CHAPTER 3: MANAGING REVENUE AND
EXPENSES
PROFESSIONAL FOODSERVICE MANAGER
• As a foodservice manager, you are both a
manufacturer and a retailer
• A professional foodservice manager is unique
because all the functions of product sales, from
item conceptualization to product delivery, are
in the hands of the same individual
• As a manager, you are in charge of securing
raw materials, producing a product, and selling
it—all under the same roof.
• A foodservice manager is one of the few
types of managers who actually has contact
with the ultimate customer.
NOTES:
•Foodservice management provides the
opportunity for creativity in a variety of settings
PROFIT: THE REWARD FOR SERVICE
•It is important to remember that guests cause
businesses to incur costs. You do not want to
get yourself in the mind-set of reducing costs to
the point where it is thought that “low” costs
are good and “high” costs are bad.
PROFIT-ORIENTED FORMULA:
TRADITIIONAL
REVENUE- EXPENSES= PROFIT
PROFIT
•Profit is the result of solid planning, sound
management, and careful decision making. The
purpose of this text is to give you the
information and tools you need to make
informed decisions with regard to managing
your operation’s revenue and expense. If these
tools are utilized
•Profit should not be viewed as what is left
over after the bills are paid.
REVENUE –DESIRED PROFIT= IDEAL EXPENSE
Ideal expense is defined as management’s view
of the correct or appropriate amount of
expense necessary to generate a given quantity
of revenue.
Desired profit is defined as the profit that the
owner desires to achieve on that predicted
quantity of revenue.
REVENUE
•Revenue dollars or peso are the result of units
sold. These units may consist of individual menu
items, lunches, dinners, drinks, or any other
item produced by your operation
•You can increase revenue by increasing the
number of guests you serve, by increasing the
amount each guest spends, or by a combination
of both approached.
WAYS TO INCREASE REVENUE
A. Management’s Effort to Increase Number of
Guests
•Add seating capacity
•Add drive- in windows
•Extension of operating hours
B. Efforts to Increase amount of money spent
by guests
•Suggestive selling by service staff
•Creative menu pricing such as bundling and
upsizing and guest discounts
EXPENSES
There are four major expense categories that
must be controlled:
- Food Costs
- Beverage Costs
- Labor Costs
- Other expense / Operating Expenses
FOOD COSTS
•Food costs are the costs associated with
actually producing the menu items a guest
selects. They include the expense of meats,
dairy, fruits, vegetables, and other categories of
food items produced by the foodservice
operation. When computing food costs, many
operators include the cost of minor paper and
plastic items, such as the paper wrappers used
to wrap sandwiches. In most cases, food costs
will make up the largest or second largest
expense category you must learn to manage.
BEVERAGE COSTS
•Beverage costs are those related to the sale of
alcoholic beverages. It is interesting to note that
it is common practice in the hospitality industry
to consider beverage costs of a nonalcoholic
nature as an expense in the food cost category.
Thus, milk, tea, coffee, carbonated beverages,
and other nonalcoholic beverage items are not
generally considered a beverage cost.
• Alcoholic beverages accounted for in the
beverage cost category include beer, wine, and
liquor. This category may also include the costs
of ingredients necessary to produce these
drinks, such as cherries, lemons, olives, limes,
mixers like carbonated beverages and juices,
and other items commonly used in the
production and service of alcoholic beverages.
LABOR COSTS
Labor costs include the cost of all employees
necessary to run the business. This expense
category would also include the amount of any
taxes you are required to pay when you have
employees on your payroll.
OTHER EXPENSES/ OPERATING EXPENSES
•Other expenses include all expenses that are
neither food, nor beverage, nor labor. Examples
include franchise fees, utilities, rent, linen, and
such items as china, glassware, kitchen knives,
and pots and pans. While this expense category
is sometimes incorrectly referred to as “minor
expenses,” your ability to successfully control
this expense area is critical to the overall
profitability of your foodservice unit.
