Food and Beverage

Why?
What?
How?
 Learning Objectives
By the end of the class, students will be able to:
• Understand the organizational structure used in larger full-
service hotels’ food and beverage operations.
• Review important operating procedures related to
purchasing, receiving, storing, issuing, and producing food
and beverage products.
• To explain the basic rules of menu planning.
• To identify factors to be considered when planning a menu.
• To identify constraints in menu planning.
• Present management concerns related to serving à la carte
meals, room-service and banquets in a hotel.
 Overview
• Food service outlets include restaurants, lounges/bars,
banquet & catering, and _____________.
• In the U.S., the average full-service hotel can generate 25% or
more of its total revenue from food and beverage sales.
• Some properties, especially those with
_______________________ can generate food and beverage
revenues approaching 50% of total hotel revenues.
• A large hotel should ensure that F&B units in the same hotel
do not compete directly with each other.
• Units must be diverse to give different segments of the
market a choice.
• Some hotels decide to have any F&B operations but lease out
spaces to outside companies to run F&B services.
 F & B Operations
Small Hotels

• In a small hotel, head

cook/chef performs most of
the food related function.

For your information

Small hotel: with 25 rooms or less.
Medium hotel: with 25 to 100 rooms.
 F & B Operations
Large Hotels

• An executive chef is responsible for

For your information management related to the food
Large hotel: with 101 to 300 rooms. production activities.
Very large hotel: with 301 to 999 rooms • He/She actually perform little in the line of
Mega hotel: with more than 1,000 rooms food production.
 Hotel & Restaurant Food Services
Planning Issues Financial Concerns
• Plan by focusing on menu. • All foodservice operations must assess
• Menu focuses on guests’ wants, financial status.
needs & preferences. • Operating budget.
• Menu impacts operational factors: • Income statement/balance sheet/cash flow
layout / equipment , labor for statement.
production, service & clean-up,
• F&B products for purchase

Emphasis on consumers Cost Control Procedures

• Marketing concerns • Necessity for standard operating
• Repeat business important to procedures.
financial success. • Purchasing/receiving/storing/issuing/pre-
preparation/preparation/serving/service
 Standard Operating Procedures:
Cycle of F&B Product Control
Step 1: Purchasing
Step 2: Receiving
Step 3: Storing
Step 4: Issuing

Step 5: Pre-Preparation
Step 6: Preparation
Step 7: Serving
Step 8: Service
 Cycle of F&B Product Control
• Develop purchase specification
Step 1: • Supplier selection
• Purchasing correct quantities
Purchasing • No collusion between property and supplier
• Evaluation of purchasing process

Step 2: • Development of receiving procedures.

• Completion of necessary receiving reports (e.g. addressing financial
Receiving and security concerns).

• Effective use of perpetual & physical inventory systems.

Step 3: • Control of product quality
Storing • Securing products from theft.
• Location of products within storage areas

Step 4: • Product rotation concerns.

• Matching issues (issue & usage)
Issuing • Purchasing as inventory is depleted.
 Cycle of F&B Product Control
• Mise-en-place
Step 5: • Minimizing food waster/maximizing nutrient retention.
Pre-paration

Step 6: • Use of standardized recipes

• Use of portion control
Preparation • Requirements for food and employee safety

Step 7: • Timing of incoming F & B orders

• Portion control
Serving • Revenue management concerns

• Revenue control concerns.

Step 8: • Serving alcoholic beverage responsibly
Service • Sanitation and cleanliness
• F&B server productivity
 Personnel Requirement

Practice of Empowerment
• Transferring some decision-making responsibility and
power to front-line employee.
• Enhancing service to guests and increasing profits for
the organization

To meet unanticipated guest needs effectively

• Staff must be trained in standardized procedures.

