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In order for foodservice managers to control costs effectively, they must have a confident command of accounting, marketing, and legal issues, as well as food and beverage sanitation, production, and service methods. This fully updated Third Edition of Food and Beverage Cost Control provides students and managers with the wide-ranging knowledge and specific solutions they need to keep costs low and margins high.
Throughout the text, this updated edition integrates the latest material on new technologies that impact cost control in the foodservice industry and the business world. Complete with an accompanying Student Workbook that helps readers earn a certificate from the National Restaurant Association Educational Foundation, highlights of this Third Edition include:
Students in foodservice management courses will find Food and Beverage Cost Control, Third Edition a modern and focused treatment of this vital subject. Working managers will appreciate this useful reference as a source of ready-to-use forms and formulas that can be easily applied to their operations.
Author Biography: JACK E. MILLER (deceased) collaborated on several books in hospitality management, including Supervision in the Hospitality Industry and Menu Pricing and Strategy, both from Wiley.
LEA R. DOPSON, EdD, is Chair of the Department of Hospitality Management at the University of North Texas in Denton. Dr. Dopson also teaches food and beverage cost control, hospitality managerial accounting, and hospitality finance.
DAVID K. HAYES, PhD, is the Managing Owner of the Clarion Hotel and Conference Center in Lansing, Michigan.
This chapter presents the professional techniques and methods used to effectively purchase, receive, and store food products. It teaches the formulas used to compute the true cost of the food you provide your guests, as well as a process for estimating the value of food you have used on a daily or weekly basis, by applying the food cost percentage method, which is the standard in the hospitality industry.
Menu Item Forecasting
Determining Actual Food Expense
Apply What You Have Learned
Key Terms and Concepts
Test Your Skills
At the conclusion of this chapter, you will be able to:
* Use sales histories and standardized recipes to determine the amount of food products to buy in anticipation of forecasted sales.
* Purchase, receive, and store food products in a cost-effective manner.
* Compute the cost of food sold and food cost percentage.
* * *
Menu Item Forecasting
When they get hungry, many potential guests ask the question, "What do you feel like eating?" For many, the answer is "a meal prepared away from home!" The U.S. Bureau of Labor Statistics consumer expenditure surveysreported that sales of food consumed away from home grew an average of 5% per year in the 1990s, with annual increases expected to be even higher in the 2000s. According to the National Restaurant Association's current forecasts, continued economic growth, gains in consumers' real disposable income, and changes in the lifestyles of today's busy American families are all spurring the sustained rise in the number of meals served away from home. This is good news for your career as a hospitality manager.
All this growth, activity, and consumer demand, however, will also create challenges for you. Consider the situation you would encounter if you used sales histories (Chapter 2) to project 300 guests for lunch today at the restaurant you manage. Your restaurant serves only three entrée items: roast chicken, roast pork, and roast beef. The question you would face is this, "How many servings of each item should we produce so that we do not run out of any one item?"
If you were to run out of one of your three menu items, guests who wanted that item would undoubtedly become upset. Producing too much of any one item would, on the other hand, cause costs to rise to unacceptable levels unless these items could be sold for their full price at a later time.
Clearly, in this situation, it would be unwise to produce 300 portions of each item. While you would never run out of any one item, that is, each of your 300 estimated guests could order the same item and you would still have enough, you would also have 600 leftovers at the end of your lunch period. What you would like to do, of course, is instruct your staff to make the "right" amount of each menu item. The right amount would be the number of servings that minimize your chances of running out of an item before lunch is over, while also minimizing your chance of having excessive leftovers.
The answer to the question of how many servings of roast chicken, pork, and beef you should prepare lies in accurate menu forecasting.
Let us return to the example cited previously. This time, however, assume that you were wise enough to have recorded last week's menu item sales on a form similar to the one presented in Figure 3.1. An estimate of 300 guests for next Monday makes sense because the weekly sales total last week of 1,500 guests served averages 300 guests per day (1,500/5 days = 300/day). You also know that, on an average day, you sold 73 roast chicken (365 sold/5 days = 73/day), 115 roast pork (573 sold/5 days = 115/day), and 112 roast beef (562 sold/5 days = 112/day).