Note: The value of dollar or simply money has
changed over a period of time. The value of
money today is quite different from what it
was in 1954. generally, inflation causes the
purchasing power of a dollar today to be less
than of a dollar from a previous time period
Forms of expressing percent
•Common Form In its common form, the “%”
sign is used to express the percentage. If we say
10%, then we mean “10 out of each 100” and
no further explanation is necessary. The
common form, the “%,” is equivalent to the
same amount expressed in either the fraction or
the decimal form.
•Fraction Form In fraction form, the percent is
expressed as the part, or a portion of 100. Thus,
10 percent is written as 10 over 100 (10/100).
This is simply another way of expressing the
relationship between the part (10) and the
whole (100).
•Decimal Form A decimal is a number
developed from the counting system we use. It
is based on the fact that we count to 10 then
start over again. In other words, each of our
major units, 10s, 100s, 1,000s, and so on, are
based on the use of 10s, and each number can
easily be divided by 10. Instead of using the %
sign, the decimal form uses the (.) or decimal
point to express the percent relationship. Thus,
10% is expressed as 0.10 in decimal form. The
numbers to the right of the decimal point
express the percentage.
PROCESS AS FOLLOWS:
PART / WHOLE = PERCENT
420 / 840 = 0.5
0.5 X 100= 50%
• Consider this example: REVENUES for a
week are in the amount of $1,600. EXPENSES for
the same week are $ 1,200. Given the formula
presented earlier, the look like as follows:
Revenue – Expenses = Profit
$1,600- $1, 200 = $ 400
But if you had planned for a $500 profit for the
week, you have been “short” . Using the
alternative formula:
Revenue- Desired Profit = Ideal Expense
•These numbers can also be expressed in terms
of percent. If we want to know what percent of
our revenue went to expenses, the formula is as
follows:
Expenses / Revenue = Expenses %/ Cost %
$1,200/ $1, 600 = 0.75 or 75 %
Another way to state this relationship is to say
that each dollar of revenue cost 75 cents to
produce and in result will take 25 cents in profit.
$1.00 revenue - $0. 75 expense = $ 0.25 Profit
•Remember as long expenses is small than
revenue, some profit will be generated, if it is
not as much as you planned. You can compute
profit %using the formula:
PROFIT / REVENUE = PROFIT %
Example: $400 Profit / $1,600 Revenue = 25 %
Profit Or
$500 Desired Profit / $1,600 Revenue =$31.25 %
desired profit
Total Expense/ Revenue = Total Expense %
$350,000 / $400,000 = 87.50 %
Profit / Revenue = Profit %
$50,000/ $400,000 = 12.50 %
WHY P & L IS IMPORTANT ?
• The P&L is important because it describes the
efficiency and profitability of an operation.
Because so many individuals and groups are
interested in a food facility’s performance, it is
important that the P&L and other financial
statements are prepared in a manner that is
consistent with other facilities.
• The primary purpose of preparing a P&L is to
identify revenue, expenses, and profits for a
given time period.
UNDERSTANDING THE BUDGET
A budget is simply a forecast or estimate of
projected revenue, expense, and profit. In some
hospitality companies, the budget is known as
the plan, referring to the fact that the budget
details the operation’s estimated, or planned
for, revenue and expense for a given time
period.
•If these items are planned for, you can
determine how close your actual performance is
to your plan or budget.
• In the summer camp example, the following
information is known:
1.Number of campers, 180
2.Number of meals daily, 3
3.Length of campers’ stay, 7 days
•With 180 campers eating 3 meals each day for
7 days, 3,780 meals will be served (180 campers
3 meals 7 days 3,780 meals). At this point the
f&b director is given a budget of $1.85 per meal,
the total revenue budgeted is $6,993 ( 1.85 x
3780)
, an expense budget can begin to be developed.
In this case, we are interested in the amount of
expenses budgeted and the amount actually
spent on expenses. Equally important, we would
be interested in the percent of the budget
actually used, a concept known as performance
to budget.
In all cases, percentages are used to compare
actual expense with the budgeted amount,
using the formula:
• ACTUAL / BUDGET = % OF BUDGET