• Managers must provide clear direction to employees.
• Managers must provide necessary resources.
 Profitability Differences:
Hotel & Restaurant Foodservices
• Profitability=Revenue-Expenses
• Profit amounts generated by restaurant F & B is relatively easy
to calculate.
• The process of allocating revenues and expenses applicable to
F & B services in a hotel is more difficult.
• Costs of F & B sales is generally higher in a restaurant than in
hotel.
• Hotel’s “bottom line” profit from F & B sales is likely to be
lower than a restaurant’s.
• Payroll costs (or fixed labor costs) are higher than in a
restaurant.
 Marketing-related Differences:
Hotel & Restaurant Foodservices

• Restaurants: Locations easily accessible to

Location within the potential guests.
community • Hotels: Locations most accessible to guests
desiring lodging accommodations.

• Restaurants: Locations easily accessible to

Location within a potential guests.
hotel • Hotels: Locations most accessible to guests
desiring lodging accommodations.

• For hotels, F& B service is viewed as an amenity or

Menu secondary (sale of guestrooms is primary
objective)
Menu
 Rationale

Everything starts with the menu.

The menu dictates much about how your operation
will be organized and managed, the extent to
which it meet its goals, and even how the building
itself - certainly the interior - should be designed
and constructed.
 Menu Helps to Determine Staff Needs

Variety and complexity increases, number of

personnel increases
• Production staff
• Service staff
• Back-of-house staff
 Menu Dictates Production and Service
Equipment Needs
Tableside service
• carving utensils, trolleys,
gueridon, salad bowls, suzette
pans, souffle dishes, soup
tureens, large wooden salad
bowl, rechaud, Voiture (heated
cart for serving roasts) and ......

Gueridon
 Menu Dictates Dining Space
• A take-out sandwich or pizza
operation would require no
dining space and the amount of
square feet required per person
would be minimal.
• On the other hand, if a restaurant
offers a huge salad buffet, dessert
selection or an after-dinner
trolley, wide aisles would be
needed to allow guests ease of
movement and moving of
equipment.
 How and When Items Must be Prepared

• To stimulate guest interest, the menu planner may

offer a dish prepared in a variety of ways:
– Cooking methods
– Poached, broiled, batter-dipped, deep fried
• The finished product must be prepared using the
method indicated on the menu
• Small quantities cooking (a la carte)
• Batch cooking
Restaurant Sample Dish
 Menu is a Factor in the Development of
Cost Control Procedures
• As the menu requires more expensive food items and
more extensive labor or capital (equipment) needs,
the property’s overall expenses and the procedures
to control them will reflect these increased cost.
 Menu Planning is also…a Tool for

• Sales: Lists the items an operation is offering for sale.

• Advertising: Communicates a property’s food and
beverage marketing plans.
• Merchandising: Target market expectations - products,
service, ambience (theme and atmosphere), perceived
value.
• Marketing tool: Strives to meet or exceed the
expectations of its target market.
 Menu Planning Constraints

Facility layout/Design
Space, equipment available, work flow, efficiency
and Equipment

Available labor Number of employees, required skills, training programs

Standard recipe, availability of the ingredients required

Ingredients during the life span of the menu, seasonal ingredients,
cost, miscellaneous cost (flight charges, storage)

Social needs, physiological needs, type of service (fast

Marketing implications food, leisure dinning), festival, nutrition

Guests’ expectation, employees’ skills and knowledge,

Quality levels and costs availability of equipment, specific ingredients, and food
costs & selling prices
 Menu Planning Strategy
• Its objective is simplification for the sake of operational
efficiency (e.g. cross-utilization menu items use the same
raw ingredients).
• Menu when carefully plan can be a streamlining of the
purchasing, receiving, storing, issuing, production, and
serving control points.
• High-quality convenience foods make it easier to offer
new items without having to buy additional raw
ingredients.
 Factors that Influence Menu Planning
Strategies
• Needs and wants of target markets
• Several items from same ingredients
• Storage requirements
• Personnel skill levels
• Product availability / seasonality
• Quality and price stability
• Sanitation procedures
 External Factors that Influence
Menu Changes
• Consumer Demands
Decide which potential markets wants to attract.
• Economic Conditions
Cost of ingredients, potential profitability of new menu
items.
• Competition
Many not want to serve next door’s best.
• Supply Levels
Seasonal items, price to the quality and quantity.
• Industry Trends
Industry’s response to new demands.
 Internal Factors that Influence
Menu Changes
• Facility Meal Patterns
Existing meal periods - breakfast, lunch and dinner
• Concept and Theme
The image may rule out certain foods that do not blend
with its theme and decor
• Operational System
Costs for new equipment to the successful production
and service of new menu items
 Pricing Approaches
• Subjective price methods: Intuition and knowing your
guests (failed to relate profit and costs).
• Reasonable price methods: Presumes value to the guest
(what charge is fair and equitable).
• Highest price methods: Sets the highest price the guests
are willing to pay.
• Loss leader methods: An unusually low price is set for an
item (or items) to bring guests in.
• Intuitive price methods: Wild guess about the selling
price (pricing methods based on assumptions, hunches
and guesses).
 Pricing Approaches
Competition and Pricing
• Know competitor’s menus, selling prices, and guest
preferences
• Lower your prices
• Raise your prices
• Elasticity of demand:

