CostControls&PurchasingWhyisFoodCostImportant?DeterminesProfitabilityIdentifiesproblemareasMeasureseffectivenessofmanagementSuccessorFailureofManagerPossibleReasonsforCostPercentVariationsTypeofServiceLocationPriceStructureTypeofMenuFoodCost-Restaurantsvs.BanquetsWhichdepartmentrunsalowercost?Why?Howdowedetermineourcostsinrestaurants?PointofSale,EOMFoodCostreport4FoodCost-InternalControlsHowdowecontrolourcostsApprovedvendorsPurchasespecificationsRecipescards,userecords,portioncontrolSteaks/Fish-portionpackvs.handcutWeeklypriceshops(randomchickenbreast-$1lbless)5/7/20245FoodCost-ProductionPlanning Productionplanning-whoisdoingthis?ProductionChartsSetupproductionparsforthelineSteakandRoastmeatchartFoodfabrication-individualorcentralized?Crossutilization.Trainingandsafety.5/7/20246FoodCost-FinancialControlsProcurement&vendors-Rebates2x/yearMenuEngineering-2xyearPointofSale-training&reportsFinancialWeeklytop30pricesheetDailyFoodCostWorksheetAccountabilityMonthlyreview/FinancialStatements5/7/20247FoodCost-WeeklyPriceSheetproductpacksizeunitWeek1PriceWeek2PriceWeek3PriceWeek4Pricewholestriploinslblb$4.004.11

ribeyesteakslblb$8.027.89

wholeribeyeslblb$5.855.75

tenderloinsteakslblb$16.0016.42

wholetenderslblb$7.858.05

randomchixbreastslblb$1.511.51

mahimahilblb

7.54

snapperlblb$13.0913.44

8FoodCost-DailyWorksheet1InvoiceNumberDateVendorAmount11812732/4/2011Martin$2,380.9299672/4/2011Sams$67.30249163202/4/2011OakFarms$245.081030382/4/2011Ashcraft$179.76

TotalAmount:$2,873.065/7/20249FoodCost-DailyWorksheet2Yesterday'sTotalPurchases$27,511.55Today'sTotalPurchases$2,873.06TotalPurchases$30,384.61TotalCredits$2,305.46TotalCostofSales$28,079.15TotalFoodSales$117,767.00TotalFoodCost23.8%5/7/202410FoodCost-Variance&TrainingVariance-Worksheetwillbe2-3pointshigherthanactual,moreofanAccountingissueNeedtoadd3-5%waste/productionfactortoreportTraining1-2weekstraininginpurchasingFoodwastevs.foodcostTaskforceChef/TaskforceotherpropertyBenchmarkingMentoring5/7/202411BeverageCostsOnlyfoodandbeveragerevenuecoverallcostsPayrollDirectoperatingexpensesUtilitiesAdministrativeexpensesAverageratioof78%ofsalescomingfromfoodand22%ofsalesfrombeveragesAveragecost17%to20%Tocontrolbeveragecosts,

amanagershouldunderstandhow:

