Food, Beverage

and Labor Cost

Control
By Mr. Weru
Joshua

Introduction to F & B Control

Definition:

F & B control may be defined as the

guidance and regulation of the costs and
revenue of operating the catering activity in
hotels, restaurants, hospitals, schools,
employee
restaurants
and
other
establishments.
In hotels, F & B sales often account for up
to half of the total revenue, while in
restaurants, F & B sales are the main or the
only source.
The amount of F & B control is related to
the size of the operation.

Objectives

of F & B Control:
Analysis
of
income
and
expenditure related to food and
beverage operations: It income
involves analysis of volumes of F & B
sales mix, average spend per guest
and number of customers served at a
given meal. Cost analysis involves
departmental F & B costs, portion
costs and overheads. The performance
of an outlet can then be expressed in
terms of gross and net profit.

 Establishment and maintenance of

standards: Standards set guidelines
for performance for employees and
basis of evaluation of achievement.
Provide basis for menu pricing
including quotations for special
functions: It helps in menu pricing
having established F & B Costs and
market considerations and in providing
quotations for functions.
Prevent Waste: With standards &
targets of costs & revenues wastage of
materials is prevented resulting from
poor preparation, over production,

Prevent

frauds by customers and

staff: Typical fraud by customers are
such things as walking out without
paying, claiming food not well cooked
or disputing number of drinks served
while those of staff may include
overcharging
or
undercharging
customers, stealing of drink, food or
cash.
Provision
of
management
information: This involves provision
of periodical reports such cost

Limitations

of a Control System:
A control system in itself will not
cure or prevent problems occurring.
An effective system is independent
upon correct up-to-date policies and
operational procedures. But the
system should identify problems and
trends in the business.
A control system will require
constant management supervision
to ensure that it functions efficiently.

 A control system will need management

action to evaluate the information
produced and to act upon it.
Special problems in F & B control
The perishability of food whether
cooked or raw and need to match
quality and quantity of purchases and
production to estimated demand. Also
need for proper storage and processing.
Unpredictability of volume of business
raising challenges with quantities of
purchases, production and right staffing.

 The unpredictability of menu mix

raising challenge in translating
estimated demand into specific
customer selections.
The
short
cycle
of
catering
operations allowing little time for
many control tasks.

The F & B Control Process

Food

and beverage control is the process

employed by foodservice managers to
achieve the one basic goal of business:
operating profitably.
Therefore the focus is establishing control
over costs and sales of F & B Operations.
Attention is centered on the particular
methods and procedures used by foodservice
managers to direct, regulate and restrain the
actions of people, both directly or indirectly,
to keep costs within acceptable bounds, to
account for revenues, and to earn a profit in
the process

An

effective control system and

procedures consists of three broad
phases; planning, operational and
management control.
The
planning
phase
involves
defining basic policies which outline
the market segments to be targeted,
how they will be catered for and the
level of profitability to be achieved.
The three basic policies which need
to be considered include:

 The financial Policy: this determines

the level profitability and cost limits to
be expected from the businesses. The
financial policy for the catering
department will set the overall targets
for the department itself, which is
further divided into targets for various
restaurants,
bars
and
function
facilities.
The marketing policy: this identifies
the broad market the operation is
intended to serve.

 The marketing policy should also

identify the immediate and future
consumer
requirements
on
a
continuous basis in order to maintain
and improve its business performance.
The broad market can be divided into
different segments having specific and
different consumer requirements.
The catering policy: this evolves from
the financial and market policies and
defines
the
main
objectives
of
operating an F & B operation.

 It covers decisions on the type of

customer the menus items and types,
the quality of F & B, the type and
quality of service, the degree of comfort
and decor, the hours of operation etc.
The operation phase includes such
activities as purchasing, receiving,
storing, issuing, production and selling.
The management control involves F & B
cost
reporting,
assessments
and
correction.

Cost

control:
Its the process used by managers
to regulate costs and guard against
excessive costs.
It involves every step in the chain of
purchasing,
receiving,
storing,
issuing and preparing food and
beverages for sale, as well as
training
and
scheduling
the
personnel involved.
The principal causes of excessive
costs are inefficiency and waste.

Sales

control:
Steps taken to ensure that all sales
result in appropriate income to the
business.
For example, profits are adversely
affected if a steak listed in the
menu for $18.95 is sold to a
customer for $ 15.95.The sales
figures
must
be
accurately
recorded.
It is also important to compare
sales records to production records

Responsibility

for control:
The responsibility for every aspect of any
food and beverage enterprise rests with
management.
It is clearly a management responsibility
to take personal charge of directing and
supervising the control procedures in
every phase of operations.
The managers may delegate some or all
the work to subordinates.
Food controller, beverage controller or
assistant managers are some of the tittles
used for these subordinates.

The

control techniques:
Establishing standards
Establishing procedures
Training
Setting examples
Observing and correcting employee
actions
Requiring records and reports
Disciplining employees
Preparing and following budgets

Establishing

Standards
Standards are defined as rules or
measures established for making
comparisons and judgments.
They are set by magt and are used
for judging the extent to which
results meet expectations.
Types of standards may include;
quality, quantity and standards
costs

 Quality standards: These define the degree

of conformance to specifications of raw
materials,
finished
products,
and,
by
extension , work. The food items are graded
according the degree of conformance to
specifications and magt should establish a
quality standard for each food item that is to
be purchased. Beverage items also require
quality standards
Quality standards must also be determined
for the workforce.
In some hotels and fine dining restaurants,
higher degrees of skill are required for the
production and service of elaborate menu
items.