•Remember that expenses create revenue;
thus, it is not your goal to eliminate expense.
• In fact, those managers who focus too much
on eliminating expense, instead of building
revenue, often find that their expenses are
completely eliminated when they are forced to
close their operation’s doors permanently!
• Control and management of revenue and
expense are important. Elimination of either is
not desired.
•As you have seen, revenue and expense
directly impact profit. Your role as a hospitality
manager is to analyze, manage, and control
your costs so that you achieve planned results.
It can be done, and it can be fun.
CHAPTER 4: DETERMINING SALES FORECAST
IMPORTANCE OF FORECASTING SALES
Simply put, if too few guests are served, total
revenue may be insufficient to cover costs, even
if these costs are well managed
In addition, purchasing decisions regarding the
kind and quantity of food or beverage to buy are
dependent on knowing the number of guests
who will be coming to consume those products.
Labor required to serve the guests is also
determined based on the manager’s “best
guess” of the projected number of guests to be
served and what these guests will buy.
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.
DEFINING SALES FORECAST
In the hospitality industry, we have many ways
of counting or defining sales. In its simplest
case, sales are the dollar amount of revenue
collected during some predetermined time
period.
The time period may be an hour, shift, day,
week, month, or year. When used in this
manner, sales and revenue are interchangeable
terms.
When you predict the number of guests you
will serve and the revenues they will generate in
a given future time period, you have created a
sales forecast.
THE HELP OF POINT OF SALE ( POS)
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.
. Alternatively, a standard cash register or even
manually produced guest checks or head counts
will help you establish how many sales were
completed
SALES VOLUME- is the number of units sold.
SALES ( revenue)
Example:
Consider Manuel, a bagel shop manager, whose
Monday business consists of $2,000 in sales
(revenue) because he actually sold 3,000 bagels
(sales volume).
ADVANTAGES OF PRECISE SALES FORECASTS
1.Accurate revenue estimates
2.Improved ability to predict expenses
3.Greater efficiency in scheduling needed
workers
4.Greater efficiency in scheduling menu item
production schedules
5.Better accuracy in purchasing the correct
amount of food for immediate use
6.Improved ability to maintain proper levels of
non-perishable food inventories
7.Improved budgeting ability
8.Lower selling prices for guests because of
increased operational efficiencies
9.Increased dollars available for current facility
maintenance and future growth
10. Increased profit levels and stockholder value
SALES HISTORY
A sales history is the systematic recording of all
sales achieved during a predetermined time
period. It is no less than an accurate record of
what your operation has sold.
Sales to date is the cumulative total of sales
reported in the unit. Sales to date is the number
we get when we add today’s sales to the sales of
all prior days in the reporting period.