ToestablishprofitabledrinkspricesTomanageinventoryToreceivealcoholicbeveragesTocontrolbarrequisitionsTousebartransfersTomaintainpoursystemsIndustryComparisonRetailIndustryShrinkagelossesunder1.5%SpendbillionstryingtokeepshrinkageundercontrolMethodofinventorycontrolcomparesunitssoldtounitsusedHospitalityIndustryAverageshrinkageof20to25%Majorityofownersdon’tthinktheyhaveaproblematallMethodofinventorycontrolcalculatescostofgoodssoldasapercentageofoverallsalesYoudon’thaveaproblem!Liquorshortagesaverage23to27%Wineshortagesaverage10%Draftbeershortagesaverage25%Beerbottlesareusually4to5% (eventhislowpercentagemeansthatmostbarsaremissing50to100bottlesperweek)Whyiscontrolharderinthebarthaninthekitchen?VarietyofproductSamepersonmakingthedrinkthatissellingitAccuracyinportionsWasteTheftAlltheaboveDrinkRecipes:EstablishingyourprofitmarginsPortioningGlasswareMixingInstructionsCostFactorsPortionControl:ProtectingyourprofitmarginsFreePouringHand-HeldMeasuringBottle-AttachedControlDevicesPrecisionPoursLiquorControlSystemsRFIDRadioFrequencyIdentificationTroubleshootingaRisingPourCostPhysicalInventoryInaccuraciesLaggingSalesPricesPoorOrderingandReceivingProceduresPromotionalDiscountingShiftinSalesMixTroubleshootingaRisingPourCostDrinkPortioningUnrecordedSpillage,Transfers,andComplimentaryDrinksEmployeeTheftToCatchaThiefYourbeveragecostiscurrentlyrunning24%andthegoalis22%.Whatshouldyouchecktodetermineifthisisbeingcausedbytheft?Remedies:InventorycountsandcontrolsshouldnotbeperformedbystaffTakeamid-shiftreadingIfyoufindaproblem,takeaction!WritearecipeguideTeachyourbartendershowtopourdraftbeerEliminatestaffdrinksEliminateOPENkeysRemediescontinued:UseaSpillage/CompsheetHoldregularbarstaffmeetingsMarkglasswaretoindicateproperpoursizeCheckdeliveriesEstablishPARSforyourbarandstockroomWhatshouldbepurchased?Whatisthebestpricetopay?Howcanasteadysupplybeassured?PurchasingInventoryControlWorkingstock-Amountofaningredientyouanticipateusingbeforepurchasingthatitemagain.Safetystock-Extraamountyoudecidetokeeponhandtomeethigherthananticipateddemand.Thesetwofactorshelptodetermineparlevels.Whendeterminingpar,youmustestablishbothminimumandmaximumamountrequired.Inventorylevelsaredeterminedby:StoragecapacityItemperishabilityVendordeliveryschedulesPotentialsavingsfromincreasedpurchasesizeOperatingcalendarRelativeimportanceofstockoutagesValueofinventorydollarstotheoperator.Excessiveinventorymayleadto:GreaterspoilageLossduetotheftStoragecost/OpportunitycostProductSpecificationNeedforeverythingyouorderAllowsforeffective/consistentpricingYoureceivetheexactitemrequestedeverytimeProductSpecificationProductnameorspecificationnumberPricingUnitStandardorgradeWeightrange/sizeProcessingand/orpackagingContainersizeIntendeduseOtherinformationsuchasproductyieldPurchasingTermsBestprice-thelowestpricethatmeetsthestandardssetbyyourestablishment.Productspecifications,vendordependability,qualityofvendorservice,accuracyindelivery.Bidsheet-aworksheetthatallowsyoutocomparebidsbyprice.Minimumorderrequirement-thesmallestdollaramountofanorderthatcanbeplaced.TheOptimalSupplierDeliveryScheduleCreditterms(discounts,rebates,creditperiod)MinimumorderrequirementVarietyLeadTimeSamplesReturnPolicyBackOrdersSOURCES(Growers,manufacturers,andprocessors)RETAILERS(hospitalityoperators)INTERMEDIARIES(middlemen)CONSUMERSCentralizedPurchasingAdvantages1.Foodsandbeveragescanbepurchasedatlowerpricesbecauseofvolume.2.Desiredqualitycanbeobtainedmorereadilybecausethepurchasingagenthasagreaterchoiceofmarkets.3.Foodscanbeobtainedthatmeetthepurchaser’sexactspecifications.4.TimeSaving-Oneordertocheckandpay.CentralizedPurchasingDisadvantages1.Eachunitmustacceptthestandarditeminstockandhaslittlefreedomtopurchaseforitsownpeculiarneeds.2.Unitscannottakeadvantageoflocal“specials〞atreducedprices.3.Menusareordinarilystandardized,limitingtheindividualunitmanager’sfreedomtochangeamenu.ReceivingProperlocationPropertoolsandequipmentProperdeliveryschedulesPropertrainingWhatisincludedineachofthese?RulesforReceivingRememberthatthedeliverypersonisalsoapotentialthief.Youwillneed:scales,wheeledequipment,boxcutters,thermometers,andacalculator.Acceptancehoursvs.refusalhoursReceivingclerkstrainedonweight,quantity,quality,andprice.UsecreditmemosCheckextendedpricesTheStorageProcessPlacingproductsinstorageMaintainingproductquality,safety,securityDetermininginventoryvalueLIFO(lastin,firstout)-theuseofthemostrecentlydeliveredproductbeforeusinganypartofthatsameproductpreviouslyonhand.FIFO(firstin,firstout)–rotatingstockinsuchawaythatproductalreadyonhandissoldpriortothesaleofmorerecentlydeliveredproducts.Make-or-BuyAnalysis“Theprocessofobjectivelyevaluatingthequalityandcostdifferencestotheportionsofpreparingamenuitemonsite,purchasingitinaconveniencefoodform,orfinishingitonsite〞MostOn-SitePreparationLeastOn-SitePreparation

LeastExpensivetoPurchaseMostExpensivetoPurchaseFresh,WholePiecesHeadlessHeadlessPeeled,De-VeinedHeadless,PeeledFresh,HeadlessHeadles