 Quantity standards: These are measures

of weight, count, or volume and used to
make comparisons and judgments. Standard
portion sizes for food and beverage
products and standards for work output are
some examples. A portion of soup should be
identified as to size of bowl or cup to be
used or the size of ladle used to portion it.
In bar operations, magt must establish a
standard quantity for each measure of liquor
used. Standard drink recipes indicating
specific quantities of ingredients to be used
in preparing particular drinks are normally
used.

 Quantity standards are important in

the control of labor as well.
When planning staff schedules, it is
useful to know, for example, the
number of tables or seats a server
can cover during a given time
period or the sandwiches a pantry
worker can make per hour.

 Standard costs: These are costs

of goods or services identified,
approved and accepted by the
magt. They may be compared with
actual costs to establish the
effectiveness of a foodservice
operation and are also basis of
determining sales prices. They are
particularly useful in cost control
and thus they must be calculated.

 Establishing
Standard
Procedures:
Procedures
are
methods
employed
to
prepare
products and perform jobs. SOPs are
those that have been established to
as the correct methods, routines and
techniques for day-to-day operations.
They
procedures
should
be
developed
for
ordering
and
purchasing, issuing and production
procedures which aid standardization
of final products

 Training:
This is a process by
which managers teach employees
how work is to be done, given the
standards and standard operating
procedures. If the employees are
suitably
trained
to
follow
established standards and SOPs,
the
control
aspects
of
the
managers job become difficult or at
times impossible.

 Setting Example: Employees in an

operation follow the examples set by the
manager-the managers behavior, manner,
responses to questions, and even a failure
to speak or take action in some situations.
Individual behaviors in a group tend to be
influence by the actions, statements, and
attitudes of their leaders. For example, if a
manager is inclined to wrap parcels of food
to take home for personal use, employees
will more likely do so. Managers must be
consistent in setting examples, as well as in
directing,
regulating,
and
restraining
employees and their actions.

 Observing
&
correcting
employees actions: If a manager
observed a bartender mixing drinks
without measuring the ingredients
and failed to remind him/her
to
measure quantities carefully, the
bartender may assume that their work
meet the managers standards. The
managers should continually observe
the actions of employees against the
standards and SOPs and correct any
deviation when necessary.

Requiring

Records and reports:

The larger the establishment, the
more likely it is that managers
observations will be indirect rather
than direct. Indirect observations are
done through analysis of variety of
records and reports. If timely records
and reports are not available,
opportunities for taking corrective
action may be lost.

 Disciplining employees: Taking

action to reprimand an employee for
work performance or personal
behavior
incompatible
with
established standards. This can be
reduced by selecting right people for
the various jobs. Those with
experience, skills and personal
characteristics that match the job
requirements.

 Preparing and following budgets: A

budget is a financial plan and a realistic
expression of magts goals and objectives
expressed in financial terms. The operating
budget is more inclined with food,
beverage and labor control. Its a forecast
of sales activity an estimate of costs that
will be incurred in the process of
generating sales. It also indicates the
resulting profits. Once an operating budget
is adopted for an upcoming period it
becomes a standard against which
operating performance is measured as the
fiscal year progresses.

 If cost and sales figures for a given

period do not meet expectations as
identified in the budget causes will be
identified. However, budget projections
are merely estimations and inaccurate.

Cost & Sales Concepts

and Cost/Volume/Profit
relationship
Cost

& Sales Concepts:

Cost:

An expense to a food service

establishment for goods or services
when they are consumed or the
services rendered.
Food and beverages are considered
consumed when they are used,
wastefully or otherwise and are no
longer available for use.
Either cooked, served, spoilt and
thrown away or stolen. Cost of labor
is incurred if people are on duty

 Fixed

and Variable Costs:

Fixed costs are costs normally unaffected
by the changes in the sales volume. They
have little direct relationship to the
business volume.
They may include, insurance premiums,
real estate taxes, rent and depreciation on
equipment.
Are
labeled
as
non
controllable.
Variable costs are directly related to
business volume. Examples are food,
beverage and labor costs. Are labeled as
controllable.

Unit

and Total costs:

The units may be food or beverage
portions, as in the cost of one steak
or one glass of wine or units of
work, as in the hourly rate for an
employee.
Total cost may relate to all food
served in a given period of say a
week or month or the total cost of
labor for one period.
Prime cost refers to the costs of
materials
and
labor:
food,

Sales

Concepts:

Food and beverage sales are exchanges

of the products and services of a
restaurant, bar or related enterprise, for
a value.
The sales in food and beverage
operations
may
be
expressed
in
monetary and non monetary terms.
Total sales refers to the volume of sales
expressed in dollars.
Total sales by category. Examples are
total food sales or total beverage sales.
Total sales per seat is total sales

 Total sales per server is the total

dollar volume of sales a given
server has been responsible in a
given time period.
Sales price refers to the amount
charged each customer purchasing
one unit of a particular item.
Average sale per customer is the
total dollar sales divided by the
number of sales or customers

 Total number sold or Sales

volume is the total number of units
or other menu items sold for a given
period of time.
Cover refers to one diner while total
covers refers to total number of
customers served in a given time
period.
Seat turnover refers to the number
of seats occupied for a given time
period divided by number of seats
available.
Sales Mix describes the relative

Cost-to-Sales

Ratio: Cost Percent:

Helps to compare the cost and sales of
food and beverages in food service
operations.
Cost/Sales=cost per dollar of sale
Can be expressed as percentage by
multiplying by 100. Cost/Sales * 100= Cost
%
Food cost/Food sales * 100= Food cost %
Beverage cost/Bev sales * 100= Bev cost
%
Labor cost/Total sales * 100 = Labor cost
%

Cost/Volume/Profit
relationship

BREAK-EVEN
ANALYSIS

Introduction
A

low food cost % will not always

result to high profits.
Lowering
menu prices or
by
increasing food costs, thus giving
customers more for their money
may result in sufficient additional
customers to increase profitability in
spite of higher food cost percent and
vice versa.

