Glossary

Business words, in plain English

Every term the lessons use, in one place. Owners use these words every day; now you can too. In a lesson they sit under “Words to know” on each ticket: tap one for its meaning.

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86 (eighty-six): Kitchen slang for taking a dish off the menu for now, usually because it ran out.

A

Accounts payable: Bills a business has received but not paid yet, mostly to its suppliers.

B

Back of house: The kitchen and the rooms behind it, and the people who work there: line cooks, prep cooks and dishwashers.
Break-even point: How much you need to sell to cover all your costs, so you make no profit and no loss. Fixed costs divided by what each sale contributes.
Build-out: Turning an empty or old space into your restaurant: the kitchen, plumbing, hood, dining room and restrooms.
Building permit: Permission from your city or county to do construction work, issued once your plans are approved.
Business model: How a business makes money: who pays it, for what, how often, and what it costs to serve one more customer.

C

Card processing fee: The slice of each card sale that goes to the bank that issued the card, the card network and the company that runs your card reader.
Certificate of occupancy: The building department's sign-off that a space is safe to use for its purpose, given after the final inspections. You can't open without it.; Source: NYC Business, City of New York
Certified food protection manager: A manager who passed an accredited food safety exam. The Food Code says the person in charge should be one.; Source: U.S. Food and Drug Administration · 2026
Check average: Total sales divided by the number of guests (or orders): what a typical guest spends.
Commission: A share of each sale that goes to whoever helped make it, like the cut a delivery app or a booking site keeps.
Contribution: What each sale leaves you after its own variable costs (like food and card fees). It goes toward the fixed costs first; once those are covered, it's profit.
Cost of goods sold: What the things you sold cost you to make or buy: the food on the plate, the products on the shelf, the servers that deliver an app. Sales minus this is gross profit.
Counter service: Guests order and pay at a counter and pick up their food. Also called quick service or limited service.
Covers: Restaurant talk for guests served. A hundred covers means a hundred people ate with you.
Cross-training: Teaching people to do more than one job, so someone can step in when a person is out or quits.

D

Deferred revenue: Money a customer has paid for something the business hasn't delivered yet, like the rest of a yearly membership. It's counted as earned bit by bit.

E

Economic nexus: Enough sales into a state that the state can make an out-of-state seller collect its sales tax, even without a shop there.; Source: Texas Comptroller of Public Accounts
EIN (employer identification number): Your business's federal tax ID number, from the IRS. You need one to hire employees. It's free, and online it comes right away.; Source: Internal Revenue Service · 2026

F

FICA: Social Security and Medicare taxes. The employer pays a share, and the same share comes out of the employee's pay.; Source: Internal Revenue Service · 2026
Fiscal year: The twelve months a company uses for its accounts. It doesn't have to match the calendar year: Costco's ends around the end of August.
Fixed cost: A cost that stays about the same however much you sell, like rent.
Food Code: The FDA's model rules for restaurant food safety. States and counties write their own rules from it, so the details vary by place.; Source: U.S. Food and Drug Administration · 2026
Food cost %: What the ingredients in a dish cost, as a share of the dish's menu price.
Food handler card: A short food safety course certificate for kitchen and serving staff. Some states require one soon after a person is hired.
Food service permit: The health department's permit to run a restaurant, often called a health permit. You get it after a pre-opening inspection, and you renew it.; Source: U.S. Food and Drug Administration · 2026
Form 10-K: The yearly report every US public company files with the SEC. It has the company's income statement and balance sheet, plus its own explanation of how the business works and what changed.
Form I-9: The federal form that checks a new hire's identity and that they're allowed to work in the US. You keep it on file; you don't mail it in.; Source: U.S. Citizenship and Immigration Services
Form W-4: The form a new hire fills in so you know how much federal income tax to hold back from their pay.; Source: Internal Revenue Service · 2026
Franchise: An arrangement where a local owner runs a restaurant under a big brand's name and pays the brand fees, and often rent, in return.
Front of house: The part of a restaurant guests see, and the people who work there: servers, hosts, bussers, bartenders and counter staff.
FUTA: Federal unemployment tax. Only the employer pays it, and only on the first part of each person's wages each year.; Source: Internal Revenue Service · 2026

G

Gross margin: The share of sales left after paying for the goods themselves (the food, the products), before paying staff, rent and everything else.

H

Health inspection: A visit from the health department to check food safety. A new restaurant gets one before opening, then more once it's open.; Source: U.S. Food and Drug Administration · 2026

I

Ideal vs. actual food cost: The ideal is what the recipe cards say food should cost. The actual is what you really spent, including waste, spills and remakes. Owners compare the two.
Income statement: A report that starts with the money coming in and takes away each kind of cost, line by line, down to the profit. Also called a profit and loss statement, or P&L.
Inventory: The food, drinks and supplies on your shelves and in your coolers that you've paid for but not used yet. Owners count it at the end of every month.; Source: Internal Revenue Service · 2025

L

Labor budget: How much you plan to spend on staff for a week or a shift: your expected sales times your labor target.
Labor cost %: What a restaurant spends on its staff (wages, payroll taxes and benefits) as a share of its sales.
Liquor license: Permission from your state (and in some places your city) to sell alcohol. It often takes months, so owners apply early.
LLC (limited liability company): A common way to set up a small business. You form it with your state, and it keeps the business's debts separate from your own.; Source: U.S. Small Business Administration
Load factor: The share of an airline's seats that are filled with paying passengers, counted over the miles flown.

