1. © Copyright 2011 by the National Restaurant Association Educational Foundation (NRAEF) and published by Pearson Education, Inc. All rights reserved. Chapter 3 Cost Control

2. Cost Control Overview  _______ is the price an operation pays out in the purchasing and preparation of its products or the providing of its service. 2 Cost control is a business’s efforts to …………………………………………………… 3.1 Chapter 3 | Cost Control  Every business needs to make _______________ than it ___________ in order to survive.  Its sales, or _________, have to be higher than its costs.  Revenue is the income from …………………………………………………………….

3. Types of Costs  A successful restaurant or foodservice operation needs to manage and control many costs.  Four main categories of costs:  1.  2.  3.  4. 3 3.1 Chapter 3 | Cost Control

4. Costs cont.  ___________ costs can change based on sales  Variable: go up and down as sales go ___________________in direct proportion; ex. ______ cost (more business, buy more food inventory)  Semivariable: go up and down as sales go up and down in ___________ proportion; labor costs (less business, must pay _____________ but can have less waiters)  the operation has a certain amount of _______ in how much it spends on these aspects of the operation. 4

5. Costs cont.  Non-controllable/fixed costs: needs to be paid ______________________________________  overhead costs = ____________________________________  do not change based on the operation’s ____________. 5

6. Operating Budgets  _________________ is a prediction of sales levels or costs that will occur during a specific time period.  Steps of forecasting  Analyze ___________: what items were popular at what time  Account for externalities:_______________________  Predict sales ______: How busy will certain days be?  Predict sales ______: how will each menu item sell Most forecasting techniques rely on having accurate ___________________________________ 6 An _______________is a financial plan for a specific period of time (usually ________) 3.1 Chapter 3 | Cost Control

7. Forecasting cont.  The most common foodservice revenue forecasting techniques are based on the number of ___________and average _________________  A sales history is a record of the number of _____________________________________  Most operations can run historical sales and production reports from their _________________________ systems. 7

8. Profit-and-Loss Report  P&L report shows whether an operation has ________money during the time period covered by the report.  P&L helps management determine areas where ____________________ must be made to bring business operations in line with established financial goals.  For an operation to be profitable, sales must exceed _____.  ________________is listed on bottom of P&L statement 8 A profit-and-loss report (P&L) is ____________________________________________ P&L is also known as an ____________________p. 157 3.1 Chapter 3 | Cost Control

9. Cost-Control Tools  Cost control measures:  ___________ menu items (food costs)  ________________________(labor costs)  Full-line supplier co.: one-stop shops that ____________________________________ __________________________________ 9 3.1 Chapter 3 | Cost Control

10. Steps in Controlling Food Costs 1. 2. 3. 4. 5. 6. 7. 10 Food costs must be controlled during all seven stages of the food flow process: 3.2 Chapter 3 | Cost Control

11. Determining Food Cost  ____________: dollar value of a food product in storage and can be expressed in terms of units, values, or both:  ______________ inventory is the physical inventory at the beginning of a given period.  The ____________________ inventory is the inventory at the end of a given period.  food cost formula: 11 ________________: actual dollar value of the food used by an operation during a certain period (sold, given away, wasted, spoiled, overportioned, etc.) 3.2 Chapter 3 | Cost Control

12. Determining Food Cost Percentage  Food cost % formula  Food cost is a ____________ cost: It should _________ or ___________ in direct proportion to an increase or decrease in sales 12 Total food cost percentage is the relationship between __________ and the _____ of food to achieve those sales. 3.2 Chapter 3 | Cost Control

13. Establishing Standard Portion Costs  Most every operation has _______________ recipes that are followed every time a menu item is prepared.  For every standardized recipe, an operation should establish a _______________________, which is the exact amount that one serving, or portion, of a food item should cost when prepared according to the item’s standardized recipe.  A _______________________is a tool used to calculate the standard portion cost for a menu item (p. 169)  As with the standardized recipe, a recipe cost card should exist for _____________________________________________ 13 3.2 Chapter 3 | Cost Control

14. As-purchased versus Edible-portion Costs  The __________________________is used to cost an ingredient at the purchase price before any trim or waste is taken into account.(p. 171)  The ___________________________is used to cost an ingredient after trimming and removing waste, so that only the usable portion of the item is reflected. 14 3.2 Chapter 3 | Cost Control