The

effect on profit from lowering

costs or changing menu prices must
be judged by magt.
Magt
must
examine
the
cost/volume/profit relationship for that
particular foodservice operation in the
light of its competition, its customers
willingness to pay higher prices, the
effect of lowering costs on quality of
food, beverage, and service and other
factors applicable to the operation.

Cost/Volume/Profit

Equation:
Their relationship can be expressed
as follows;
Sales=cost of sales + cost of labor
+ cost of overhead+ profit or
Sales =variable cost + fixed cost +
profit
S=VC + FC +P

Variable

Cost, fixed Cost & Sales:

Variable costs can be expressed as
a % of sales this percentage should
relatively remain constant.
The relationship between fixed cost
and sales volume will vary-increase
and decrease
Once
acceptable
levels
are
determined for costs, they must be
controlled if the operation is to be
profitable.

Variable

Rate and Contribution

Rate:
Variable rate is the ratio of VC to
Total sales
Variable Rate = VC/Sales
For example, if the Variable (VC) is
$4200, and the sales (S) is
$9200.Therefore,
VR = VC/S=4200/9200=0.456
This
can
be
expressed
as
percentage which equals 45.6%

 If 45.6% of sales is needed to cover

variable costs, then the remainder
is available for covering the fixed
cost and target profit .
So, 100%-45.6% = 54.4%
This percentage or ratio is known
as Contribution rate.
CR = Fixed cost + Profit / Sales

Break-Even

Point:

This is the point where the total sales is just

sufficient to cover both the variable and the
fixed cost (TC=TR). No profit at this point.
Contribution Margin: The dollar amount
remaining after variable costs have been
subtracted from the sales is defined as the
contribution margin.
Selling price Variable costs of that item
This is also true for the total of all menu
items but in this case is referred to as the
gross margin and the gross profit on sales.

 Unit Sales required to break-even: If

one knows the average contribution
margin per sale and the dollar figure for
fixed costs, it is then possible to
calculate the number of sales or
customers needed to cover fixed costs
and the desired profits.
Sales units = FC/CM per unit ( BEP)
While at a given target profit
Sales unit = FC + Profit / CM per unit

Calculate:

For example, if the financial records

of a small restaurant indicates
sales of $48,000 and variable costs
of
$18,000
and
average
contribution margin is $10 in a
given period the number of
customers
served
can
be
calculated

Purchasing & Receiving

Control
Introduction

Introduction
All

types of foodservice establishments

must purchase supplies, receive them
when they arrive and someone must
verify that the quantity, quality and
price are the same as ordered.
The food must be appropriately stored,
issued to production department when
needed and finally served to customers.

50

All

the foodservice establishments,

then, have the following sequence
of operations;
Purchasing
Receiving
Storing
Issuing
Producing
Selling and serving
Food & Beverage Cost Control By
Weru J N

51

The

responsibility of purchasing may

be assigned to different persons
depending with the organizational
structure and management policies.
But
for
control
purposes
the
authority to purchase foods and the
responsibility for doing so should be
assigned to one individual.
The
individual
will
be
held
responsible for the system of control
procedures set up F & B controller.
52

Standards

&
Standard
Procedures for purchasing:
These ensures a continuing supply
of sufficient quantities of necessary
foods, of appropriate quality to its
intended use, purchased at the
most favorable price. Standards
must
be
developed
for
the
following;
Quality of food purchased
Quantity of food purchased
Prices at which food is purchased
Food & Beverage Cost Control By
Weru J N

53

 Establishing

quality standards:
Once a menu has been developed the list of
required
both
perishable
and
non
perishables for the day-to-day operations
can be determined.
Before purchasing, important decisions must
be made about brands, sizes, packaging,
grades, and degree of freshness required
among other things.
If a foodservice operation is to produce
products of consistent quality, it must use
raw materials of consistent quality.
These carefully written descriptions are
known as standard purchase specifications.
54

 However, these specifications are not

fixed but can be revised when necessary.
Establishing

quantity standards:

All foods deteriorate with time, some

more quickly the others. It is the job of
food controller to establish a system to
ensure that purchase quantities match
with production needs.
For purchasing purposes foods are
divided
into
perishables
and
nonperishable.

55

Perishables:

Decisions must be made as to total

quantities needed.
Par stock is defined as the quantity
of any item required to meet
anticipated needs in some specific
upcoming period.
Taking
a
daily
inventory
of
perishables
is
thus
a
basic
requirement of purchasing routine
56

Nonperishable's:

Do not present the problem of rapid

deterioration.
However, large stock will tie
capital, high risk of pilferage and
increase holding cost such as labor
and storage space.
Inventories can be maintained at
appropriate levels through; periodic
order
method
or
perpetual
inventory method.
57

Period

Order Method:
This
permits
comparatively
infrequent ordering in contrast to
methods of ordering perishables.
The calculation of the amount to
order is done as;
Amount required for upcoming
period less amount presently on
hand plus amount wanted at the
end of the period to last until next
delivery. Bin cards are used to
establish the flow of stock.
58

Perpetual

Inventory Method:
This uses perpetual inventory
cards similar to bin cards but with
additional information such as
name and address of the supplier
and is inform of stores records not
fixed on the shelf.
It also indicates the most recent
purchase price, re-order point, par
stock and re-order quantity.
59

Par

Stock & Re-order:

Par stock can be determined by
considering;
Storage space available
Limits on total value of inventory
prescribed by management.
Desired ordering frequency
Usage rate
Suppliers
minimum
order
requirements
Food & Beverage Cost Control By
Weru J N

60

Re-order

Quantity:
It is the amount that order will be
made each time the quantity of a
particular item diminishes to the reorder point.
Re-order quantity = Par stock less
re-order point plus usage rate until
delivery.
Bin cards and perpetual inventory
cards can be used to monitor stock
levels.
61

Establishing

Price Standards:

With purchasing specifications and

quality to buy, the inventory procedures
and quantity to buy one can turn to the
question of price.
Food supplies should be made on the
basis of competitive prices obtained from
several possible suppliers.
For the perishables the prices may
change daily and thus need to determine
the current prices.

