Chapter 3 Cost Control

1. Chapter 3 Cost Control

2. Cost Control Overview Cost control is a business’s efforts to …………………………………………………… • 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 ……………………………………………………………. • _______ is the price an operation pays out in the purchasing and preparation of its products or the providing of its service. 3.1 Chapter 3 | Cost Control

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. 3.1 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.

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

6. Operating Budgets An _______________is a financial plan for a specific period of time (usually ________) • _________________ 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 ___________________________________ 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.

8. Profit-and-Loss Report A profit-and-loss report (P&L)is ____________________________________________ P&L is also known as an ____________________p. 157 • 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 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 ______________________________________________________________________ 3.1 Chapter 3 | Cost Control

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

11. Determining Food Cost ________________: actual dollar value of the food used by an operation during a certain period (sold, given away, wasted, spoiled, overportioned, etc.) • ____________: 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: 3.2 Chapter 3 | Cost Control

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

13. Establishing StandardPortion 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 _____________________________________________ 3.2 Chapter 3 | Cost Control

14. As-purchased versusEdible-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. 3.2 Chapter 3 | Cost Control

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

17. Monitoring ProductionVolume 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 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. 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 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) 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. 3.3 Chapter 3 | Cost Control

22. Quality Standards forPurchasing 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 ______________________________________ 3.4 Chapter 3 | Cost Control

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

25. Quality Standardsfor 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 3.4 Chapter 3 | Cost Control