Chp. 8 powerpoint

© Copyright 2017 by the National Restaurant Association Educational Foundation (NRAEF). All rights reserved.

COST CONTROL

Revenue:
•Income from sales
•Before expenses subtracted

Costs:
•Expenses incurred
•Purchase, prepare, serve products

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COST CONTROL

Costs higher than sales:
•Business losing money
•May go out of business

Cost control:
•Manage spending

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MANAGING COSTS

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TYPES OF COSTS

Four main categories:

1.Product or food costs
2.Beverage costs
3.Labor costs
4.Overhead costs

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TYPES OF COSTS

Controllable costs:
•Food costs
•Beverage costs
•Labor costs
•Incurs when meals or services are provided
•Can be adjusted

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TYPES OF COSTS

Noncontrollable (fixed) costs:
•Overhead costs

oInsurance, utilities, lease or mortgage

•Costs do not change
•Cannot be adjusted

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CONTROLLABLE COSTS

•Food costs
oFood items to create menu

•Beverage costs
oIngredients to make beverages

•Direct proportion to sales

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FOOD COSTS FOR PENNE PASTA

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BEVERAGE COSTS FOR LANA FIZZ

STANDARDIZED RECIPE

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CONTROLLABLE COSTS

Control food and beverage costs:
•Use standardized recipes
•Standardized procedures for

oPortion control

oMenu listing

oPricing

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CONTROLLABLE COSTS

Labor costs:
•All staff

oManagement

oFront of house

oBack of house

•Wages to benefits

oInsurance

oRetirement plan

•Hourly employees

oScheduled according to sales

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NONCONTROLLABLE COSTS

Overhead costs:
•Fixed costs
•Sales volume does not impact
•Insurance

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THE OPERATING BUDGET

Operating budget:
•Financial plan
•Specific period of time

oOne year

oBroken into months

•Manage operation’s costs
•Anticipated sales revenue
•Projected costs
•Estimate of profit or loss expected
Depreciation

oLoss of value of time

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THE OPERATING BUDGET

Operating budget’s purpose:

1.Predict potential sales

oRevenue

2.Identify controllable cost needs
3.Note all noncontrollable costs
4.Identify operating goals and manager’s performance responsibilities
5.Provide benchmark of operation’s performance

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SAMPLE OPERATING BUDGET

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THE OPERATING BUDGET

•Critical tool

•Requires time and care

•Monitor daily

•Changes in sales or forecasted costs
oChange operating budget

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THE OPERATING BUDGET

Forecast:
•Current business trends
•Estimate of future sales and costs
•Predict changes that affect operating budget
•Accurate historical data

oPast performance

•Account for outside factors

oWeather, time of year, local construction

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SAMPLE SALES FORECAST

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THE OPERATING BUDGET

Revenue:
•Estimate potential changes

oPrevious sales

•Customer count

oChanges in customer numbers

•Average sales per customer

oChange in money average customer spends

oTotal dollar sales / total number of customers

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THE OPERATING BUDGET

Food or beverage costs:
•Sales history

oRecord of every portion sold

•Moving average technique

oAverage sales over months

oNumbers not based on unique month

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THE OPERATING BUDGET

Production sheet:
•All items prepared on given day
•Produce right amount of food

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SAMPLE PRODUCTION SHEET

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THE OPERATING BUDGET

Point-of-sale (POS) system:
•Run historical sales
•Production reports

Projected sales estimate:
•Labor needs

oProduction

oFront of house

•Kitchen staffing

oMenu item production

•Food and beverage ordering

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PROFIT AND LOSS REPORTS

P&L report or P&L statement:
•Explains what happened
•Compilation of sales and cost information

oSpecific period of time

•Lost or made money
•Met budget

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PROFIT AND LOSS REPORTS

P&L report includes:
•Income

oFood and beverage sales

oMerchandise sales

•Expenses

oFood, beverage, labor

Profitable operation:
•Sales greater than costs

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PROFIT AND LOSS REPORTS

Managers use reports:
•Efficiency of operation
•Determine where costs increased
•Make decisions

oControl costs

•Profitability of operation

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SAMPLE PROFIT AND LOSS REPORT

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PURCHASING CONTROL

Invoice:
•Bill for purchased items
•Check invoice for accuracy

oCorrect quantity

oCorrect price

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SAMPLE PRODUCT INVOICE

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PURCHASING CONTROL

Packing slip:
•Separate from invoice
•List of items
•Quantities received

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SAMPLE PACKING SLIP

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PURCHASING CONTROL

•Inaccurate invoice or delivery
oInvoice corrected

•Check purchase order and invoice

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SAMPLE PURCHASE ORDER

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COST-CONTROL TOOLS

Control costs:
•Consistent quality and portion sizes

oLadles and scoops

oReceiving scales and portion scales

Control staffing and labor costs:
•Time clocks
•POS systems
•Keep track of sales

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COST-CONTROL TOOLS

Managers monitor sales:
•Email
•Internet
•Software programs

Full-line supplier companies:
•One-stop shops
•Provide equipment, food, supplies
•Programs to control costs

oCost planning

oControlling sales

oControlling inventory

oMenu focus

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COST-CONTROL TOOLS

Software programs:
•Better access to information
•Accurate and convenient collection of information
•Improved analysis of information

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SAMPLE DATA ANALYSIS FROM A POS SYSTEM

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COST-CONTROL TOOLS

When choosing technology ask:
•Will it help enhance guest satisfaction?
•Will it help increase revenue?
•Will it help reduce costs?
•Will it increase employee or management productivity?
•Will it improve communication?

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