62

Standard

Purchasing Procedure: the

steps may include;
A requisition from an authorized person
which should be inform of a completed
requisition form. This should also be
accompanied by a purchase specification.
Selection of source of supplies. This could
be from purchasing records indicating
similar previous supplies or enquiries to
new supplies. New suppliers must be
selected based on their quotations
indicating price, quality and delivery
performance.

 Place the purchase order by

administering a purchase order to
selected supplier
Receiving of deliveries and noting
of any discrepancies in quality and
quantity of goods delivered.
Transferring of the commodities to
the requisitioning department or to
the stores and updating the
respective stores records.

 Receiving

Control:
Main objective of receiving control is to
verify the quantity, quality and price of
each item delivered if they conform to
the order placed.
Any discrepancies
should be noted.
Delivered supplies are accompanied with
an invoice which list the items and
prices.
Signing
of
the
invoice
acknowledges the receipt of the supplies.
Directs are food items extremely
perishable nature and are purchased on
a more or less daily bases.
65

 Stores are food items though perishable

will not diminish significantly in quality
if not used immediately. They can be
held in storage for a day or so.
Compare quantity and prices in delivery
note with that in purchase order.
Compare quality of delivered items with
the purchase specifications.
A goods delivery note should be
completed indicating the details of
commodities accepted and what the
company owes the supplier.
66

F & B storing and Issuing

control
Introduction

67

Introduction
Having

accepted a particular level

of cost of the food to be served in a
foodservice operation, steps to
prevent
the
development
of
additional and unplanned costs
before food is sold to customers
should be taken.
These costs may develop from
spoilage, wastage, or pilfering.
68

Storing

Control:
The standards established for
storing food should address the
five principal concerns;
Conditions of storage facilities and
equipments
Arrangement of food in storage
areas
Security of storage areas
Dating and storage of stored foods
69

 Condition of storage Facilities:

The factors to consider include;
temperature, storage containers,
shelving, and cleanliness.
Problems with any of these may
lead to spoilage and waste.
Temperature
is
particularly
important for perishables.
The food controller should keep a
log on each refrigeration unit.
70

 Many food items are purchased in airtight

containers, but others are purchased in
unsealed containers-paper bags, boxes, and
sacks-which are susceptible to attack by
insects and vermin. Care should be taken in
storing food in whatever manner will best
maintain their original quality.
At no one time should food products be
stored on the floor. Appropriate shelving,
with slatted shelves for perishable foods to
permit circulation of air in refrigerated
facilities is preferred.
Absolute cleanliness should be enforced in
all food-storage facilities at all times.
71

 Arrangement of Foods:
Factors to consider include; keeping
the most-used items readily available,
fixing definite locations for each item,
and stock location.
The most frequently used items should
be stored near the entrance to reduce
time required to move needed items
from storage to production.
With definite locations for the food
items it takes less time to locate them
and to monitor inventory.
72

 The first-in, first out method of

stock rotation (FIFO) where older
quantities are used before the new
deliveries
helps
to
reduces
possibilities for food spoilage.
Ensuring that stock rotation takes
place is particularly important with
perishables, but should not be
neglected with nonperishables.

73

 Location of storage facilities:

Storage facilities should be located
between
the
receiving
and
preparation areas.
This facilitates the moving of foods
from the receiving areas to storage
and
from
the
storage
to
preparation areas.
A properly located storage facility
has four effects; speeding the
storing and issuing of food,
maximizing
security,
reducing

74

 Security:
Food should be stored in manner
that discourages pilferage.
Once
in
storage,
appropriate
security must be maintained.
The storeroom should be entrusted
to specific individual and other
employees should not be permitted
to remove items at will.

75

 Dating and Pricing:

Dating facilitates certainty on the
age of all items and making
provision for their use before the
can spoil.
Pricing makes it easy for the stores
clerk to prices/ value any issues or
requisitions.
The prices are later used to
calculate the cost of goods issued.
76

Issuing

Control:
There are two elements in the
issuing process:
The physical movement of foods
from storage facilities to food
preparation areas and record
keeping
associated
with
determining the cost of the food
issued.

.
77

 Physical Movement of Issued

Food:
Standards and standard procedures
for the physical movement of the
foods must be determined specifically
for a given establishment
In
large
establishments
written
requisitions that must be authorized
by specialized personnel are often
required.
In small establishments more informal
practices are employed.
78

 Record Keeping for Issued food:

Directs are charged to food cost as
they
are
received,
on
the
assumption
that
they
are
perishables
purchased
for
immediate use.
Stores are considered part of the
inventory until issued for use. Only
issues are charged to food cost.
Any issues must be on requisitionlist of items required and quantities.
This must be authorized by the chef.
Food & Beverage Cost Cntrol By
Weru J N

79

 Food & Beverage Transfers:

Food productions in the kitchen may
require to use certain beverage
items, such as wines and liquors,
not
purchased
specifically
for
kitchen use.
On the other hand, some food items
may end up being used in the bars,
such as fruits.
Food may also be transferred from
one kitchen to another or one unit
to another in chain operations.
Food & Beverage Cost Cntrol By
Weru J N

80

 Intra-unit Transfers:
They include transfers of food and
liquor between the kitchen and bar,
and between kitchen and kitchen in
large establishments.
As transfers are made, items and
amounts are recorded.
The records are sent to the food
controller, who use them to adjust
cost figures for greater accuracy.
81

