Food and Beverage Control

Objectives of F&B control * Analysis of income and expenditure performance can be expressed in gross profit, net margin (gross – wages) and net profit (net margin – rent, rates, insurance…) * Establishment and maintenance of standards. SOP (standard operational procedures) * Pricing * Prevention of waste * Prevention of fraud * Management information Problems of F&B control * Perishability of food * Business volume unpredictability/sales instability Menu mix unpredictability * F&B operation short cycle -> little time for many control tasks * Departmentalization - several production and service departments -> separate trading results Fundamentals of control Planning phase Policies: pre-determined guidelines * Financial policy – level of profitability, subsidy and cost limits from each department * Marketing policy: target group * National identity * Customer profile Market share – same or more percentage of ‘our’ market * Turnover – sales volume increased by x% on previous year * Profitability – profit increased by each unit by x% on previous year * ASP (average spending power) increased by x% or to achieve a new ASP of no less than €x * Product – same high standard * Customer satisfaction – net result must be the satisfaction of every customer * Catering policy – main objectives of F&B facilities and describe the methods of how this is achieved * Type of customer * Type of menu * Beverage provision necessary for operation Food quality standards * Method of buying (contract, cash…) * Type and quality of service * Degree of comfort and decor * Hours of operation Operational phase * Purchasing * Product testing (tasting) * Yield testing * Purchase specifications – concise description of quality, size, weight etc. * Method of buying * Clerical procedures (who places orders, what documentation necessary for control) * Receiving * Quantity inspection * Quality inspection * Clerical procedures (acknowledgement of the receipt, delivery signature) * Storing and issuing * Stock records Pricing of items * Stocktaking (how much stock to be held, rate of stock turnover etc. ) * Clerical procedures (what documentation in necessary) * Selling * Checking system (number of items sold) * Control of cash * Clerical procedures Post operation phase * F&B cost reporting (daily or weekly) * Assessment – compare reports with budgets and with previous performance * Correction if necessary Reality of control: never 100% efficient Setting the budget and break-even analysis * Budget – plan which reflects policies and determines the business perations for a particular trading period * Budgetary control – control with particular responsibility for budget results is assigned to managers and continuous comparison between the actual results and the budgeted figures is made * Objectives of budgetary control * To provide a plan of action, to keep business with its policies and to maximize the full use of resources * To set standards of performance * To set out levels of cost responsibility and to encourage cost awareness * Capital budgets – assets, equipment etc. * Operating budgets – day-to-day income and includes sales, cost of sales, labour, maintenance etc.

Stages of budgeting 1. Determination of net profit, capital invested and risks involved 2. Preparation of sales budget – volume of sales necessary to achieve desired net profit. Also influences budgeted cost for food, labour etc. 3. Preparation of administration and general budgets (office expenses, advertising etc. ) 4. Preparation of capital expenditure budget (new equipment, furniture) 5. Preparation of cash budget (cash inflows/outflows, cash balance) 6. Preparation of master budgets (trading account, profit loss account and balance sheet) Costs, profits and sales Material costs = opening stock + cost of purchases - closing stock - cost of staff meals * Labour costs = wages and salaries * Overhead costs = all other costs Four kinds of costs * Fixed – always the same * Semi-fixed – depends on volume of sales but not in same proportion (fuel, telephone costs) * Variable – in proportion to volume of sales * Total – sum of above Profit * Gross profit – total sales - cost of materials * After-wage profit/net margin – total sales - material - labour * Net profit – total sales - total costs (material, labour, overhead cost) Break-even analysis * Based on: Selling price, product mix and unit costs remain the same * Only one product is made/sold * Break-even = C/(S-V) * C = total fixed costs * S = sales price * V = variable cost Software systems * Menu planning (popularity and profitability) * Production control (quantities) * Stock management (maintain stock levels) * Purchase ordering (order automatically when minimum stock) * Menu analysis (individual customer menu choices recorded) * All of these systems together: EPOS system Basic concepts * Planning, standard yields, recipes, portion sizes -> PYRS * Production planning (or volume forecasting) Goal: cost control, purchasing, reduce waste, production on demand, comparison between actual and potential volume of sales * Standard yields * Is the usable part of that product after initial preparation, or the edible part of the product after preparation and cooking * Goal: know how much to buy, safeguard against wastage – measurement of efficiency of production, accurate food costing * Standard recipe * Goal: accurate costing, important to know nutritional value, useful in kitchen * Standard portion size * Aid to food costing Methods of food control Control cycle * Purchase order * Delivery note Invoice (usually send directly to accounts department) * Requisition Weekly/monthly food cost report * For small business * Simple and quick to make * No intermediate information (only after 7 or 28 days) Daily food cost report * For small to medium-sized business * Simple and easy to follow * Detailed * Corrective action can be taken early in the month * Accuracy is important * Ignores staff meals, food that goes to/from bar -> not accurate Calculation of potential food costs 1. Multiply number of each menu item during a sample week by potential food cost per portion -> total potential food cost of a week 2.

