1. Class Name Instructor Name Date, Semester Foundations of Cost Control Daniel Traster Revenue Prediction chapter 12

2. Opening Question 2 If you managed a restaurant, what information would you want to know to help you predict how many guests to expect at tomorrow’s meal services?

3. Forecasting Process 3 Record actual counts and other data to evaluate forecast’s accuracy and to adjust future forecasting Make further adjustments based on qualitative factors to create a final forecast Adjust prior data using rolling averages or trends. Collect as much historical data as possible

4. Forecasting Process Historical quantitative data come from POS system or reservation/walk-in book Qualitative data should be recorded daily in a log or POS system Qualitative data includes: ―weather, ―special events, ―conventions, ―holidays, ―construction project, ―competition changes, ―marketing promotions ―…anything that might explain business fluctuations 4

5. Trends Start with customer count from the same day of the week from the prior week or the prior year. Adjust based on historical trend percent increase or decrease 5 % change Current customer count– prior count Prior customer count =

6. Example 12a 6 Restaurant saw 347 customers the first Friday in March this year and 360 the first Friday in March last year. What is the percent change from last year? % change 347-360 360 ==-0.036 (3.6% decrease)

7. Using Trends Trends only significant if repeated over and over each same day of the week Manager uses trend to calculate initial forecast New Customer Count = Prior Count X (1 + percent change in decimal form) 7

8. Example 12b New Count = 340 X (1 + 0.014) = 344.8 or 345 8 Business has consistent trend of 1.4% increase over last year’s customer counts. If first Friday in March last year saw 340 customers, how many should be forecast for the first Friday in March this year?

9. Rolling Averages C = Customer count for that period N = total number of periods counted 9 Rolling Average Count C1 + C2 + C3…+ CN N = Use rolling averages when no trend is consistent across weeks.

10. Example 12c 10 Business forecasts using rolling averages over 4 weeks. Guest counts for past 4 weeks have been 418, 437, 398, and 414. What is forecast for upcoming week? Rolling Average 418 + 437 + 398 + 414 4 == 417

11. Adjusting for Qualitative Data Manager adjusts initial forecast based on qualitative data Keep adjusting as new data comes in (weather report changes, for example) Forecast 1-2 weeks our for schedule, 2-3 days out for ordering, 1 day out for kitchen production schedule 11

12. Evaluating the System 12 Constantly compare the forecast to the actual guest count to learn from mistakes and to make more accurate forecasts in the future.

13. Forecasting Sales Converting customers to revenue helps to budget and control costs Average Check = amount of revenue the average person generates on a check Can calculate average check by server to identify strong servers or average check by day, week, or meal period to inform when to offer promotions 13

14. Average Check 14 Average Check Revenue for a Period Guests for that Period =

15. Example 12d Average Check = $12,385 ÷ 1,104 = $11.22 15 Over past 4 Mondays, restaurant has served total of 1,104 guests for lunch and brought in $12,385 from those 4 periods. What is average guest check for Monday lunch during this period?

16. Uses for Average Check It is a control tool. If it changes much over time, manager should research why and correct problems or reinforce results When seating is limited, increasing average check may be only way to improve profit Average check can forecast revenue Forecast Revenue = Forecast Guests X Average Check 16

17. Example 12e Forecast revenue = 3,700 X $47.58 = $176,046 17 Restaurant with average check of $47.58 forecasts 3,700 guests next month. How much revenue should manager expect next month?

18. Using Forecast Revenue 18 Using forecast revenue and target food cost %, beverage cost %, and labor cost %, manager can determine budget in dollars for a given period of time.

19. Seat Turnover 19 When seating is maxed out, manager can serve more customers in a period by increasing the seat turnover or number of customers per seat in a given period. Seat Turnover Customers Served in a Period Total Seats in Dining Room =

20. Example 12f Seat Turnover = 280 ÷ 120 = 2.33 20 Restaurant has 120 seats in dining room, but serves 280 guests at dinner. What is seat turnover for dinner?