Food production control 1:

Portions
Introduction

82

Introduction
The

standards
and
standard
procedures for production control are
to ensure that all portions of any given
item conform to managements plans
for that item.
Portions of a given menu item should
be identical to one another in terms of;
ingredients, proportions of ingredients,
production method and quantity.
83

Standardization

of Menu Items:
It is necessary to develop the
following standards and standard
procedures for each menu item:
Standard portion size
Standard recipe
Standard portion cost

84

 Standard Portion Size

Defined as the quantity of any
menu item that is to be served to
the customers at a fixed price,
each time that item is ordered.
Every item on a menu can be
quantified in one of three ways by
weight, by volume, or by count.
Standard
portion
sizes
help
eliminate customer discontent and
excessive costs.
F & B Cost Control By Weru J N

85

 Standard Recipe:
This is a list of the ingredients and the
quantities
of
those
ingredients
needed to produce a particular item,
along with a procedure or method to
follow.
They help to ensure that the quality
of any item will be the same each
time the item is produced
They help to establish consistency of
taste, appearance, and customer
acceptance.
86

 Standard Portion Cost:

Defined as the dollar amount that
a standard portion should cost,
given the standards and standards
procedures for its production.
This can be calculated for every
item on every menu, provided that
the ingredients, proportions,
production methods and portion
sizes have been standardized.
87

 Calculating Standard Portion

Cost
Several Methods Can be used;
Formula
Std Portion cost = Purchase price
per unit
Number of portions per unit
Recipe detail and cost card
Butcher test
Cooking loss test
88

 Using Yield Percentage:

Defined as the percentage of a
whole purchase unit of meat,
poultry, or fish that is available for
portioning after any required inhouse processing has been
completed.
Yield % = Portionable /Edible
weight
Purchase Weight
Yield % can be used to calculate
the quantity of purchase and

89

Food Production Control 2:

Quantities

To

control production volume, three

standard procedures are required;
Maintaining sales history
Forecasting portion sales
Determining production quantities

Importance of Forecasting Sales:

The first question operating
managers must ask themselves is
very simple: "How many guests
will I serve today?" - "This week?" "This year?" The answer to
questions such as these are critical,
since these guests will provide the
revenue from which the operator
will pay basic operating expenses.

Sales Histories
Sales history is the systematic
recording of all sales achieved during
a pre-determined time period. Sales
histories can be created to record
revenue, guests served, or both.
Forecasts of future sales are normally
based on your sales history since
what has happened in the past in your
operation is usually the best predictor
of what will happen in the future.

 A sales forecast predicts the

number of guests you will serve
and
the
revenues
they
will
generate in a given future time
period.
You can determine your actual
sales for a current time period by
using a computerized system
called a point of sales (POS) system
that has been designed to provide
specific sales information

 Sales may be a blend of cash and

non-cash.
With accurate sales records, a sales
history can be developed for each
foodservice outlet you operate and
better decisions will be reached
with regard to planning for each
units operation.
Sales to date is the cumulative
total of sales reported in the unit.

 Guest count is the term used in

the hospitality industry to indicate
the number of people you have
served, and is recorded on a
regular basis.
For many other
foodservice operations, sales are
recorded in terms of sales revenue
generated.

 Most POS systems are designed to

tell you the amount of revenue you
have generated in a given time
period, the number of guests you
have served, and the average sales
per guest.
When
managers
record
both
revenue
and
guest
counts,
information needed to compute
average sales per guest, a term
also known as check average, is
provided.

 Maintaining Sales Histories

Sales history may consist of
revenue, number of guests
served, and average sales per
guest. You may want to use
even
more
detailed
information, such as the
number of a particular menu
item served, the number of
guests served in a specific
meal or time period, or the
method of meal delivery (for
example, drive-through vs.

Sales Histories are likely to be arranged

in one of three ways:
By operating period, such as one week
or month, so that all sales records for an
entire operating period can be viewed
together on one page, card, or screen
By day of the week, so that all sales
records for a given day (Tuesday, for
example) for a period of several weeks
can be compared.
By entre item, so that the degree of
popularity of a given item can be seen
over time.

Other Information in Sales Histories

One of the most common of these
conditions
is
the
weather.
Most
foodservice operators find that weather
conditions have a noticeable impact on
sales volume. In many establishments,
bad weather has a clearly negative
impact on sales volume.
Hotels and motels in major metropolitan
centers often find the impact of weather
on sales to be the opposite: Bad weather
seems to increase food and beverage
sales in these properties, probably
because it discourages guests from going
out to nearby restaurants.

 Special events can decidedly

influence sales and are often
included in sales histories. The
occurrence of a national holiday on
a particular day or the presence of
a particular convention group in a
hotel can affect sales considerably.
So can such varied conditions as
faulty kitchen equipment, a torn-up
street in front of the restaurant, or
a major sale at a nearby store.

Popularity Index:
In addition to keeping records of
numbers of portions sold, many
foodservice operators use the data to
determine a popularity index.
Popularity index is defined as the
ratio of portion sales for a given menu
item to total portion sales for all menu
items.
Popularity index = Portion sales for
Item A
Total portion sales

Sales

Forecasting:
A usual first step in forecasting is to
predict total anticipated volume: total
numbers of customers anticipated for
particular days or particular meals.
To arrive at a figure, one refers to the
sales history to find the total number
of sales recorded on each of a number
of comparable dates in the recent past.
When great differences are apparent,
reasonable efforts must be made to
determine
the
reasons
for
the
differences.

 When the effects of surrounding

conditions have been evaluated,
the next step is to judge the extent
to which these conditions will exist
and affect sales on the particular
date or dates for which one is
preparing the forecast.
This may involve checking a local
calendar
for
coming
events,
following weather forecasts, and
looking into various other relevant
sources of information.