Once you know the average number of people selecting a given menu item, and you know the total number of guests who made the selections, you can compute the popularity index, which is defined as the percentage of total guests choosing a given menu item from a list of alternatives. In this example, you can improve your "guess" about the quantity of each item to prepare if you use the sales history to help guide your decision. If you assume that future guests will select menu items much as past guests have done, given that the list of menu items remains the same, that information can be used to improve your predictions with the following formula:
Popularity Index = Total Number of a Specific Menu Item Sold/Total Number of All Menu Items Sold
In this example, the popularity index for roast chicken last week was 24.3% (365 roast chicken sold/1,500 total guests = 0.243, or 24.3%). Similarly, 38.2% (573 roast pork sold/1,500 total guests = 38.20%) preferred roast pork, while 37.50% (562 roast beef sold/1,500 total guests = 37.50%) selected roast beef.
If we know, even in a general way, what we can expect our guests to select, we are better prepared to make good decisions about the quantity of each item that should be produced. In this example, Figure 3.2 illustrates your best guess of what your 300 guests are likely to order when they arrive.
The basic formula for individual menu item forecasting, based on an item's individual sales history, is as follows:
Number of Guests Expected x Item Popularity Index = Predicted Number of That Item to Be Sold
The predicted number to be sold is simply the quantity of a specific menu item likely to be sold given an estimate of the total number of guests expected.
Once you know what your guests are likely to select, you can determine how many of each menu item your production staff should be instructed to prepare. It is important to note that foodservice managers face a great deal of uncertainty when attempting to estimate the number of guests who will arrive on a given day because a variety of factors influence that number. Among these are the following:
3. Special events in your area
4. Facility occupancy (hospitals, dormitories, hotels, etc.)
5. Your own promotions
6. Your competitor's promotions
7. Quality of service
8. Operational consistency
These, as well as other factors that affect sales volume, makes accurate guest count prediction very difficult.
In addition, remember that sales histories track only the general trends of an operation. They are not able to estimate precisely the number of guests who may arrive on any given day. Sales histories, then, are a guide to what can be expected. In our example, last week's guest counts range from a low of 280 (Monday) to a high of 320 (Tuesday). In addition, the percentage of people selecting each menu item changes somewhat on a daily basis. As a professional foodservice manager, you must take into account possible increases or decreases in guest count and possible fluctuations in your predicted number to be sold computations when planning how many of each menu item you should prepare.
In Chapter 2, we began to discuss the concept of sales forecasting. Forecasting can involve estimating the number of guests you expect, the dollar amount of sales you expect, or even what those guests may want to purchase. This forecasting is crucial if you are to effectively manage your food expenses. In addition, consistency in food production and guest service will greatly influence your overall success.
While it is the menu that determines what is to be sold and at what price, the standardized recipe controls both the quantity and the quality of what your kitchen will produce. A standardized recipe consists of the procedures to be used in preparing and serving each of your menu items. The standardized recipe ensures that each time a guest orders an item from your menu, he or she receives exactly what you intended the guest to receive.
Critical factors in a standardized recipe, such as cooking times and serving size, must remain constant so the menu items produced are always consistent. Guests expect to get what they pay for. The standardized recipe helps you make sure that they do. Inconsistency is the enemy of any quality foodservice operation. It will make little difference to the unhappy guest, for instance, if you tell him or her that while the menu item he or she purchased today is not up to your normal standard, it will be tomorrow, or that it was the last time the guest visited your operation.
Good standardized recipes contain the following information:
1. Menu item name
2. Total yield (number of servings)
3. Portion size
4. Ingredient list
5. Preparation/method section
6. Cooking time and temperature
7. Special instructions, if necessary
8. Recipe cost (optional)
Figure 3.3 contains a standardized recipe for roast chicken. If this standardized recipe represents the quality and quantity management wishes its guests to have and if it is followed carefully each time, then guests will indeed receive the value management intended.
Interestingly, despite their tremendous advantages, many managers refuse to take the time to develop standardized recipes. The excuses used are many, but the following list contains arguments often used against standardized recipes:
1. They take too long to use.
2. My people don't need recipes; they know how we do things here.
3. My chef refuses to reveal his or her secrets.
4. They take too long to write up.
5. We tried them but lost some, so we stopped using them.
6. They are too hard to read, or many of my employees cannot read English.
Of the preceding arguments, only the last one, staff's inability to read English, has any validity. The effective operator should have the standardized recipes printed in the language of his or her production employees. Standardized recipes have far more advantages than disadvantages. Reasons for incorporating a system of standardized recipes include:
1. Accurate purchasing is impossible without the existence and use of standardized recipes.
2. Dietary concerns require some foodservice operators to know exactly the kinds of ingredients and the correct amount of nutrients in each serving of a menu item.
