Bar & Restaurant Glossary

Plain definitions, formulas, and worked examples for the numbers bar and restaurant managers use to price menus, control inventory, and run a profitable program. Written by people who've run bars.

C

COGS (Cost of Goods Sold)
COGS is the dollar value of product you used over a period: beginning inventory plus purchases minus ending inventory.
Contribution Margin
Contribution margin is the dollar amount a menu item leaves you after its ingredient cost: menu price minus cost.

M

Markup
Markup is how much you raise a price above cost, shown as a percent of cost or a multiplier. A $2.50 drink sold for $10 is a 300% markup, or 4×.

P

Par Level
A par level is the amount of a product you aim to keep on hand. When inventory drops below it, you reorder the difference.
Pour Cost
Pour cost is the percentage of a drink's menu price that goes to the cost of its ingredients: ingredient cost ÷ menu price.
Prime Cost
Prime cost is COGS plus labor, usually tracked as a percentage of total sales. It's the biggest expense you can control day to day.
Profit Margin
Profit margin (gross margin) is the share of an item's price left after ingredient cost: (price − cost) ÷ price.

R

Recipe Costing
Recipe costing is calculating what a drink or dish costs to make from the purchase price and amount of every ingredient in it.

S

Sales Mix
Sales mix is the share of your total sales that each menu item or category makes up, measured in units sold or in revenue.
Shrinkage
Shrinkage is product you paid for but can't account for in sales, from overpouring, spills, spoilage, breakage, theft, or bad counts.

W

Weighted Pour Cost
Weighted pour cost is your overall pour cost across the menu, with each drink weighted by its share of sales.