Chapter 3: Cost Control

Transcription

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

2 Cost control is a business s efforts to manage how much it spends. Every business needs to make more money than it spends in order to survive. That is, its sales, or revenue, have to be higher than its costs. 2

3 Revenue is the income from sales before expenses, or costs, are subtracted. Cost is the price an operation pays out in the purchasing and preparation of its products or the providing of its service. 3

4 A successful restaurant or foodservice operation needs to manage and control many costs: Food costs Beverage costs Labor costs Overhead costs All of which can fall under the categories of: Variable costs Semi-variable costs Controllable costs Fixed or non-controllable costs 4

5 Variable or semi-variable costs can change based on sales. These are controllable costs because the operation has a certain amount of control in how it spends on these aspects of the operation. Food costs, beverage costs, and labor costs each have components that are related to sales levels. 5

6 Overhead cost is a fixed or non-controllable cost, meaning it needs to be paid regardless of whether the operation is making or losing money. Fixed costs do not change based on the operation s sales. List some fixed costs a restaurant will always be responsible for 6

7 An operating budget is a financial plan for a specific period of time. 7

8 A forecast is a prediction of sales levels or costs that will occur during a specific time period. Most forecasting techniques rely on having accurate historical data for the operation. The most common foodservice revenue forecasting techniques are based on the number of customers and average sales per customer. 8

9 Average sales per customer If an establishment has a yearly sales of $224,640 with an estimated 80 diners each day, open 6 days a week and 52 weeks each year, what is the average sale per customer? How many diners are we working with? 80 * 6 * 52 = 24,960 patrons Divide yearly sales by total # of customers $224,640 / 24,960 = $9 9

10 A sales history is a record of the number of portions of every item sold on a menu. Most operations can run historical sales and production reports from their point-of-sale (POS) systems. 10

11 Moving Average Technique: Smoothing Technique Uses sales information for 2 or 3 similar periods averaged together More likely to be accurate since it isn t solely based on one time period 11

12 A profit-and-loss report (P&L) is a compilation of sales and cost information for a specific period of time. 12

13 A P&L shows whether an operation has made or lost money during the time period covered by the report. Helps managers gauge an operation s profitability as well as compare actual results to expected goals. Helps determine areas where adjustments must be made to bring business operations in line with established financial goals. For an operation to be profitable, sales must exceed costs. 13

14 Net income - also referred to as the bottom line 14

15 A pro forma is what you estimate income and expenses to be over a period of time. A profit and loss report shows actual income and expenses over a period of time Copyright 2014 by the National Restaurant Association Educational Foundation (NRAEF) All rights reserved. 15

16 + - Net Sales - Cost of goods sold = Gross Profit - Controllable Costs - Uncontrollable Costs = Profit/Loss Total food, beverage sales, merchandise, & catering less sales tax Cost of all the food products sold less any free food Net sales minus the cost of selling the goods and services Operating costs such as labor, uniforms, shrinkage, utilities, etc. Operating costs such as rent, insurance, licenses, overhead, etc. Profit/loss after total operating costs have been deducted from gross profit and before taxes 3.10 Copyright 2014 by the National Restaurant Association Educational Foundation (NRAEF) All rights reserved. 16

17 Advances in technology have drastically increased the number of options available to operations in controlling costs. 17

18 Software programs can be used to complete the calculations required in cost planning, controlling sales, controlling inventory, and focusing on the menu. Provide better access to information, more accurate and convenient collection of information, and improved analysis of that information. If used effectively, technology can help in running an operation more efficiently and helping to reduce and effectively control costs. 18

19 Full-Line Suppliers: One Stop Shops Offers equipment, food, and supplies Helps control costs and maintains consistency 19

20 Every business needs to obey one basic principle to survive: it must make more money than it spends. Food costs, beverage costs, and labor costs each have components that are related to sales levels. An operating budget is a financial plan for a specific period of time. It lists the anticipated sales revenue and projected costs and gives an estimate of the profit or loss expected for the period. A profit-and-loss report is a compilation of sales and cost information for a specific period of time that shows whether an operation has made or lost money. 20

21 Profit & Loss Statement Information Worksheet Individually Pg 163 #1: Working with 1 or 2 others, think of a quick-service restaurant of which you are familiar. Begin to create an operating budget for that establishment. Highlight the top 5 factors you would need to consider and explain your rationale for using them. Refer to pg /29/