 Elastic: Price change creates a larger % in the quantity

demanded (prices-sensitive).
 Inelastic: The % change in quantity demanded is less than
the % change in price.
 Pricing Approaches
• Simple Mark-up Pricing Methods: Designed to cover all
costs and to yield the desired profit.

Three Steps:
 Determine the ingredients’ costs
 Determine the multiplier
 Establish a base selling price
 Cost of Goods Sold (COGS)
Food cost
• Cost of all foods and beverages used producing menu items.
• Cost of goods sold=raw food cost
Calculated two ways
• Total cost of all foods used during a given time period.
• The cost of one portion or menu item.
Calculating COGS
• Conduct an inventory at the beginning and end of desired
period (day, week, month, quarter, or year).
• Maintain records of all purchases.
• Generally supplies, tools, and non-food items are not included.
 Calculating COGS
COGS*: Cost of Goods Sold

Value of food inventory at beginning of

period

Plus Value of food purchased during period

Minus Value of inventory at end of period

Cost of goods (Food) sold
 Calculating COGS
COGS*: Cost of Goods Sold
Practice:
The total value of food inventory on December 1 is $7,600.
The restaurant purchases $2,300 worth of food during
December and inventory on January 1 is worth $5,600.
What is the COGS during the month of December?

Answer:
 Food Cost Percentages
• Ratio of costs to sales

Practice
COGS for December was $4,300. If the food sales for
December totaled $10,750, what is the food cost
percentage for the month?

Answer:
 Food Cost Percentages
• By itself a single food cost percentage is meaningless.
 Compare with other months of the same year
 Compare with same month of previous years
 Compare with similar food service operations
• There is no perfect food cost percentage.
Example
If the food items in a sliced turkey sandwich cost $2.80 and
the sandwich sells for $5.25, what is the food cost
percentage?
Answer: $2.80/$5.25=53%
How will you reduce this percentage?
 Food Cost Percentages
Practice
Calculate the food cost percentage for an operation with
annual sales of $540,000. The physical inventory at the start
of the year listed foods on hand valued at $23,000; the year
end inventory listed foods valued at $17,000. Purchases
during the year totaled $235,000.
Note: Calculate COGS in advance.
Answer:
COGS:
Food Cost Percentage:
 Cost-Based Menu Pricing
Food Cost Percentage
• Cost per Portion / Food Cost % = Selling Price
Practice
Your manager has determined that food costs should be no
more than 28% of sales. What should you charge for a bowl
of onion soup if the recipe cost is $1.12 per portion?

Selling Price =
 Cost-Based Menu Pricing
Factor Pricing
• A multiplier is used to calculate menu prices.
• 100 / Desired food cost percentage = factor
• Multiply the cost of each menu item by the factor to get
the selling price.