Sales to date on Tuesday, January 2, is computed
by adding Tuesday’s sales to those of the prior
day ($851.90 + $974.37= $1,826.27).
The Sales to Date column is a running total of
the sales achieved by Rae’s Restaurant for the
week. Should Rae’s manager prefer it, the sales
period could, of course, be defined in blocks
other than one week. Common alternatives are
meal periods, days, weeks, two-week periods,
four-week periods, months, quarters (three-
month periods), or any other unit of time that
makes sense and is helpful to the manager.
SALES HISTORY FIGURE 2
Given the data in Figure 2.3, the implications for
staffing service personnel at the camp are very
clear. Fewer service personnel are needed from
9:00 to 11:00 A.M. than from 7:00 to 9:00 A.M.
The reason is obvious. Fewer campers eat
between 9:00 and 11:00 A.M. (40) than
between 7:00 and 9:00 A.M. (121)
Notice that, as a knowledgeable manager, if you
were operating this camp, you could either
reduce staff during the slower service period or
shift those workers to some other necessary
task. Notice also that you might decide not to
produce as many menu items for consumption
during the 9:00 to 11:00 AM period. In that way,
you could make more efficient use of both labor
and food products. It is simply easier to manage
well when you know the answer to the
question, “How many guests will I serve?
SALES HISTORIES
Sales histories can be created to record
revenue, guests served, or both. It is important,
however, that you keep good records of how
much you have sold because doing so is the key
to accurately predicting the amount of sales you
will achieve in the future
COMPUTING AVERAGES FOR SALES HISTORIES
An average is defined as the value arrived at by
adding the quantities in a series and dividing the
sum of the quantities by the number of items in
the series.
Sometimes, an average is referred to as the
mean in a series of quantities. The two major
types of averages you are likely to encounter as
a foodservice manager are as follows:
Fixed average
Rolling average
FIXED AVERAGE
A fixed average is an average in which you
determine a specific time period, for example,
the first 14 days of a given month, and then you
compute the mean or average amount of sales
or guest activity for that period. Note that this
average is called fixed because the first 14 days
of the month will always consist of the same
days and, thus, the same revenue number
ROLLING AVERAGE
The rolling average is the average amount of
sales or volume over a changing time period.
Essentially, where a fixed average is computed
using a specific or constant set of data, the
rolling average is computed using data that will
change regularly.
14- DAY SALES LEVELS
7-DAY ROLLING AVERAGE UBALDA’S SPORTS
BAR
RECORDING REVENUE, GUEST COUNTS, OR
BOTH?
As previously mentioned, some foodservice
operations do not regularly record revenue as a
measure of their sales activity. For them,
developing sales histories by recording the
number of individuals they serve each day
makes the most sense. Thus, guest counts, the
term used in the hospitality industry to indicate
the number of people served, is recorded on a
regular basis. For many other foodservice
operations, sales are recorded in terms of sales
revenue generated.
Not surprisingly, you may decide that your
operation is best managed by tracking both
revenue and guest counts. In fact, if you do
decide to record both revenue and guest
counts, you have the information you need to
compute average sales per guest, a term also
known as check average.
TOTAL SALES/ NUMBER OF GUESTS SERVED =
AVERAGE SALES PER GUEST
MAINTAINING SALES HISTORIES
While a 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 (e.g., drive-through vs. counter
sales).
The important concept to remember is that you
have the power to determine the information
that best suits your operation. That information
should be updated at least daily, and a
cumulative total for the appropriate accounting
period should also be maintained
In most cases, your sales histories should be
kept for a period of at least two years. This
allows you to have a good sense of what has
happened to your business in the recent past. Of
course, if you are the manager of a new
operation, or one that has recently undergone a
major concept change, you may not have the
advantage of reviewing meaningful sales
histories. If you find yourself in such a situation,
it is imperative that you begin to build and
maintain your sales histories as soon as possible
so you will have relevant data on which to base
your future managerial decisions.
SALES VARIANCE
changes from previously experienced sales
levels, will give you an indication of whether
your sales are improving, declining, or staying
the same.
Because that information is so important to
predicting future sales levels, many foodservice
managers improve their sales history
information by including sales variance as an
additional component of the history.
SALES HISTORY AND VARIANCE
The variance in Figure is determined by
subtracting sales last year from sales this year.
In January, the variance figure is obtained as
follows:
SALES THIS YEAR – LAST YEAR = VARIANCE
$54,000 - $51,200= $2,800
PERFECT VARIANCE/ PERCENTAGE CHANGE