15. Recipe Yields  To convert a recipe, use the formula:  When determining yield, take into account for __________________ loss of meats and some vegetables (greens) 15 A ____________is the process of determining the number of portions that a recipe produces. 3.2 Chapter 3 | Cost Control

16. Controlling Portion Sizes  Controlling ____________ is very important for a restaurant to meet its standard food cost.  Tools that are essential for accurate portion control include:  1.  2.  3.  4.  Another mechanism for ensuring that portions are the right size is to __________any item that can be preportioned before serving. 16 3.2 Chapter 3 | Cost Control

17. Monitoring Production Volume and Cost  When restaurants produce too much, food cost goes ___; produce too little, and sales are lost.  A food production chart shows how much product should be ____________by the kitchen during a given meal period.  A well-structured chart can ensure product quality, avoid product ______________, and minimize ________  ______________is critical in helping management forecast how many portions of each menu item to produce on a given day.  p. 177 17 3.2 Chapter 3 | Cost Control

18. Menu Pricing  The _______ is the primary sales tool in most restaurant  There are a number of methods for menu pricing: (p.178)  A contribution margin is the portion of dollars that a ____________________________________ 1. ____________________________, an operation must know the portion costs for each item sold. 2. _______________pricing method, multiply raw food costs by a predetermined fraction. 3. __________________method, the total revenue is divided by the number of seats, average seat turnover, and days open in one year. 4. ______________percentage is equal to the food cost divided by food sales. 18 3.2 Chapter 3 | Cost Control

19. Budgeting Labor Costs  Labor is a semivariable, controllable cost. Labor costs are tied to _____________________  Most operations have both ____________________________________  Operations must be aware of the fluctuations in their sales so as to have just the right amount of ______ on hand to handle customers efficiently 19 3.3 Chapter 3 | Cost Control

20. Labor Cost Factors  ___________________: amount of sales an operation is doing for a given time period, impacts labor costs.  _____________________: the number of employees hired to fill one position in a year’s time.  _____________________: specifications of the operation with regard to products and service (employee skills will need to be higher in fine dining vs. quick service)  A restaurant or foodservice operation must meet ________________ standards. If an employee does not prepare a product that meets the operation’s standards, the item must be redone. This costs money, in terms of wasted product and lost productivity (overcooked steaks, burnt fries) 20 3.3 Chapter 3 | Cost Control

21. Scheduling  A __________________: shows the number of people needed in each position to run the restaurant or foodservice operation for a given time period. P. 190  To make the best estimates for a master schedule, it also needs to consider current ______________________  A _____________________is a chart that shows employees’ names and the days and times they are to work. P. 191  A contingency plan helps an operation remain efficient and productive even during _________________________________________  1.  2. 21 3.3 Chapter 3 | Cost Control

22. Quality Standards for Purchasing and Receiving  Purchasing: choose a ____________ _______  Receiving: receive only when operation is slow Meat: _______________ Dairy: _______________ Fish: fresh, _______; frozen fish, __________  When receiving:  1.  2. Have a copy of ______________on hand  3. Check delivery against both ____________________________________ __ 22 3.4 Chapter 3 | Cost Control

23. Quality Standards for Storing  Monitor __________ food daily to preserve its quality.  Rotate all products in storage following the __________________________________  Check storage facilities:  Dry storage ____________  Refrigerator: _____________  Freezer: _______________ 23 3.4 Chapter 3 | Cost Control

24. Quality Standards for Food Production and Service  Standard-_________ sizes, ______________recipes, and standard-portion ___________ are all food-production standards.  Managers should __________ each item to be sure that it meets quality standards 24 3.4 Chapter 3 | Cost Control

25. Quality Standards for Inventory  ____________________means counting and recording the number of each item in the storeroom.  Closely monitor _______________ to ensure that products are ordered as they are needed.  Carefully monitoring inventory also helps ensure that no product goes to _________. Minimizing waste keeps costs __________ and sales ____.  _________% of all inventory shortages are due to employee theft 25 3.4 Chapter 3 | Cost Control