Practice
What factor is used to set menu prices with a 28% food cost?
Answer
 Determining the Price Multiplier
Based upon:
• Experience or “rule of thumb”
• Contribution margin
• Impact of sales mix
• Does not reflect higher or lower labor cost.
• Assume food cost associated with producing menu item
are know.
 Cost-Based Menu Pricing
Prime Cost Pricing
• The most significant costs in a food service operation.
• Pricing Prime Cost = Food Cost + Direct Labor
• Prime Cost % = Food Cost % + Direct Labor %
• Prime Cost / Desired Prime Cost % = Selling Price
Practice
The raw food cost for a rack of lamb is $7.50 and it takes a
cook a total of 9 minutes to clean and trim it for service. If
that cook is paid $8.50 per hour, (1) what is the direct labor
cost? (2) what is the prime cost?
If the desired prime cost percentage is 48%, what is the selling
price?
 Evaluating the Menu: Menu Engineering
Basic Menu Engineering Process

Plow-horse: Items that Star: Items that are

are not profitable but popular profitable.
popular

Dogs: Items that are Puzzle: Items that are

neither profitable nor profitable but no
popular. popular.
 Defining Profitability
Contribution Margin
A “high” contribution margin for an individual menu item
would be one that is equal to or greater than the average
contribution margin.
 Defining Popularity
• Popular Index bases upon the notion of “expected
popularity”
• For example, 4 items on a menu and each is assumed to be
equally popular, the sales of each would be expected to be
25%: 100% / 4 =25%
• Menu engineering assumes that an item is popular if its
sales equal 70% of what is expected…
• For example, A food item is considered popular if its sales
is: 25% * 70% = 17.5% of total sales
Menu Engineering Worksheet
Improving the Menu: Managing Plow-horse
Items low in contribution margin, but high in popularity
• Increase prices carefully.
• Test for demand.
• Relocate the item to a lower profile on the menu.
• Shift demand to more desirable items.
• Combine with lower cost products.
• Assess the direct labor factor.
• Consider portion reduction.
 Improving the Menu: Managing Puzzle
Items high in contribution margin but low in popular
• Shift demand to these items.
• Consider a price decrease.
• Add value to the item.
 Improving the Menu: Managing Star
Items high in contribution margin and high in popularity
• Maintain rigid specifications.
• Place in a highly visible location on the menu.
• Test for selling price inelasticity.
• Use suggestive selling techniques.
 Improving the Menu: Managing Dog
Items that are low in contribution margin and low in popularity:
• Candidates for removal from the menu.
Room Service
 Room Service Operations:
Profitability Concerns
• Relatively few properties generate profits from
room service.
Why lose money? • Very high labor costs.
• High expenses incurred for capital costs (delivery
carts/warming devices)

• Service to guests: Some guests select hotels based

Why offered? on room service availability
• Impacts hotel rating.

How to offset • Offers hospitality suite business

losses? • Provides hosted events
 Room Service Operations:
Menu Planning Factors

• Less likely to oversee room service food quality.

• Must offer products maintaining quality during
Quality Concerns holding and transportation to guest room
(example: problems with omelet & French fries).

• Advertising availability of other hotel services

Cross-selling (example: dinner menu, Sunday brunch)

• Language barriers for international guests: Use of

pictures and multi-lingual menu descriptions.
Menu Language • Clearly state ordering-requirements: Minimum
order charges/ mandatory tipping policies.
 Room Service Operations:
Operating Issues
• An inaccurate room service order cannot be corrected quickly.
• A minor problem in room service may impact guest’s perceptions about the
entire lodging experience.
• Guest placing order/order taker/room service
production-service staff/room service staff
Communication • Abbreviations should be clearly understood by
order taker and food production staff.

• Improving the accuracy of room service orders:

Technology Electronic cash register/Point-of Sale
terminal/remote printer

• Opportunities for upselling are overlooked.