Percentage variance is obtained by subtracting

sales last year from sales this year and dividing
the resulting number by sales last year. Thus, in
Revenue forecast for this time period is
the month of January, the percentage variance
determined by multiplying sales last year by the
is determined as follows
% increase estimate and then adding sales last
SALES THIS YEAR – SALES LAST YEAR / SALES year. In the month of January, revenue forecast
LAST YEAR = PERCENTAGE VARIANCE is calculated using the following formula:

EXAMPLE: $54,000- $51,200 / $51,200 = 0.055 SALES LAST YEAR + ( SALES LAST YEAR X %
OR 5.5 % INCREASE ESTIMATE) = REVENUE FORECAST

VARIANCE / SALES LAST YEAR = PERCENTAGE $68,500 + ( 68,500 X 0.075) = $73, 637.50
VALUE
SALES LAST YEAR X (1 / % INCRAESE ESTIMATE )
2800/ $51,200 = 0.055 OR 5.5 % = REVENUE FORECAST

SALES THIS YEAR / SALES LAST YEAR – 1 = $68,500 X ( 1= 0.075) = $73, 637.50
PERCENTAGE VARIANCE

$54,000/ $51,200 – 1 = 0.055 OR 5.5%

PREDICTING FUTURE SALES

FUTURE REVENUES

Erica Tullstein is the manager of Rock’s Pizza Pub

on the campus of State College. Her guests
consist of college students, most of whom come
to the Rock to talk, listen to music, eat, and
study. Erica has done a good job in maintaining
sales histories in the two years she has managed
the Rock. She records the revenue dollars she
achieves on a daily basis, as well as the number
of students frequenting the Rock. Revenue data
for the last three months of the year are
recorded in Figure
If Erica were to use the 6.1% average increase
from the fourth quarter of last year to predict
her guest count for the first quarter of the
coming year, a planning sheet could be
developed as presented in Figure.
It is important to note that Erica is not required
to use the same percentage increase estimate
for each month. Indeed, any forecasted increase
management feels is appropriate can be used to
predict future sales.
Notice that in January, for example, the guest
increase estimate is rounded from 769.82 to
770. This is because you cannot serve “0.82”
people! The guest count forecast is determined
by multiplying guest count last year by the %
increase estimate and then adding the guest
count last year. In the month of January, guest
count forecast is calculated using the following
formula:

GUEST COUNT LAST YEAR + ( GUEST COUNT

LAST YEAR X % INCREASE ESTIMATE) = GUEST
COUNT FORE CAST

12,260 + ( 12,620 X 0.061) = 13,390 a

GUEST LASTYEAR X ( 1.00 + % INCREASE

ESTIMATE ) = GUEST COUNT FORECAST

12,260 X (1.00 + 0.061)= 13,390

FUTURE AVERAGE SALES PER GUEST

Recall that average sales per guest (check

average) is simply the amount of money an
average guest spends during a visit. The same
formula is used to forecast average sales per
guest as was used in forecasting total revenue
and guest counts. Therefore, using data taken
from the sales history, the following formula is
employed:

LAST YEAR’S AVERAGE SALES PER GUEST +

ESTIMATED INCREASE IN SALES PER GUEST =
SALES PER GUEST FORECAST

OR

REVENUE FORECAST / GUEST COUNT

FORECAST = AVERAGE SALES PER GUEST
FORECAST

$73,637.50/ 13,390= $5.50

FIRST QTR AVERAGE SALES PER GUEST

FORECAST

Food and Beverage Cost Control
CHAPTER 1- COST AND SALES CONCEPT
INTRODUCTION
•Successful restaurant personnel, including chefs, restaurant
managers, food and beverage controllers, dining room managers,
and stewards have the ability to keep costs at predetermined
levels. They understand that successful operations require that
costs be carefully established and monitored so that profit will
result.
•Food, beverage, and labor costs generally represent between 60%
and 70% of the total costs of a restaurant operation. If these
costs are not carefully established and monitored, they can
gradually increase until profit is eliminated, and losses are
sustained.
Learning Objectives
1. Define the terms cost and sales.
2. Define and provide an example of the following types of costs:
fixed, directly variable, semi variable, controllable, non-
controllable, unit, total, prime, historical, and planned.
3. Provide several examples illustrating monetary and nonmonetary
sales concepts.
4. Describe the significance of cost - to - sales relationships and
identify several cost - to - sales ratios important in food and
beverage management.
5. Identify the formulas used to compute cost percent and sales
price.
6. Describe factors that cause industry wide variations in cost
percentages.
7. Explain the value of comparing current cost - to - sales ratios
with those for previous periods.
Cost Concepts
•Accountants define a cost as a reduction in the value of an
asset for the purpose of securing benefit or gains.
•In F&B Business cost is defined as the expense to a hotel or
restaurant of goods or service when the goods are consumed, or
the service rendered.
•Food and beverage are “Consumed” when they are used,
wastefully or otherwise, and are no longer available for the
purpose which they were acquired. (Units: weight, volume or
total value)
•The cost of labor is incurred when people are on duty, whether
or not they are working and whether they are paid at the end of
the shift or at some later date. (Hourly or weekly or monthly.
Cost Concept
•Variable Cost are those that are clearly related to business
volume. As business volume increase, variable cost will increase
and vice versa.
•Food & Beverage cost are considered directly variable cost. statements, invoices, employees’ time card and other similar
Direct Variable Cost are those that are directly linked to volume records. It is used for establishing unit cost, determining menu
of business increase and decrease of volume correspondingly. prices, and comparing present with past labor cost.

