Management: Analysis and Decision Making Chapter 10 Food and Beverage Management: Analysis and Decision Making

Learning Objectives After completing this chapter, you should be able to: • Explain how enhanced quality should be the focus of an operation’s improvement philosophy. • Explain a three-step process for analyzing a restaurant or foodservice operation and establishing financial priorities. • Describe procedures for corrective action plans. • Describe basic procedures for implementing change.

Quality as an Improvement Philosophy Management Decision Making

Evaluating Quality

A Close Look at Financial Analysis Set Expectations Annual Operating Budget The Budget Team Budgeting Revenues Budgeting Expenses

Assess the Actual Situation Analyze the Variance

Revenue Analysis Expense Analysis Profit Analysis

Budget Revisions

Corrective Action Process Identify Problems

Managers Math Answer the Questions:

Make Decisions

Procedures for Implementing Change Overcoming Resistance to Change Managing Change

Quality Improvement in Action: Implement Rollouts

Managers Are Decision Makers

1. Explain how enhanced quality should be the focus of an operation’s improvement philosophy. A quality system involves several steps: establish standards, identify defects, track defects, and implement a problem-solving strategy to correct defects that occur. Spot checking strategies by the manager and chef are useful for evaluating quality. They might, for example, order the same meal during two different shifts and see whether the meal is the same. They should evaluate the plating, speed of delivery, and quality, and confirm that a standardized recipe was followed. Managers may take daily or weekly notes to record their findings and communicate issues to the appropriate staff members.

2. Explain a three-step process for analyzing a restaurant or foodservice operation and establishing financial priorities. A three-step analysis process for establishing corrective action priorities includes developing a budget, assessing the situation using the income statement, and analyzing for variances. Budgets are prepared with input from the management team. The basic process includes estimating revenues and then forecasting expenses (including fixed, variable, and mixed costs) to determine profits. Experienced managers use historical information and their knowledge about internal and external changes to develop budget benchmarks. Income statements reflect the operation’s efficiency and profitability.

Analysis should include both dollar figures and profit percentages. 2. Explain a three-step process for analyzing a restaurant or foodservice operation and establishing financial priorities continued… Significant variances between budget expectations and actual performance reflected by the income statement require analysis. Analysis should include both dollar figures and profit percentages. If basic assumptions have changed, the budget should be revised.

3. Describe procedures for corrective action plans. Sometimes corrective action is necessary to reduce variances. First, problems must be identified to determine those that most affect profitability. Managers must then make decisions about how to address unacceptable variances most effectively. One decision-making process involves defining the problem, determining and evaluating solution alternatives, selecting and implementing the best alternative, and evaluating its effectiveness.

4. Describe basic procedures for implementing change. Employees may resist the changes required. Managers can use several strategies to overcome resistance to change. First, the process will be easier if the manager has involved employees and explained why changes are necessary. Also, change is easier if situations have historically been better after changes than before. A continuous quality improvement (CQI) initiative can drive the culture in which change is implemented. Employees will know that regardless of how small a change might be, the operation can better meet its mission and goals. Several basic procedures can be used to implement rollouts of new or revised policies, procedures, and menu items.

A final step is recording the rollout results. 4. Describe basic procedures for implementing change continued… This process involves identifying rollout changes, planning rollout details, considering staff training if necessary, and implementing the rollout. Then, rollout data must be collected and evaluated, and the rollout may need adjustments depending on how well its objectives were attained. A final step is recording the rollout results.

Key Terms: Bottom line A planned profit or another financial goal such as to break even. Calendar year A year that begins on January 1 and ends on December 31. Continuous quality improvement (CQI) A system of ongoing efforts to better meet or exceed customers’ expectations, and to define ways to perform work with better, less costly, and faster methods. Fiscal year Any 365-day accounting period that does not begin on January 1. Fixed cost A cost, such as rent, that does not change as revenue changes. Food cost percentage The percentage of all food revenue that was spent to purchase the food products required to generate that revenue.

Key Terms continued: Income statement The percentage of all food revenue that was spent to purchase the food products required to generate that revenue. Mixed cost A cost that contains both fixed and variable components, such as labor. Net income The profit made in a business. Profit percentage The profit or loss expressed as a percentage of total revenue. Quality system A system that outlines how quality processes and procedures should be implemented, controlled, and maintained. Revenue, incremental

Key Terms continued: Rollout The process of introducing something new in an operation. Spot checking A regular review of standardized recipes and food products as a way to maintain product quality. Supply and demand, law of Economic beliefs about the supply of an item and its price relative to its demand. Generally, as the price of an item increases, the demand for the item decreases (although the reverse can also occur). Variable cost A cost that changes in proportion to revenues.

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