitability of a business. ROA is designed to show how efficient your management decision is at leveraging the financial assets to generate revenue. The formula used to determine ROA is ROA = (Net Income / Average Total Assets) x 100. Most investors would like to see an ROA of five percent or more.

6. ROI

Like ROA, Return on Investment more popularly known as ROI is another way to understand hospitality business profitability. Return on investment is calculated by subtracting cost from monetary gain (i.e. gross profit) and then dividing the result by the cost or ROI (%) = [(Net Profit / Cost of Investment) x 100].

It is also a method that provides business insights to hospitality operators to determine their next strategies and which investments work better. Expected ROI in the restaurant industry is fully dependent on the type of investment and the following factors:

• Location

• Concept of menu

• Market conditions

• Competition

• Operational efficiency

• Marketing and Branding

7. EBITDA

EBITDA or Earnings Before Interest, Taxes, Depreciation, and Amortization is one of the indicators of the overall financial success of a business. In the restaurant industry, this is also another way of knowing the net operating income by subtracting fixed costs from gross profit, without considering the debt loads or any working capital. EBITDA helps lenders and hospitality enterprises compare profitability across industries without having to consider the consequences of financing.

8. Back of House

This term refers to everything that occurs behind the scenes of a business premise – out of the guests’ sight. This includes but is not limited to the kitchen, management office, prep rooms, staff areas, storage, and more. In the hospitality and restaurant industry, this term is also used to define non-operational departments such as finance, marketing, human resources, engineering, etc.

9. Front of House

This term refers to the area where customers sit, dine, or if in a hotel, check in or check out. Some elements that make up the front of the house are a reception, a bar or lounge, the dining area, and basically any area where customers could roam around and get in contact with the staff. Explore the importance of a brilliant restaurant front-of-house team below.

Learn more: Streamlining Front of House operations: A blueprint for hospitality success | Happy diners: 6 tips to build guest loyalty

10. Waitlist

In the restaurant industry, a waiting list is a list of people who have come or tried to reserve a dining table but have to wait until it’s available due to limited slots or seatings. Once someone cancels their reservation, the people on the wait list then will be prioritized to get their seats. While a waitlist is a great indication of a high-traffic business, it is also important to ensure that guests have a seamless waiting experience, which can be managed with a waitlist management system.

TableCheck's Door Waitlist Management helps restaurants manage their walk-in guests more easily. Guests can conveniently book a table in advance using their own devices while being able to view menus or head to the bar while they wait for their table. Once their tables are ready, they will be notified by SMS or email which creates a seamless guest experience that drives profits for the restaurant while also making it more efficient for restaurant operations and staff.

11. Pace rules

The pace rule refers to the maximum number of guests a restaurant would allow per period. The pacing limits will help to gradually spread out the number of reservations ultimately reducing overcrowding and ensuring that guests are not sent away. This system will also help to take the pressure off the front and back of the house, ensuring smooth operations and an exceptional guest experience.

TableCheck's Pace Rule feature empowers restaurants with a powerful tool to manage their tables and control the timing of service, especially during peak periods in the restaurant or whenever there are special events being held at the venue.

12. Fixed expense & Variable expense

Operating expenses are made of two categories: fixed and variable. Fixed expenses are the same expenses from time to time, regardless of how much profit or traffic the business generates. Some common fixed expenses are rent, base salaries, and insurance. Variable expenses fluctuate based on the volume of the business, including the cost of ingredients, utilities, and overtime pay. They can also sometimes be impacted by external forces, such as market shortages that drive up costs, or rising competitors that cause war pricing.

13. Mark-up

This term refers to the amount by which the selling price of a product is increased (by a percentage) based on its original cost. For example, a mark-up of $30 from the $70 cost yields the $100 selling price. If stated as a percentage, the mark-up percentage is 42.9% (calculated by dividing the mark-up amount by the product cost). Despite similarities, from the formula, this term is used differently from the margin.

RELATED: 6 restaurant pricing strategies to maximize profits

14. Footfall

Footfall refers to the number of people who visit the restaurant in a given period typically measured weekly, monthly or yearly. It’s a term used by businesses to gauge and analyze the success or failure of particular restaurant marketing campaigns at a specific time, monitor business trends, and determine staffing needs per shift.

Here are some key terms related to footfall in restaurants:

• Location: Restaurants in high-traffic areas and neighborhoods often receive more footfall than restaurants that are less accessible

• Peak hours: Restaurants often experience footfall during lunch and dinner service

• Seasonal variations: Footfall may vary according to season

• Marketing campaigns promotions: Using data, business owners can help restaurant business owners create a comprehensive campaign to increase footfall to their venues

• Competitive analysis: Researching competitors helps restaurant and hospitality operators gain more insight into what they are up against

15. PAR

Par or Periodic Automatic Replacement refers to the number of items in the kitchen or front-of-house that business owners should maintain in inventory between deliveries. Par is also often called the “build-to amount,” where you need to build to par level when ordering inventory, so you can keep the business running smoothly. Order too far below par and you risk running out of food before your next scheduled delivery, order too far above par and you risk spoiling perishable items.

16. Net profit

Net profit in restaurants is the calculation of total sales, minus operating expenses, wages, taxes, and all costs associated with the business in a given period. This term is also commonly referred to as the “bottom line”.

The formula for calculating net profit is: Net Profit = Total Revenue - Operating Expenses - Non-Operating Expenses

A positive net profit signifies that the restaurant business is making revenue while a negative net profit means the restaurant is losing money and has more expenses than profit.

17. Gross profit

This term refers to the selling price of a product minus the cost of producing it. For a service business like restaurants and Hotel F&B restaurant venues, it's the selling price of the service minus the cost of the time spent doing the job. Gross profit also refers to total sales (also known as revenue or turnover) minus the total cost of sales.

18. Walk-ins

Walk-in means a guest who comes into a restaurant requesting a table without making a prior reservation. Walk-in guests are more common In a casual setting restaurant, while for formal or fine dining that requires long preparation and limited seating, usually reservation is required. To help restaurants manage their walk-in guests more effectively, a feature like TableCheck's Waitlist Management solution provides them the ability to send notifications to guests once their tables are available.

19. BEO

BEO, otherwise known as Banquet Event Order is a term that refers to all the order information for a banquet client at a hotel or restaurant. Also known as "event order", this could include the number of guests, tables and chairs arrangements, decoration or design requests, menu orders, lighting/security needs, etc. The sales team will generate the BEO after discussing it with the client, and the other team will follow through with the details based on it.

20. Happy hour

Happy hour is a specific period when restaurants drop their prices or give special offers in a bid to gain customers and boost low-selling items, which also works to attract crowds during slow hours.

TableCheck helps restaurants and hotels maximize online reservations, optimize outlet operations, and elevate guest hospitality and loyalty through features like Door Waitlist Management, TableCheck EDM, Survey, and TableCheck Insight. TableCheck is used by more than 10000+ hospitality operators worldwide to offer their guests award-winning experiences.