Upselling Technique • Upselling increases guest check average
 Room Service Operations:
Within-Room Service
Training Issues for Room Service Attendants
• Explaining procedures to retrieve room service items.
• Asking guests where room service meal should be set up.
• Presenting guest check and securing payment.
• Opening wine bottles (where applicable).
• Providing an attitude of genuine hospitality.
Banquet
 Banquet Operations:
Profit Opportunities
• Well-planned banquets can be profitable!
• Banquet menu has higher contribution margin: banquets
frequently celebrate special events.
• Forecasting & planning production, service and labor are
relatively easy: Formal guarantee is made / Less
likelihood of overproduction of food with subsequent
waste.
• Beverage sales from hosted or cash bars increase profit:
Capable of increasing alcoholic beverage sales
Increasing market share of the Increasing property’s
community’s banquet business profitability
 Banquet Operations:
Menu Planning
Factors/Concerns for planning banquet menus
• Guest preferences
• Ability to deliver desired quality products
• Availability of ingredients required to produce the menu
• Production / service staff with appropriate skills
• Equipment / layout / facility design issues
• Nutrition issues
• Sanitation issues
• Peak volume production / operating concerns
• Ability to generate required profit levels
 Banquet Operations:
Service Styles
Appetizers and pre-poured champagnes can be served by
Butler service
service staff at a reception while guests stand.
Quantities of food are pre-arranged on a self-service line;
Buffet service
guests pass along the line and help themselves
Family style Platters and bowls of food are filled in the kitchen and
(English style) brought to guests’ tables
Meals are prepared or finished at tableside by service staff:
French service
(e.g., tossing Caesar salad / flambéing entrée)
Production staff plate food in the kitchen; service staff bring
Platter service
it to the table to place individual portions on guests’ plates

Plated service Production staff pre-portion food on plates in kitchen;

(American service) service staff serve to guests
 Butler service
Appetizers and pre-poured champagnes
can be served by service staff at a
reception while guests stand.

French service
Meals are prepared or finished at
tableside by service staff: (e.g., tossing
Caesar salad / flambéing entrée)
 Banquet Operations:
Beverage Functions
Various ways to charge for beverage
Individual drink
Collecting cash or a ticket when each drink is sold
price
Charging on a by-bottle basis for each bottle consumed /
Bottle charge
opened
Per-person Charging a specific price for beverages based on attendance
charge at the event
Charging the host a specific price for each hour of beverage
Hourly charge
service
Specific per- Using hours of beverage service; Charging number of drinks /
event charge hour X number of guests
 Alcoholic Beverage Service in Hotels
Good training protects guests, public and hotel from
tragedies and lawsuits
• Responsible service & consumption of alcoholic beverage is
an integral part of the responsibility of all F & B managers in
all types of operations.
• Train for all staff in the hotel (i.e. including non-F&B positions,
e.g. front desk, housekeeping, maintenance and/or security
staff ) to recognize and respond to visible signs of guests’
(non-guests’) intoxication.
• Develop and implement ongoing training for responsible
service of alcoholic beverages.
 Recommended Reading
• To operate or not to operate hotel restaurants: Is there a
difference for having a restaurant on property versus
having it as a tenant?
https://www.hospitalitynet.org/opinion/4084563.html

• The rules for designing a hotel restaurant

https://www.restobiz.ca/rules-designing-hotel-restaurant/
Case Study
 Short-Staffed in the Kitchen
Sally is the general manager of one of the best restaurants in town, known as The Pub. As
usual, at 6:00 P.M. on a Friday night, there is a forty-five-minute wait. The kitchen is
overloaded, and they are running behind in check times, the time that elapses between the
kitchen getting the order and the guest receiving his or her meal. This is critical, especially if a
complaint is received because a guest has waited too long for a meal to be served. Sally is
waiting for her two head line cooks to come in for the closing shift. It is now 6:15 P.M. and
she receives phone calls from both of them. Unfortunately, they are both sick with the flu
and are not able to come to work.

As she gets off the phone, the hostess tells Sally that a party of fifty is scheduled to arrive at
7:30 P.M. Sally is concerned, knowing that they are currently running a six-person line with
only four cooks. The productivity is very high, but they are running extremely long check
times. How can Sally handle the situation?

1) How would you handle the short-staffing issue?

2) What measures would you take to get the appropriate cooks in to work as soon as possible?
3) What would you do to ensure a smooth, successful transition for the party of fifty?
4) How would you manipulate your floor plan to provide great service for the party of fifty?
5) How would you immediately make an impact on the long check times?
6) What should you do to ensure that all the guests in the restaurant are happy?