•Payroll Cost includes salaries and wages and employee benefits •It will be used for planning and determining the future to develop
and often referred as Labor Cost. Because labor cost consists of
planned costs - projections of what cost will be or should be for
fixed and variable element it is known as semi-variable cost,
meaning a portion should change in short-term and the other a future period. It is often called as Budgeting.
portion remains unchanged.

CONTROLLABLE AND NON-CONTROLLABLE COST

Industry-wide Variations in Cost
•Controllable cost is those that can be change in the short term
Cost percentage vary considerably from one foodservice operation
such as Direct Variable Cost, Wages, Advertising & Promotion,
to other. This is due to many possible reasons.
Utilities, Repairs & Maintenance and Administration and General
Basically there are two types of foodservice operation.
Expenses.
• Those that operate at low profit margin and depends on
•Non-Controllable cost are those that cannot normally be
relatively high business volume.
changed in short-term such as fixed cost like Rent, Interest on a
mortgage, Real estate taxes, License fee and Depreciation. • Those that operate at relatively high profit margin thus does
not require high business volume
•Unit Cost may be food & beverage portion as in the cost of one
item or hourly unit of work. In F&B business unit cost are
commonly in average unit cost rather than actual unit cost.
Sales Concept
•Total Cost are the total of food & beverage portions served in
Sales Defined
one period such as a week or a month or total cost of labor for
one period. In general, the term sales is defined as revenue resulting from
the exchange for a products (Food & Beverage) and service
•Prime Cost is a term used in the Hotel Industry refer to the
(Waiter) for value ($$).
cost of materials and labor. (Food, Beverage, and Payroll)
The sales concept in F&B operation usually can be express as:
•Historical and Planned Costs
monetary and non-monetary.
•Historical cost are all cost are historical - that is, that they can
be found in business records, book of account, financial
Monetary Terms Average check = Total dollar sales ÷ Total number of covers

•Total Sales is a term that refers to the total volume of Total sales of $3,902.30 and 140 covers. Thus,
expressed in dollar term for instant any given period, such as a
Average sale = $3,902.30 ÷ 140
week, a month or a year.
= $27.87
By Category. Total dollar volume of sales by category are
total food sales or total beverage sales. Or total steak Yasser, one of the servers, had 30 customers and total dollar sale
sales or seafood sales. of $565 on the Saturday night of February 13, average sale per
server for Jim would be calculated as follows:
By Server. This is total dollar volume of sales for which a
given server has been responsible in a given period. This is Average sale = Total sales for Yasser ÷ No. of customers for
to help the management to make judgment on employees Yasser
performance.
= $565 ÷ 30
By Seat. Usually for a year period. Total Dollar sales
= $18.8
divided by the number of seats in the restaurant.
Non-Monetary Terms
•Sales Price refers to the amount charged each customer
purchasing one unit of a particular item. It can be a single meal or •Total Number Sold refers to the total number of menu item
entire meal. sold in a given time period.

•Average Sale in business is determine by adding individual sales •Cover is the term used to describe one diner regardless of the
to determine a total and then dividing that total by the number of quantity of good the person consumes.
individual sales. Two types of commonly calculated averages are:
•Total Cover refer to the total number of customers served in a
average sale per customer and average sale per server.
given period. Help to make judgment & comparisons.
Per Customer is the result of dividing total dollar sales by
•Average Covers is determined by dividing the total number of
the number of sales or customer.
cover for a given period by some other number such as hour of
Per Server is total dollar sales for an individual server operation, day of operation or numbers of server.
divided by number of customer served by that individual
1. Cover per Hour = Total Covers / No. of Hours of Op.
server.
2. Covers per Day = Total Covers / No. of Days of Op.
Average Sale
3. Covers per Server = Total Covers / No. of servers
This average is determined as follows:
Non-Monetary Terms relationship between cost and sales or the cost per dollar of sale.