21. Seat Turnover (cont.) Impacted by slow kitchen service or understaffed or slow dining room staff Guest service should not be so rushed that it reduces check average; service must remain efficient but comfortable for guests Seat turnover can be used with forecast to decide how many (if multiple) dining rooms to open or when to expand dining room 21

22. Menu Mix Menu Mix % = % of sales that come from each menu item It is usually divided by menu category and is relatively consistent with a meal period across same days of the week Caveat: may change seasonally or with weather, and definitely with menu change 22

23. Menu Mix Formula Note: Number of each item sold and total sold come from POS system or sales receipts 23 Menu Mix % Number of that item sold Total number of items sold =

24. Example 12g Menu Mix % = 37 ÷ 140 = 0.264 or 26.4% 24 Restaurant typically sells 140 desserts each Monday. Of those, 37 are usually sorbet. What percent of desserts are the sorbets?

25. Menu Mix (cont.) Menu mix usually calculated against total in a menu category Manager must calculate % of guests who purchase food from each menu category 25 % buying category Guests buying that category Total guests =

26. Example 12h % buying dessert = 140 ÷ 330 = 0.424 or 42.4% 26 Of the 330 guests in a restaurant one night, only 140 buy dessert. What percent bought dessert?

27. Forecasting Number of Menu Items Sold from Menu Mix Percents 27 Guest Forecast Percent buying a category of food Number of dishes in that category forecast to be sold Step 1

28. Forecasting Number of Menu Items Sold from Menu Mix Percents 28 Number of dishes in a category forecast to be sold (step 1) Menu Mix % for an item Number of that item forecast to be sold Step 2

29. Example 12i 1.No. ordering dessert = 370 X 0.42 = 155.4 2.No. of sorbets = 155.4 X 0.37 = 57.5 or 58 sorbets 29 Historically, 42% of guests order dessert Thursday night. Of those, 37% are sorbet. How many sorbets should the pastry chef plan for next Thursday if the guest forecast is 370 guests?

30. Forecasting Kitchen Production Manager uses forecast menu mix sales to plan kitchen production Manager should adjust forecast based on qualitative data, desire to have a buffer, or desire to run out of certain foods to avoid leftovers. Accurate production schedule minimizes leftovers, waste, purchases, and labor costs 30

31. Menu Analysis for Increased Profitability Making the most profitable items the most popular ones helps to maximize overall profit Menu Analysis is best done over a long time period (several months or a year) 31 Menu Analysis is process through which managers compare each menu item’s profitability and popularity

32. Calculating Popularity Work with only one menu category at a time… 32 3. High popularity items sell more items than benchmark; low popularity items sell fewer items than benchmark 2. Popularity Benchmark = average number of each menu item sold X 70% or 0.7 1. Start with number of each item sold (in one category); add total items sold and divide by number of menu items in that category. This is “average number of each menu item sold”

33. Calculating Profitability, Part 1 Contribution = Item Sales Price – Item Food (or Margin (CM) Beverage) Cost 33 Menu CM = No. sold (for an item) X CM (for that item)

34. Calculating Profitability 34 Still working with only one menu category at a time… 7. An item is “high profitability” if its item CM is higher than the average weighted menu CM. Item is “low profitability” if its item CM is lower than the average weighted menu CM. 6. Calculate Average Weighted Menu CM = total menu CM ÷ total number of items sold (in that menu category) 5. For each item, calculate Menu CM = number of item sold X its item CM. Add all menu CM’s together to get menu CM total. 4. For each item, calculate item CM = item sales price – item food cost.

35. Using Menu Analysis To make an item more popular: move its location on the menu or suggestive sell it. To make an item more profitable: adjust its portion size or sales price. Can always rework a menu item or replace it entirely 35

36. Menu Analysis Categories 36 high popularity, high profitability. Leave these items alone. Star high popularity, low profitability. May increase sales price, reduce food cost, or leave alone if it is a signature dish/draw. Plowhorse low popularity, high profitability. Relocate on menu, highlight on menu, rework menu description, suggestive sell. Puzzle low popularity, low profitability. Often requires a change: increase sales price, suggestive sell, or replace with a dish that still meets the needs of the customers who used to order the dog. (e.g., replace a vegetarian dish with another vegetarian dish) Dog

37. Reconciling Kitchen Production with Sales Kitchen production schedules can be used to reconcile food produced against food sold. All food prepared by kitchen must be accounted for to protect against theft. Kitchen Production Sheet uses menu mix % and forecast to predict how many of each dish will be sold. 37

38. Example 12j Number ordering dessert =130 X 0.42 = 54.6 or 55 guests ordering dessert 38 Restaurant forecasts 130 guests for dinner tomorrow. 42% of guests usually order dessert. Use chart on next slide to calculate the number of each dessert forecast to be sold.