Same with sold portions and menu prices -> potential total sales 3. Divide total potential food cost by total potential sales -> potential food cost percentage * Necessary information for above calculation: * Number of items sold and their selling prices * Standard recipe cards of all menu items * Summary of potential food cost obtained from recipe cards * Average market price for main ingredients Methods of beverage control * Six basic types: control of purchasing, receiving, storing and issuing, planning, establishment of standard yields, recipes, portion sizes and inventory * Par stock or bottle control system Beginning stock * Number of empty bottles to be counted and requisitioned for the day * Potential sales based on quantities issues and compared to actual revenue received * Adjustments made to selling price if necessary * Potential sales value system * Revenue value of each bottle based on standard size of drink, contents of bottle and selling price for each drink * Full bottles of spirits: potential sales value is the same as selling price * Spirits sold by glass: number of drinks x price per drink = potential sales value * Millimeter system * Most accurate EPOS reporting Menu item preference – to identify potential menu items that aren’t doing well and eliminate them from the menu * Menu item profitability * Sales by meal period – to know when to hire more staff or for marketing * Sales by server – to identify members of staff who need further training * Category report * Table waiting times Profit sensitivity analysis (PSA) * Identifying the ‘critical’ or ‘key factors’ of a business and how they influence the net profit * Method of PSA: 1. Identify key factors (number of covers, F&B costs, labour costs…) 2. Assume a change in one key factor at a time 3.

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Calculate resulting change in net profit 4. Calculate ‘profit multipliers’ PM = % of change in net profit / % of change in key factor 5. List the PM’s in order of size 6. Analyze results Menu engineering * Evaluation of menu with regard to its present and future content, design and pricing * Highlight the good and poor performers on a menu * Customer demand – number of customers served * Menu mix – customer preference for menu item * Contribution margin (GP% - gross profit %) of each menu item (how much earned from item) * Stars – popular menu items and high GP% * Plowhorses – popular but low GP% Puzzles – low popularity but high GP% * Dogs – low popularity and low GP% Systems of revenue control * Manual or automated * Sales checks: each item ordered and the selling price to be recorded in check pads * Cashiers role: check and record the check pads in a ‘check number issue sheet’ and check pricing of all checks and add taxes Computerized items * Pre-checking systems: waiter has own machine key * Pre-set pre-checking system: each item on menu has its own key on machine * Electronic cash registers (ECR): EPOS is better so now only for small operations * MPOS: handheld/mobile EPOS system

Forecasting * How many customers and what will they eat at what time * We need: * Sales and turndown history * Cancellations and no show trends * Competitor data * Market trends * Weather forecast * Methods of forecasting software * Non-linear regression: used when time is the independent variable * Multiple regression analysis * Trend analysis * Adaptive filtering Operating ratios * Total F&B sales * Recorded and checked against budgeted sales figure * Done daily for large businesses * Departmental profit * Expenses = costs of F&B labour * Profit = % of departmental sales Ratio of separate F&B sales to total sales * ASP – number of items recorded on till roll and total sales * Sales mix – food-beverages, appetizers-coffees-mains * Payroll costs - % of sales – higher if more service * Index of productivity – sales/payroll * Stock turnover * Rate of stock turnover = cost of F&B consumed / average stock value at cost * Number of items that average level of stock has turned over in a given period * Sales per seat available – sales value that can be earned by each seat * Rate of seat turnover – number of times that each seat is used * Sales per waiter * Sales per m?

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