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Food & Beverage Cost Control, 5th edition

Food & Beverage Cost Control, 5th edition
Dopson, Hayes, & Miller
@2011 John Wiley & Sons

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Chap 3 Chap 3 Presentation Transcript

  • © 2011 John Wiley & Sons Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller Chapter 3 Managing the Cost of Food
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Main Ideas Part 1  Menu Item Forecasting  Standardized Recipes  Inventory Control  Purchasing  Receiving Part 2  Storage  Determining Actual Food Expense  Technology Tools
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Part 1 Menu Item Forecasting  Menu item forecasting addresses the questions:  “How many people will I serve today?”  “What will they order?”
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Figure 3.1 Menu Item Sales History Date: 1/1 - 1/5 Menu Items Sold Menu Item Mon Tues Wed Thurs Fri Total Week’s Average Roast Chicken 70 72 61 85 77 365 73 Roast Pork 110 108 144 109 102 573 115 Roast Beef 100 140 95 121 106 562 112 Total 280 320 300 315 285 1,500 300
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Menu Item Forecasting  Popularity index is defined as the percentage of total guests choosing a given menu item from a list of alternatives. Popularity Index =Total Number of a Specific Menu Item Sold Total Number of All Menu Items Sold
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Menu Item Forecasting  Individual menu item forecasting, based on an item’s individual sales history: Number of Guests Expected x Item Popularity Index = Predicted Number of That Item to Be Sold  The predicted number to be sold is simply the quantity of a specific menu item likely to be sold given an estimate of the total number of guests expected.
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Figure 3.2 Forecasting Item Sales Menu Item Guest Forecast PopularityIndex Predicted Number to Be Sold Roast Chicken 300 0.243 73 Roast Pork 300 0.382 115 Roast Beef 300 0.375 112 Total 300
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Menu Item Forecasting  Factors influencing number of guests:  Competition, weather, special events in your area, facility occupancy, your own promotions, your competitor’s promotions, quality of service, and operational consistency.  Sales histories track only the general trends of an operation. They are not precise.
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Standardized Recipes  The standardized recipe controls both the quantity and quality of what the kitchen will produce.  It details the procedures to be used in preparing and serving each of your menu items.
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Standardized Recipes  Good standardized recipes contain the following: 1. Menu item name 2. Total yield (number of servings) 3. Portion size 4. Ingredient list 5. Preparation/method section 6. Cooking time and temperature 7. Special instructions, if necessary 8. Recipe cost (optional)
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Figure 3.3 Standardized Recipe Roast Chicken Special Instructions: Serve with Recipe Yield: 48 Crabapple Garnish (see Crabapple Garnish Portion Size: 1/4 chicken Standardized Recipe) Portion Cost: See cost sheet Serve on 10-in. plate Ingredients Amount Method Chicken Quarters (twelve 3-3½-lb. chickens) 48 ea. Step 1. Wash chicken; check for pinfeathers; tray on 24 in. x 20 in. baking pans. Butter (melted) 1 lb. 4 oz. Step 2. Clarify butter; brush liberally on chicken quarters; combine all seasonings; mix well; sprinkle all over chicken quarters. Salt 1/4 C Pepper 2 T Paprika 3 T Step 3. Roast at 325o F in oven for 2 1/2 hours, to an internal temperature of at least 165o F.Poultry Seasoning 2 t Ginger 1 1/2 t Garlic Powder 1 T
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Standardized Recipes  The following list contains arguments often used against standardized recipes: 1. They take too long to use. 2. My people don’t need recipes; they know how we do things here. 3. My chef refuses to reveal his or her secrets. 4. They take too long to write up. 5. We tried them but lost some, so we stopped using them. 6. They are too hard to read, or many of my people cannot read English.
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Standardized Recipes  Reasons for incorporating a system of standardized recipes include: 1. Accurate purchasing 2. Dietary concerns are addressed-ingredients identified 3. Accuracy in menu laws-ingredients identified 4. Matching food used to cash sales 5. Accurate recipe costing and menu pricing 6. New employees can be better trained 7. Computerization of a foodservice operation depends on them
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Standardized Recipes  When adjusting recipes for quantity (total yield), two general methods may be employed.  They are: 1. Factor Method 2. Percentage Technique