39. Example 12j Chart DessertMenu Mix %Forecast Count Strawberry Cheesecake 14.5% Chocolate Mousse18.7% Crème Brulee23.1% Pecan Pie19.9% Ice Cream Sundae23.8% 39

40. Example 12j Answer DessertMenu Mix %Forecast Count Strawberry Cheesecake 14.5%8.0 Chocolate Mousse18.7%10.3 Crème Brulee23.1%12.7 Pecan Pie19.9%10.9 Ice Cream Sundae23.8%13.1 40

41. Converting Forecast Menu Mix Count to Kitchen Production Schedule 41 Manager must adjust numbers to account for qualitative factors Chef must factor in prior leftovers (portions on hand) and create a “buffer” in case forecast is off slightly

42. Kitchen Production Sheet 42 made by manager the day before service based on most recent qualitative data Adjusted Forecast reusable leftovers from prior shift Portions on hand determined in advance by chef to cover most services without running out of a menu item Buffer See Table 12.3 in the Text.

43. Kitchen Production Sheet 43 adjusted forecast + buffer – portions on hand Portions to Prepare portions to prepare + portions on hand Total Available is completed at end of shift to record food not sold (for reconciling sales) and to ensure none are “lost” before next shift Having too many leftovers regularly is cause to adjust buffers or forecasting processes Leftovers See Table 12.3 in the Text.

44. Example 12j converted to Kitchen Production Sheet DessertForecast Count Adjusted Forecast Portions on Hand BufferPortions to Prepare Total Avail- able Left- overs Cheese -cake 8.08351013 Mousse10.3120517 Brulee12.7140519 Pie10.911151516 Sundae13.11255 17 44

45. Kitchen Production Sheet Notes If kitchen runs out of food and additional portions are made during service, “additional production” should be recorded on the form If a dish is 86’ed, manager should record when this occurs to determine if it represents good or bad forecasting 45

46. Mishaps and Sales Reconciliation When no errors occur during service, dishes sold = number available for sale – leftovers Errors often occur and should be recorded on a Food Mishap Report a.k.a. Void Sheet Void Sheet lists all items rendered unusable during service; for each item lost, it includes ―the name of server, ―item name, ―reason for void, ―and possibly check number, date, and time of mishap 46

47. Voids Every void must be accounted for to ensure it isn’t being stolen Trusted employee or manager should verify (visually) that each item is legitimately ruined before entering it on Void Sheet 47 Voids occur when food is dropped on floor, customer rejects it for improper cooking, customer dislikes the taste, or cook ruins it and removes it from circulation

48. Voids Lots of a voids coming from a single employee suggest the employee needs retraining Lots of voids across the staff may suggest an understaffed business 48 Reasons for voids:

49. Food and Sales Reconciliation Form At end of service or day, manager should complete a food and sales reconciliation form to confirm that all portions prepared by kitchen are accounted for as sales, voids, or leftovers. 49 See Table 12.5 in text, which shows sample food and sales reconciliation form.

50. Part of Example 12j as Food and Sales Reconciliation Form Kitchen Production FoodPortions on Hand Portions Prepared Add. PrepTotal Available LeftoversPortions Consumed Cake310013112 Mousse0170 215 Brulee0190 514 Pie115016115 Sales Accounting FoodPortions Sold VoidsTotal Output Portions Consumed DifferenceNotes Cake120 0 Mousse14115 0 Brulee12113141See Susie Sundae180 0

51. Food and Sales Reconciliation Form Info on Form comes from Kitchen Production Sheet, Void Sheet, POS system/guest checks, and physical inventory of kitchen stations Total Output (portions sold + voids) should match Portions Consumed (sent out from kitchen) Any discrepancy should be investigated 51

52. Reconciliation Form (cont.) Regularly forgetting to enter voids or checks missing from the same employee may be a sign of theft or signal a need for retraining POS systems record which server orders each dish, so missing checks are not an issue. Missing food is easier to track to a specific server. 52