 After these steps have been taken,

it is possible to estimate the total
business volume that may be
anticipated for the day or dates for
which
the
forecast
is
being
prepared.
For example, if recent history
indicated 300 to 315 sales for
dinner on Mondays in pleasant
weather, one could reasonably
anticipate that the next Monday
would bring approximately the
same volume of business if good
weather were expected. In this

The next step is to forecast the

anticipated number of sales of each
item on the menu. This is simpler to do
if the menu is identical to those that
have appeared on Mondays in the past.
However, it can also be done for
changing menus if the sales history is
set up to reflect the relative popularity
of individual items as compared with a
changing variety of other items
appearing on the same menu. This type
of forecasting is more difficult, but by
no means impossible

Determining Production Quantities:

The Production Sheet
A production sheet is a form on
which one lists the names and
quantities of all menu items that
are to be prepared for a given date.
Production
sheets
translate
management's
portion
sales
forecasts into production targets.
Production sheets list menu items
and quantities in terms that the
chef and staff can use in
production.
The production sheet is best

 Production sheets vary in form and

complexity from one kitchen to
another.

It would be filled out by a

manager and forwarded to the
chef as many days in advance as
possible.
Upon receiving it, the chef would
have valuable information about
both total anticipated volume for a
particular meal and the number of
portion sales anticipated for each
item on the menu.
With this information in hand, a

Monitoring quantity production:

Reasons
To determine whether the sales
forecast
has
been
reasonably
accurate in predicting both the total
number of customers and their
individual preferences for particular
menu items
To judge how closely the chef has
followed the production standards
established on the production sheet.

Void Sheet:
Whenever a portion is returned, an
authorized individual, such as a kitchen
supervisor or chef, records it on the void
sheet, indicating the name of the item,
the number of the check on which it
appeared, and the reason for its return.
If the number of returns is consistently
high and evenly distributed among job
classifications,
investigation
may
indicate general understaffing. This
finding may suggest a need for
additional
personnel
to
improve
customer service.

 If all returned portions must be

recorded on the void sheet and
attested to by a member of the
management team, it is more
difficult for kitchen personnel to be
careless with food.
The recording of returned portions
makes possible the reconciliation
of kitchen records of portions
produced and records of portions
sold

Monitoring Foodservice
Operations
Monthly Inventory & Monthly
Food Cost

11

Introduction
The

most common approach to

monitoring food service operations
is completing various procedures
and calculations at the end of each
month.
These
includes taking monthly
inventory
and
procedures
for
determining monthly food cost and
food cost percentage.
11

Monthly

Inventory:
This is done by taking physical
inventory at the close of an accounting
period.
Helps to determine the actual cost of
the foods and beverages used during
the month, to monitor how well control
measures have worked.
Taking physical inventory requires
counting the actual number of units on
hand of each item in stock and
recording an appropriate books.
11

Valuing

the Physical Inventory:

Principal difficulty is assigning unit value
for each item because all purchases may
not have been made at the same price.
There are five possible ways of assigning
values to units of product: actual
purchase price methods; first-in, first-out
method;
weighted-average
purchase
price method; latest purchase price
method and last-in, first-out method .
The following example explains the
inventory valuation;
11

Monthly

Food Cost Determination

Food cost is determined by means
of formula;
Opening Stock
+ Purchase
= Total Available
Closing Stock
= Cost of Food
Food Cost % = Food Cost/ Sales
* 100
F & B Cost Control By Weru J N

11

Example

The financial records of Indatwa

Restaurant reveal the following
figures for the month of January
2011.Calculate the cost of food
issued.
Opening stock
$ 9,010
Food Purchases $ 23,570
Closing Stock
$ 9,356
Food Sales
$ 65,420
11

Adjustments

to Cost of Food Issued

Transfers to and from the kitchen
affect the cost of food issued. Any
transfers to the kitchen such as
cooking
liquor
from
the
bar
increased the food cost while
transfer of food to bar decrease the
food cost.
Other factors affecting cost of food
issued
include
steward
sales,
promotion expense and gratis to bar.
11

Calculating

Cost of Food consumed &

cost of Food sold
During the same month of January the
following adjustment were available.
Cooking Liquor $ 200
Food to bar
$ 170
Steward sales
$ 80
Gratis to Bar
$ 290
Promotional Expense $ 250
Cost of employees meals $ 1,050
F & B Cost Control By Weru J N

12

 Once the food cost and food cost

percent have been calculated, they
should be reported to management.
These
should
be
within
the
acceptable limits, provided there
have been no significant changes in
menu or operating procedure and no
significant drop in sales.
If the figures are unacceptable
corrective measures should be taken.

12

Inventory

Turnover
Managers are responsible for ensuring
that sufficient supplies of appropriate
foods available for use when needed.
Are also expected to prevent the
accumulation of excessive quantities of
food.
To measure how often a food inventory
has been consumed and replenished
during
an
accounting
period
foodservice managers calculate the
inventory turnover.
F & B Cost Control By Weru J N

12

 Inventory turnover rate is

calculated by means of the
following formulas:
Average inventory = Opening S. +
Closing S.
2
Inventory turnover = Food Cost
Average inventory

F & B Cost Control By Weru J N

12

Daily Food Cost

Introduction

12

Introduction
Monthly

reports may delay correction

of errors that may have been made.
To avoid the delay and to make figures
more timely on which to base day-today operating decisions, a number of
larger and better organized foodservice
operations
use
daily
food
cost
calculations.
To determine daily food cost directs
and stores issued for the day must be
established.
12


Calculating

Daily Food Cost

Thus, the daily cost of food can be
determined in the following way:
Cost of directs
+ Cost of stores
+ Adjustments that increase daily cost
- Adjustments that decrease daily cost
= cost of food consumed
- cost of employee meals
= daily cost of food sold