Seat Turnover or simply turnover refer to the number of seats Cost ÷ Sales = Cost per dollar of sale
occupied during a given period (or number of cover) divided by the
decimal answer, and any decimal can be converted to a percentage
number of seats available.
if one multiplies it by 100 and adds a percent sign (%).
140 customers served during that one Saturday meal. The
Cost ÷ Sales x 100 = Cost%
restaurant has 75 seats, so seat turnover would be calculated as
follows: $ 312,090 ÷ $ 891,687 =.35 and .35 x 100 = 35.0 %

Seat turnover = Number of customers served ÷ Number of seats Food cost ÷ Food sales x 100 =Food cost%

= 140 ÷ 75 Beverage cost ÷ Beverage sales x 100 = Beverage cost%

= 1.87 turns Labor cost ÷ Total sales x 100 = Labor cost%

Sales Mix is a term used to describe the relative quantity sold of The formula also can be use to determine the Sales price if the
any menu item compared to other items in the same category. cost% is known.

Sales Mix For the Sugar & Spice Restaurant August 20xx Cost ÷ cost% = Sales(or Sales Price)

Menu Item Portion Sales Sales Mix If the given cost percentage were 30.0 percent and the food cost
for the item were $3.60, the appropriate sales price would be
Strip steak 1,000 12.5%
$12.00, illustrated here
Ginger shrimp 1,200 15.0
30.0 % ÷ 100 = 0.3
Lamb chop 1,800 22.5
$ 3.60 ÷ 0.3 = $12.00
Vege burrito 2,400 30.0
The formula also can be use to determine the cost if the spending
Chicken chop 1,600 20.0 power and cost% is known.

Totals 8,000 100.0% Suppose this banquet manager is dealing with a group willing to
spend $15.00 per person for a banquet, and the same given 30.0
percent cost percent is to apply. Calculation of the maximum
The Cost-to-Sales Ratio permissible cost per person is facilitated by rearranging the
formula once again:
Foodservice establishment calculate cost in dollars and compare
those cost to sales in dollars. This enable them to discuss the
Sales x Cost % (expressed as a decimal ) = Cost
Sales X Cost % = Cost
So the cost per person can be calculated as $4.50:
30.0 % ÷ 100 = 0.3
$ 15.00 X 0.3 = $ 4.50
CHAPTER 2- THE CONTROL PROCESS DHM
The Control Process
Introduction
The control in the F&B industry really means controlling people
action. These are the factors: -
 Food does not disappear by itself, without help
 Excess quantity of food and beverage into the plate and
glass.
 Employees’ wages calculation are not base on the wrong
numbers of hours unless someone gives the wrong
information.
 Food are not consumed by pest unless made available by
human
 Customer seldom leave without paying unless make possible
Managing Income &Expenses
Food Service Management
It is important that the foodservice manager must be a
talented individual. These criteria are true:
The person must be able to grab opportunities & profit oriented
 A unique salesperson
 Good personality with the guest
 Hard working person and most important
 The person is the controller or regulator of the operation
to achieved maximized profits and minimize costs.
Managing Income &Expenses
INCOME
 Income can be managed in may ways thus to insure profit.
Increasing income can be done by increasing the number of
guest and the amount of money they spent.
 This goal can be achieved by suggestive selling, creative
menu pricing and discount.
 Our main goal in this course is not to sale but controlling
expenses.
EXPENSES
There are four major expense categories that must be controlled
by management. They are…
FOOD COST, BEVERAGE COST, LABOR COST & OTHER
EXPENSES
The Control Process
1.Definition of Control
Control is a process used by managers to direct, regulate and
restrain the actions of people so that the established goals of an
enterprise may be achieved.
2.Cost Control Defined
Cost Control defined as the process used by managers to regulate
cost and guard against excessive costs.
The Control Techniques
It is an ongoing process throughout the operation.
1. Establishing Standard
Two principle of the principal causes of excessive cost are
•Standard are defined as rules or measures established for
inefficiency and waste.
making comparisons and judgments.
3. Sales Control
•Quality Standards are used to define the degree of excellence
Sales Control is important to ensure that all sales results in of raw materials, finished products and by extensions, work
appropriate income to the business. Therefore, it is important to performed.
require that each employees record each sales accurately.
•Quantity Standard are defined as measures of weight, count or
(Checks, duplicates, bills or etc.)
volume used to make comparisons and judgment.
4. Responsibility for Control
•Standard Cost is defined as the cost of goods or services
Responsibility is clearly falls onto the management, but the task identified, approved and accepted by management in order to
on controlling differ due to the nature of the establishment. make judgment and comparisons of the effectiveness of the
operation. Thus standard cost must be calculated as accurately as
Small establishment the control responsibility usually taken by the
possible.
management but for larger establishment it is delegated to the
assistant manager or controller.