M

Margin: The share of each sale a business keeps after paying a set of costs. Profit margin is what's left after paying for everything.
Markup: How much a business adds on top of what something cost it, as a share of that cost. Markup divides by the cost; margin divides by the price, so the same dollars give a bigger markup than margin.
Membership fee: A yearly fee a customer pays for the right to shop or use a service, whatever they buy.
Menu mix: Which dishes guests actually order, and how often. A good mix leans on dishes that earn more per sale.

N

Net income: The bottom line: what's left after every cost, including interest and taxes. It belongs to the owners.
Net margin: Net income as a share of sales: what's left of each dollar after every cost, including interest and taxes.
Net sales: Money from selling goods, after returns and discounts. At Costco it doesn't include the membership fees, which are counted separately.
New-hire report: A short report to your state about each person you hire or rehire. Federal law requires it, and states use it to help collect child support.; Source: U.S. Department of Health and Human Services, Administration for Children and Families, Office of Child Support

O

Occupancy cost: What it costs to be in your building: mostly rent, plus related costs such as property taxes.
Operating income: Profit from running the business: sales minus the cost of the goods and the costs of running the place (staff, rent and so on), before interest and taxes.
Overtime: Extra pay, at a higher rate, for hours past the weekly limit. Federal law counts hours by the workweek; some states add rules of their own.; Source: U.S. Department of Labor, Wage and Hour Division
Owner's draw: Money a sole owner takes out of the business for themselves. It isn't a wage on the profit report: the profit is the owner's to draw from.

P

Payroll tax: Tax an employer pays on top of the wages it pays, such as its share of Social Security and Medicare and federal unemployment tax.; Source: Internal Revenue Service · 2026
Plan review: When the building, fire and health departments check your drawings before you build, so the kitchen and dining room meet the rules.; Source: U.S. Food and Drug Administration · 2026
Plate cost: What all the ingredients and packaging in one serving of a dish cost you.
Prime cost: Food and drink costs plus labor costs: the two biggest costs in most restaurants.
Private label: A store's own brand, made for it by suppliers, like Costco's Kirkland Signature. It usually earns the store more per sale than a national brand.
Profit before taxes: What's left of sales after every cost of running the business, before income tax. Also called income before taxes.

R

Recipe cost card: A card that lists every ingredient in a dish with what it costs, adds them up to the plate cost, and compares that with the menu price.
Recurring revenue: Money that comes in again and again on a schedule, like monthly memberships or subscriptions, instead of one sale at a time.
Renewal rate: The share of members whose membership came due who paid for another year.
Restaurant-level profit: What big chains report as their restaurants' own profit: sales minus food, staff, rent and running costs, before head office, equipment wear, interest and taxes. It's bigger than the company's profit.
Revenue: All the money a business takes in from selling things, before it pays any costs. Also called sales, or the top line.
Royalty: A fee paid for using someone else's brand or idea, usually a percent of sales. Franchisees pay royalties to the company whose name is on the sign.

S

Sales tax permit: Permission from your state to collect sales tax from customers and pay it to the state. States call it different things, like a seller's permit or a certificate of authority.
Seasonality: Sales that rise and fall with the time of year: busy summers and holidays, slow stretches after New Year.
Self-employment tax: Social Security and Medicare tax that people who work for themselves pay on their profit, since no employer pays a share for them.; Source: Internal Revenue Service · 2026
SG&A: Selling, general and administrative costs: what it takes to run the business, like staff, buildings, card fees and the head office, apart from the goods themselves.
Sunk cost: Money already spent or promised that you can't get back, like rent you've signed for. Good decisions look at what will change, not at sunk costs.
SUTA (state unemployment tax): Unemployment tax an employer pays to its state. Each state sets its own rates and rules.

T

Table service: Servers take orders and bring food to the table. Also called full service.
Tip credit: In states that allow it, the part of a tipped worker's minimum wage an employer may count from their tips instead of paying it in cash.; Source: U.S. Department of Labor, Wage and Hour Division
Tip pool: Tips shared among a group of workers. Federal rules limit who can be in it, and managers can never take a share.; Source: U.S. Department of Labor, Wage and Hour Division
Tipped employee: Under federal law, a worker who regularly gets more than a set amount in tips each month, such as a server or bartender.; Source: U.S. Department of Labor, Wage and Hour Division
Turnover: How often workers leave a business and have to be replaced.

V

Variable cost: A cost that grows with each sale, like the ingredients in each burger.
Variance: The gap between what you expected and what happened: this month against last month, or against your plan. Owners look for the lines with the biggest gaps first.

W

Warehouse club: A store that charges a yearly membership to shop and sells a short list of items in bulk at low markups, like Costco, Sam's Club or BJ's.
Workers' comp: Insurance that pays for medical care and lost pay when an employee is hurt at work. Each state sets its own rules.

Y

Yield: How much of what you buy ends up on the plate, after trimming, peeling and cooking.

Z

Zoning: Local rules about what kind of business can go where. Check that a space is zoned for a restaurant before you sign a lease.; Source: U.S. Small Business Administration