12

Example

The financial records of Indatwa

Restaurant reveal the following
figures
for
the
January
5
2011.Calculate the cost of food sold
& food cost percent.
Cost of directs $ 218.75
Cost of stores issued $ 955.45
Cooking liquor $ 90.00
Steward sales
$ 10.00
F & B Cost Control By Weru J N

12

 Food to bar $ 20.00

Gratis to bar $ 20.00
Employee meals $ 89.65
Total sales
$ 3,068.95

12

Food

Cost Percent Today & To date:

The daily food cost may not be
accurate as the value of directs and
stores issues will vary daily.
The issues and directs on a given day
may be covering a number of days
yet they are charged for one day.
To help overcome the problem of
artificially high food cost percent one
day and low food cost percent the
next, most operations also
F & B Cost Control By Weru J N

12

 Calculate food cost percent to

date.
Food cost percent to date is
defined as the cumulative food
cost percent for a period.
It takes into account all food costs
and food sales for all days so far in
the period.
Food cost % to date = Food cost to
date
Food sales to date
F & B Cost Control By Weru J N

13

Simple Daily Cumulative Cost

Record
Adjustme
nts
Add
ed

Total Cost

Sub Toda
trac y
ted

To
Date

Total Sales

Food Cost
%

Toda To
y
Date

Tod
ay

Dat
e

Dire
cts

stor
es

To
dat
e

1
Jan

$
254.
2

$
$
$
977. 57.2 255
3
.3

$
$
$
1,033 1,033 2,77
.4
.4
78.0

$
37.
2,778 2%
.0

37.2
%

2
Jan

$
326.
7

$
$
$
944. 86.2 253
3
.4

$
$
$
1,103 2,137 2,91
.6
.0
9.2

$
37.
5,697 8%
.0

37.5
%

3
Jan

$
262.
5

$
$
$
1,04 88.6 177
0.4
.8

$
$
$
1,213 3,350 3,05
.7
.7
6.95

$
39.
8,754 7%
.15

38.3
%

4
Jan

$
256.
4

$
$
$
965. 120. 220
3
0
.0

$
$
$
$
36. 37.7
1,121 4,472 3,09 11,84 3% %
.65
.35
8.35By Weru J N
F4.2
& B Cost Control
13

Conclusion:

When food costs and food cost

percents are determined daily and
to date and used as monitoring
devices, the effects of these
measures can be assessed daily,
with the expectation that at the
end of the operating period, costs
will be in line with magts goals.

13

Beverage Production
Control
Introduction

13

Introduction
Control

over beverage production is

established to achieve two primary
objectives:
Ensuring that drinks are prepared
according to magts specifications.
Guarding against excessive costs
that can develop in the production
process.
13

Specifications

for drink production

must take into account both the
tastes of expected customers and
magts desire to prepare drinks of
appropriate quality and volume.
A customer who is served a cocktail
that does not meet expectations
may be dissatisfied and complain,
or simply not return.

F & B Control By Weru J N

13

Standards

and
Standard
Procedures for Production:
Standards for the quantities of
ingredients
used
in
drink
preparation, as well as for the
proportions of ingredients in a drink
should be established. This assures
the customers that a drink will meet
their expectations every time its
ordered.
When drinks are prepared by
formula and served in standard
portion sizes, one portion of any

13

 The sales prices for drinks being

fixed, the cost-to-sales ratio for
one portion of any drink should be
the same for every other portion
of that drink.
The beverage cost percent for the
overall
operation
should
be
reasonably stable, provided the
sales remain relatively constant.

13

Establishing

Quantity Standards:
The magt must determine in
advance the specific quantities to
be used for the production of drinks
and then provide the bartender
with a means of measuring those
quantities.
This fixed quantity is then given to
a customer in return for a fixed
sales price of a drink.
13

Devices

for Measuring Standard

Quantities
The short glass. These are small
glasses provided to bartenders for
measuring. They are either plain or
lined.
The jigger. A double-ended stainless
steel measuring device.
The Pourer. A device fitted on top of
a bottle, that measures the quantity
poured from the bottle, limiting that
quantity to a predetermined amount.
13

 In addition to controlling the

quantity of liquor used in preparing
each drink, it is desirable to control
the overall size of drinks.
Standardizing the glassware used
for
service
makes
this
comparatively simple.
The magt should establish the
standard portion size for each type
of drink and provide bartenders
with the appropriate glassware.
14

Quality

Standards And Standard

Procedures
In order to control costs standard
recipes must be established. This is
particularly important for mixed
drinks.
The recipes also makes it possible
for the customer to get a similar
drink every time they order a given
mixed drink.
With standard portion size, standard
portion cost should be determined

14

Monitoring Beverage
Operations
Introduction

14

Introduction
There

are three general approaches to

monitoring beverage operations. These
include;
Determining the cost of beverages sold,
and comparing with standard cost.
Comparing the number of ounces of
beverages sold with the number of
ounces consumed.
Comparing the potential sales value of
beverages consumed with the actual
revenue recorded.
F & B Control By Weru J N

14

Cost

Percent Methods:
All beverage operations should
compare cost and sales figures on a
regular basis to see whether the
planned cost-to-sales ratio is being
maintained.
Cost percent method follows a
formula;
Opening stock plus purchases then
less closing stock to get the value of
beverages issued to the bar.
14

 There
are
various
possible
adjustments to beverage cost
which must be accounted for.
These include food and beverage
transfers from bar to kitchen and
vice versa, promotional drinks,
drinks consumed by managers etc.

14

For

Example:
The financial records on Muhima
Bar for the month of February
provide the following information.
Opening beverage stock $3,201.80
Beverage purchases
$3,666.80
Closing stock
$3,875.40
Food to bar
$59.70
Mixers
$115.60
14

 Bar to kitchen
$32.70
Magts Drinks
$ 7.35
Special promotions
$20.00
Net sales
$11,461.90
Calculate the beverage cost
percent.