5. Instituting Control 2. Establishing Procedures

Food & beverage establishment usually involves process of raw
material purchased, received, stored and issued for the purpose
of manufacturing products for sale and services.
At each stage of operation, it is necessary to institute control in
order to stop pilferage or problems.
Procedures are the method employed to prepare products or
perform jobs.
Standard Procedures are those that have be established as the
correct methods, routines, and techniques for day-to-day
operations.

Each control must be suitable to each of the operation, depends

on the nature of material and service requiring control and on the
degree of difficulty inherent (fundamentals) in instituting the
control. Example:
Production procedures must be standardized for several reasons.
One of the most important of these is customer satisfaction. Any
given item should be produced by the same method and with the
same ingredients every time it is served. It should also be served
in the same quantity each time, partly so that regular customers
will be given the same quantity each time they order the item, and
partly to maintain cost standards.
3. Training
Training is a process by which managers teach employees how
work is to be done, given the standards and standards procedures
established.
Example;
if management has established a standard 4 - ounce portion size
for hamburgers, then all employees responsible for producing
portions of hamburgers must be made aware that 4 ounces is the
correct portion size.
4. Setting Example
Employees in an operation follow the examples set by the manager
— the manager’s behavior, manner, responses to questions, and
even a failure to speak or take action in some situations.
The behavior of individuals in a group tends to be influenced by
the actions, statements, and attitudes of their leaders.
Work Habits, attitudes, behavior, spirit of a manager are the
evident.
If the manager who has occasion to help employees plate food for
the dining room serves incorrect portion sizes, employees will be
more likely to do the same when the manager is not there.
Similarly, if a manager is inclined to wrap parcels of food to take
home for personal use, employees will be more likely to do so.
5. Observing and Correcting Employee Actions
One of a manager’s important tasks is to observe the actions of all
employees continually as they go about their daily jobs, judging
those actions in the light of the standards and standard
procedures established for their work.
If any employees are failing to follow the standards, it is a
manager’s responsibility to correct their performance to the
extent necessary at the appropriate time.
6. Requiring Records and Reports
Recording and reports is an important element in control as these
information helps in decision making, judgment & comparisons of
the operations. One such report is the statement of income.
Example;
it is important to recognize that managers need timely
information to determine whether primary goals and sub goals are
being met. If timely records and reports are not available,
opportunities for taking corrective action may be lost.
7. Discipline Employees
Discipline is defined as action taken to give a warning, punish or
telling off an employee for work performance or personal behavior
incompatible with established standards.
It is seldom practice but only used as a deterrent or if corrective
action failed.
By selecting the right people for the various jobs — those with
the experience, skill, and personal characteristics that match the
job requirements the number of individuals requiring some level of
discipline can be reduced to a bare minimum. However, every
manager must face the fact that, at times, an individual staff
member must be disciplined.

8. Preparing and Following Budgets

Preparing and following budgets may be the most common

technique for controlling business operations.

Budget is defined as a financial plan and may be describe as a

realistic expression of management’s goals and objectives
expressed in financial terms. (Cash flow budget, capital equipment
budget and advertising budget.)

Operation Budget is the most important budget for F&B

manager. It is a forecast of sales activity and an estimate of cost

that will be incurred in the process of generating those sales.

Consist of the following four steps:

PREPARING AN OPERATING BUDGET
1. Establish standard and standard procedures for operation.
1. An operating budget is normally prepared using historical 2. Train all individual to follow established standards and
information from previous budget and other financial standard procedures.
records. 3. Monitor performance and compare actual performance with
2. The second step is to calculate the percentage and analysis established standards.
of the previous records. 4. Take appropriate actions to correct deviations from
3. Then making assumption or judgment base on all the standards.
influencing factors that might affect the business
operation during the forecasted period, and computing into
the new budget.
Flexible budget normally prepared for levels of business volume
above and below the expected level. (See Illustration).