Variable Costs
Expenses that fluctuate with sales volume, primarily food costs, hourly labor, and packaging. Expressed as a percentage of sales.
Related Terms
Fixed Costs
Expenses that remain constant regardless of sales volume, including rent, insurance, management salaries, and equipment depreciation.
Contribution Margin
Revenue minus variable costs (food and hourly labor), representing the dollars available to cover fixed costs and generate profit.
Prime Cost
The sum of food costs and labor costs, representing the two largest controllable expenses in restaurant operations. Typically targeted at 55-65% of sales in QSR.
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