14

The

Liquid Measure Approach:

This involves taking daily physical
inventory of bar stock, determining
the number of ounces consumed each
day, and calculating the number of
ounces sold each day from detailed
sales records.
Ideally the number
of ounces
consumed each day should equal the
number of ounces sold.
Modern technology is now available
for ounce-control procedures.
14

Food & Beverage Sales

Control

Introduction

14

Introduction
Cost

control results in savings, but

lack of revenue control results in lost
dollars that offset those savings.
The principal goals of sales control
are:
Optimizing
the
number
of
customers
Maximizing profits
Controlling revenue
15

Optimizing

the Number of Customers:

Many restaurants advertise, and many
provide incentives to customers.
However, this is not adequate to
maximize the number of customers.
Other factors influence customers
selection of restaurants which include:
Location: The closer a restaurant is to
its target market, the more the
business it will do.

15

 Menu differentiation: This refers to

the uniqueness of a restaurants menu
items. The more the differentiation of
the goods and services the more the
number
of
loyal
customers
a
restaurant is likely to have.
Price acceptability: For a menu item
to sell, the sales price must be
acceptable to the customers. The
customers perceived value of the
products they consume, must justify
the price they pay for the product.
15

 Lighting and dcor: Selecting lighting

and dcor that will appeal to a sufficiently
large segment of the targeted market and
thus help maximize the number of
customers, is a key to restaurants
success.
Portion sizes: Portion sizes must satisfy
the clientele a foodservice operator seeks
to attract.
Product quality: Quality requirements
will differ with market segments and thus
management
should
assess
the
expectations of every target segment.
15

 Service
standards:
The
managers who seek to optimize the
number the number of customers
should be aware of the extent and
quality of service that their
customers want.
Menu diversity: The greater the
scope of menu, larger the segment
of market to which the menu will
appeal and the more likely the
restaurant will be to succeed.
15

However,

no one restaurant that

may perfectly meet all these
factors,
but
the
management
should put them in consideration
and try to satisfy as many as
possible to satisfy the greatest
possible
number
of
potential
customers

15

Maximizing

Profit:
There are two principal means for
maximizing profit:
Pricing products properly
Selling those products effectively

15

Pricing

the Products Properly:

Prices determine the revenue and the
degree of profitability for any
restaurant.
Cost is a main consideration in
determination of prices for menu
items.
However, other factors such as
product differentiation and customers
price sensitivity will affect the sales of
products and should be considered.
15

Selling

Products Effectively:
Two main principals are available for
selling products effectively:
The menu: This is the primary selling
tool and consideration should be
given to menu design and layout,
variety,
item
arrangement,
descriptive
language,
kitchen
personnel and equipment.
Sales techniques: The servers play
an important role in influencing
customers selections.
15

 Many restaurant managers hold

daily meetings with servers just
before opening time.
They use this time to go over the
days menu with servers to be sure
they can describe each item to any
customer, naming the principal
ingredients and the preparation
methods.

15

 The time can also be used to go

over
new
menu
items,
to
enumerate the specials of the day,
and to identify any dishes that
servers are expected to make
special efforts to sell.
Adopting standard sales techniques
can play an important role in
increasing and maximizing sales.
Suggestive selling is an example.
16

Beverage

Sales Control:
It is similar to food sales control, but
there are special considerations.
In increasing the number of sales and
maximizing profit it is not ethical and
also against local or state laws to
influence the customers to increase
consumption.
However, this can be achieved by
increasing the number of customers.

16

 To
increase
the
number
of
customers requires understanding
of
why
people
patronize
establishments that serve alcoholic
beverages.
Customers are motivated to visit
the establishments for a number of
reasons;
drinking,
socializing,
conducting
business,
eating,
seeking entertainment and killing
time.
The needs of these customers will

16

Revenue

Control:
For hotels and restaurants using
manual systems guest checks are
used to record sales.
However, in larger establishments
it is complex to use the guest
checks.
The guest check system will also
vary from one establishment to
another.
16

Documenting

All Sales:
Guest checks are traditionally used
to record each menu item ordered.
They are also used for a number of
other reasons such as:
Help servers remember specific
guest orders
Provide a written food order to
kitchen personnel.
Give itemized bills to guests
16

 Maintain written records of portion

sales to add to a sales history.
Prove accuracy of cashiers work
Verify the accuracy of prices
charged
Provide the records required for tax
purposes
Most establishments use guest
checks order which are sequentially
numbered
and records kept on
checks issued to a given waiter.
16

Pricing

All Sales Correctly

Most establishments use dupe system
that requires servers to write food
orders, but no prices as orders are
taken.
Then each server records prices on the
checks and dupes with a machine
similar to a cash register, for a printed
receipt which is attached to the dupe.
At the end the records at cashiers
register is compared to that in the
kitchen.
16

Recording

Revenue:
Cashiers
are
assigned
the
responsibility for taking payments
from customers and recording sales as
the customers leave the restaurants.
For proper revenue control, sales are
always recorded in a register, and
guest checks.
The sales may also be broken into
appropriate categories such as food
sales, beverage sales, taxes and tips.
16

Computer

Systems

In

Revenue

Control:
Today, technological advances has
ended the dependence of many
foodservice operations on traditional
guest checks.
Guests selections are recorded at
computer terminals by depressing
keys marked with the names of menu
items or using touch-screen monitors
that transfer orders to the kitchen or
bar.
F & B Control By Mr. Weru J N

16

 Additional features automatically

look up correct menu prices for the
items selected and then calculate
both tax and total, printing
itemized bills, or checks for guests.

16