The effect of price and volume on revenue Table 7.1

Key points of revenue appraisal Revenue is product of price and volume Appraisal needs to take account of changes in both price and volume Averages not always accurate and prone to misinterpretation Allow for inflation and/or price rises Need to compare like with like Incorporate 12-month rolling totals to determine true trends and performance Revenue cannot be fully appraised by itself

Calculation of change in costs and revenues Table 7.2

Examples of cost percentages for foodservice operations Table 7.3

Key points of cost appraisal Structures vary, and change over time Can be measured in cash or percentages Proportional relationship between costs Relationship between costs and inflation Cross-sectional and time-series analyses useful Incorporate 12-month rolling totals to determine true trends and performance Operators with the lowest costs perceived as having a key advantage Allocating indirect costs more complex than direct costs

Example profit and loss account Table 7.4

Comparison of gross profits Table 7.5

Comparison of operating profits Table 7.6

Yield comparisons Table 7.7

Relationship between revenue, costs and profits in foodservice operations Figure 7.1

Comparison of GP in relation to revenue Table 7.8

Comparison of GP and GP % Table 7.9

Sales mix example Table 7.10

Effect of changed sales mix Table 7.11

Sales mix example (beverages) Table 7.12

Example of profitability calculations Table 7.13

Example of popularity and profitability ranking Table 7.14

Menu engineering matrix Figure 7.2 Adapted from Kasavana and Smith 1999

Comparison of net operating profit measures Table 7.15

Key points of profit appraisal Be clear how profit measures are contrived Compare like with like Appraise against objectives to give value Setting objectives includes subjective judgements Sales mix analysis determines real trends Profit percentages measure efficiency, not profitability Percentages allow for comparison only, cash contribution is what is being sought Comparison with industry norms can be useful Use rolling 12-month totals to determine true trends and performance Take account of stakeholders’ priorities

Customer importance/operation achievement matrix Achievement by operation Importance to customer Figure 7.3

Customer importance/operation capability matrix Ability of operation Importance to customer Figure 7.4

Customer importance/staff importance matrix Importance to staff Importance to customer Figure 7.5

The three levels of strategy and the relationship between them Figure 7.7

SWOT matrix Strengths Weaknesses List of strengths List of weaknesses Opportunities List of opportunities 1 Strengths to make use of opportunities 2 Weaknesses which prevent exploitation of opportunities Threats List of threats 3 Strengths to counter threats 4 Weaknesses which prevent countering threats

Eight possible strategic routes for foodservices operations Cost to the customer Perceived added value Figure 7.9 Adapted from Johnson and Scholes 1999

Ansoff’s growth matrix with alternative strategies/directions Products Markets Figure 7.11

Strategic means and assessing options Internal development Mergers and acquisitions Joint development Assessing options Suitability Feasibility Acceptability