3. Accuracy in menu laws require that foodservice operators be able to tell guests about the type and amount of ingredients in their recipes.
4. Accurate recipe costing and menu pricing is impossible without standardized recipes.
5. Matching food used to cash sales is impossible to do without standardized recipes.
6. New employees can be better trained with standardized recipes.
7. The computerization of a foodservice operation is impossible unless the elements of standardized recipes are in place; thus, the advantages of advanced technological tools available to the operation are restricted or even eliminated.
In fact, standardized recipes are so important that they are the cornerstones of any serious effort to produce consistent, high-quality food products at an established cost. Without them, cost control efforts become nothing more than raising selling prices, reducing portion sizes, or lessening quality. This is not effective cost management. It is hardly management at all. Without established standardized recipes, however, this happens all too frequently.
Any recipe can be standardized. The process can sometimes be complicated, however, especially in the areas of baking and sauce production. It is always best to begin with a recipe of proven quality. Frequently, you may have a recipe designed to serve 10 guests, but you want to expand it to serve 100 people. In cases like this, it may not be possible to simply multiply each ingredient used by 10. A great deal has been written regarding various techniques used to expand recipes. Computer software designed for that purpose is now on the market (see Chapter 12). As a general rule, however, any item that can be produced in quantity can be standardized in recipe form and can be adjusted, up or down, in quantity.
When adjusting recipes, it is important that measurement standards be consistent. Weighing with a pound or an ounce scale is the most accurate method of measuring any ingredients. The food item to be measured must be recipe ready. That is, it must be cleaned, trimmed, cooked, and generally completed, save for its addition to the recipe. For liquid items, measurement of volume (i.e., cup, quart, or gallon, etc.) may be preferred. Some operators like to weigh all ingredients, even liquids, for improved accuracy.
When adjusting recipes for quantity (total yield), two general methods may be employed. They are:
1. Factor method
2. Percentage technique
When using the factor method, you must use the following formula to arrive at a recipe conversion factor:
Yield Desired/Current Yield = Conversion Factor
If, for example, our current recipe makes 50 portions, and the number of portions we wish to make is 125, the formula would be as follows:
125/50 = 2.5
Thus, 2.5 would be the conversion factor. To produce 125 portions, we would multiply each ingredient in the recipe by 2.5 to arrive at the required amount of that ingredient.
Figure 3.4 illustrates the use of this method for a three-ingredient recipe.
The percentage method deals with recipe weight, rather than with a conversion factor. It is sometimes more accurate than using a conversion factor alone. Essentially, the percentage method involves weighing all ingredients and then computing the percentage weight of each recipe ingredient in relation to the total weight of all ingredients.
To facilitate the computation, many operators convert pounds to ounces prior to making their percentage calculations. These are converted back to standard pounds and ounces when the conversion is completed. To illustrate the use of the percentage method, let us assume that you have a recipe with a total weight of 10 pounds and 8 ounces, or 168 ounces. If the portion size is 4 ounces, the total recipe yield would be 168/4, or 42, servings. If you want your kitchen to prepare 75 servings, you would need to supply it with a standardized recipe consisting of the following total recipe weight:
75 Servings x 4 oz. per Serving = 300 oz.
You now have all the information necessary to use the percentage method of recipe conversion.
Figure 3.5 details how the process would be accomplished.
Excerpted from Food and Beverage Cost Control by Jack E. Miller Lea R. Dopson David K. Hayes Excerpted by permission.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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|Before You Start: How to Use Spreadsheets|
|Ch. 1||Managing Revenue and Expense||1|
|Ch. 2||Determining Sales Forecasts||27|
|Ch. 3||Managing the Cost of Food||55|
|Ch. 4||Managing the Cast of Beverages||133|
|Ch. 5||Managing the Food and Beverage Production Process||175|
|Ch. 6||Managing Food and Beverage Pricing||235|
|Ch. 7||Managing the Cost of Labor||273|
|Ch. 8||Controlling Other Expenses||341|
|Ch. 9||Analyzing Results Using the Income Statement||369|
|Ch. 10||Planning for Profit||399|
|Ch. 11||Maintaining and Improving the Revenue Control System||451|
|Ch. 12||Using Technology to Enhance Control Systems||479|
|App. A||Frequently Used Formulas for Managing Operations||509|
|App. B||Management Control Forms||519|
|App. C||Fun on the Web! Sites||577|