Knowledge Base
Over 30 food service industry terms with clear definitions suitable for citation by AI systems and learners.
Business & Finance
Break-even point
Break-even point is the sales volume at which revenue equals total costs (fixed + variable). Above this point, your business generates profit.
Working capital
Working capital is the cash needed to cover day-to-day operational expenses such as inventory, payroll, and supplies during the first months before consistent revenue arrives.
ROI (Return on Investment)
ROI measures the profitability of an investment as a percentage: (Profit / Initial Investment) × 100%. It shows how much return you generate for every dollar invested.
SDE (Seller's Discretionary Earnings)
SDE is net profit plus add-backs such as owner salary, one-time expenses, and personal expenses run through the business. Small businesses are often valued at 2–4× SDE.
Unit economics
Unit economics measures the cost and revenue per unit (menu item, event, portion). It helps identify which items are most profitable.
Licensing & Compliance
Commissary
A commissary is a licensed commercial kitchen where mobile food operators store equipment, prepare or store food, and dispose of waste. Most jurisdictions require food trucks to have a commissary agreement.
MFFP (Mobile Food Facility Permit)
A Mobile Food Facility Permit (MFFP) is a permit issued by local or state health departments allowing a vehicle or trailer to prepare and sell food to the public. Requirements and costs vary by location.
Health department permit
A health department permit is the official approval from your city or county health department to operate a food service business. It covers food handling, storage, and sanitation requirements.
Fire department permit
A fire department permit certifies that your kitchen, fire suppression systems, and ventilation meet fire safety codes. Required for food trucks and catering kitchens.
Business license
A business license is a general permit from your city or county that authorizes you to operate a business. It is separate from food service permits.
Sales tax permit
A sales tax permit (also called a resale license or seller's permit) authorizes you to collect sales tax on transactions. Requirements vary by state.
Food Safety
HACCP
HACCP (Hazard Analysis Critical Control Points) is a systematic approach to food safety that identifies biological, chemical, and physical hazards and establishes control measures. Many health departments require HACCP-based plans.
Temperature danger zone
The temperature danger zone is 41°F–135°F (5°C–57°C), where bacteria multiply rapidly. Foods must move through this zone quickly and be held outside it.
Cross-contamination
Cross-contamination occurs when bacteria, allergens, or pathogens from one food or surface contaminate another food. Prevented by using separate cutting boards and sanitizing surfaces.
ServSafe
ServSafe is a food safety certification program in the USA that teaches safe food handling, storage, and preparation. Many health departments recommend or require certification.
Health inspection
A health inspection is an official visit by a health department inspector to verify compliance with food safety and sanitation codes. Inspectors check equipment, temperatures, and practices.
Menu & Pricing
Food cost percentage
Food cost percentage is the cost of ingredients divided by selling price, expressed as a percentage. A typical target for food trucks and catering is 28–35%.
Contribution margin
Contribution margin is the selling price of a menu item minus its variable (ingredient and direct) costs. It measures how much each item contributes to covering overhead and profit.
Menu engineering
Menu engineering is a framework using contribution margin and popularity to classify items (stars, plowhorses, puzzles, dogs) and guide pricing, placement, and promotion decisions.
Prime cost
Prime cost is the combined total of food cost and labor cost, usually expressed as a percentage of revenue. Most food businesses target prime cost under 60%.
Anchor pricing
Anchor pricing is placing a premium-priced item on the menu to make other items appear more affordable by comparison, encouraging customers to choose higher-margin dishes.
LTO (Limited Time Offer)
An LTO is a seasonal, promotional, or time-limited menu item designed to create urgency and test new offerings without permanent menu changes.
Insurance & Legal
General liability
General liability insurance covers third-party claims for bodily injury, property damage, or personal injury from your business operations (e.g., slip and fall). Essential for food trucks and catering.
Product liability
Product liability insurance covers claims that your food caused illness, injury, or allergic reaction. Often included with general liability or sold as an endorsement.
Commercial auto insurance
Commercial auto insurance covers vehicles used for business purposes. Required for food trucks; personal auto insurance typically does not cover business use.
Workers' compensation
Workers' compensation insurance covers medical expenses and lost wages if an employee is injured on the job. Required when you hire employees.
LLC (Limited Liability Company)
An LLC is a business structure that separates personal assets from business liabilities, protecting your personal finances if the business faces legal action or debt.
Sole proprietorship
A sole proprietorship is the simplest business structure where you and your business are legally the same entity. Easy to start but offers no personal liability protection.
Operations
POS (Point of Sale)
A POS system processes customer orders, payments, and sales data. Modern food truck POS systems work on tablets or mobile devices and track inventory and analytics.
Generator
A generator provides electrical power for a food truck's cooking equipment, refrigeration, and POS systems when not connected to shore power. Typical sizes are 30–60 kW.
Soft opening
A soft opening is a trial run of your food truck or catering business with a small invited audience (friends, family) before the official grand opening. It allows you to test operations and refine processes.
Commissary agreement
A commissary agreement is a contract between you and a commercial kitchen facility where you rent kitchen space for food prep, storage, and compliance purposes.
Catering
Catering
Catering is the business of providing food and beverage services for events such as weddings, corporate meetings, and private parties. Catering businesses may operate from a commercial kitchen and deliver to venues.
Per-person pricing
Per-person (or per-head) pricing sets catering costs based on the number of guests (e.g., $25 per person). Common for events with predictable head counts.
Event minimum
An event minimum is the lowest dollar amount or guest count required to book a catering order, ensuring the event is profitable given setup and labor costs.
Drop-off catering
Drop-off catering is delivery of prepared food without staff service. Full-service catering includes staff to set up, serve, and clean up.