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Standardized Recipes  Factor Method: recipe conversion factor:  For example, a 50 portion recipe can be converted to a 125 portion recipe: 125/50=2.5 2.5 is multiplied by each ingredient (except spices) Yield Desired Current Yield = Conversion Factor
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Figure 3.4 Factor Method Ingredient Original Amount Conversion Factor New Amount A 4 lb. 2.5 10 lb. B 1 qt. 2.5 2 ½ qt. C 1 ½ T 2.5 3 ¾ T
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Standardized Recipes  The percentage method deals with recipe weight, rather than with a conversion factor. Ingredient Weight/Total Recipe Weight=% of Total then % of Total x Total Amount Required = New Recipe Amount
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Figure 3.5 Percentage Method Ingredient Original Amount Ounces % of Total Total Amount Required % of Total New Recipe Amount A 6 lb. 8 oz. 104 61.9% 300 oz. 61.9% 185.7 oz. B 12 oz. 12 7.1 300 oz. 7.1 21.3 oz. C 1 lb. 16 9.5 300 oz. 9.5 28.5 oz. D 2 lb. 4 oz. 36 21.5 300 oz. 21.5 64.5 oz. Total 10 lb. 8 oz. 168 100.0 300 oz. 100.0 300.0 oz.
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Inventory Control  A desired inventory level is simply the answer to the question, “How much of each needed ingredient should I have on hand at any one time?”  Working stock is the amount of an ingredient you anticipate using before purchasing that item again.  Safety stock is the extra amount of that ingredient you decide to keep on hand to meet higher than anticipated demand.
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Inventory Control  Inventory levels are determined by a variety of factors: 1. Storage Capacity 2. Item perishability 3. Vendor delivery schedule 4. Potential savings from increased purchase size 5. Operating calendar 6. Relative importance of stock outages 7. Value of inventory dollars to the operator
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Inventory Control  Do not overload storage capacity. Leads to greater spoilage and loss due to theft.  Shelf life is the amount of time a food item retains its maximum freshness, flavor, and quality while in storage.  The cost to the vendor for frequent deliveries will be reflected in the cost of the goods to the operator.
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Figure 3.6 Shelf Life Item Storage Shelf Life Milk Refrigerator 5-7 days Butter Refrigerator 14 days Ground Beef Refrigerator 2-3 days Steaks (fresh) Refrigerator 14 days Bacon Refrigerator 30 days Canned Vegetables Dry Storeroom 12 months Flour Dry Storeroom 3 months Sugar Dry Storeroom 3 months Lettuce Refrigerator 3-5 days Tomatoes Refrigerator 5-7 days Potatoes Dry Storeroom 14-21 days
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Figure 3.7: Recommended Refrigeration and Freezer Storage Period Maximums Cold Storage Chart These short, but safe, time limits will help keep refrigerated food from spoiling or becoming dangerous to eat. Because freezing keeps food safe indefinitely, recommended storage times are for quality only. Product Refrigerator (40 °F, 4.5 °C) Freezer (0 °F, -18 °C) Eggs Fresh, in shell 3 to 5 weeks Do not freeze Raw yolks & whites 2 to 4 days 1 year Hard cooked 1 week Does not freeze well Liquid pasteurized eggs, egg substitutes Opened 3 days Does not freeze well Unopened 10 days 1 year Mayonnaise Commercial, refrigerate after opening 2 months Do not freeze Frozen Dinners & Entrées Keep frozen until ready to heat — 3 to 4 months Deli & vacuum-packed products Store-prepared (or homemade) egg, chicken, ham, tuna, & macaroni salads 3 to 5 days Does not freeze well Hot dogs & luncheon meats Hot dogs Opened package 1 week 1 to 2 months Unopened package 2 weeks 1 to 2 months Luncheon meat Opened package 3 to 5 days 1 to 2 months Unopened package 2 weeks 1 to 2 months
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Product Refrigerator (40 °F, 4.5 °C) Freezer (0 °F, -18 °C) Bacon & Sausage Bacon 7 days 1 month Sausage, raw—from chicken, turkey, pork, beef 1 to 2 days 1 to 2 months Smoked breakfast links, patties 7 days 1 to 2 months Hard sausage—pepperoni, jerky sticks 2 to 3 weeks 1 to 2 months Summer sausage labeled “Keep Refrigerated” Opened 3 weeks 1 to 2 months Unopened 3 months 1 to 2 months Ham, Corned Beef Corned beef, in pouch with pickling juices 5 to 7 days Drained, 1 month Ham, canned labeled “Keep Refrigerated” Opened 3 to 5 days 1 to 2 months Unopened 6 to 9 months Do not freeze Ham, fully cooked vacuum sealed at plant, undated, unopened 2 weeks 1 to 2 months Ham, fully cooked vacuum sealed at plant, dated, unopened “Use-By” date on package 1 to 2 months Ham, fully cooked Whole 7 days 1 to 2 months Half 3 to 5 days 1 to 2 months Slices 3 to 4 days 1 to 2 months Hamburger, ground, & stew meat Hamburger & stew meat 1 to 2 days 3 to 4 months Ground turkey, veal, pork, lamb, & mixtures of them 1 to 2 days 3 to 4 months
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Product Refrigerator (40 °F, 4.5 °C) Freezer (0 °F, -18 °C) Fresh beef, veal, lamb, pork Steaks 3 to 5 days 6 to 12 months Chops 3 to 5 days 4 to 6 months Roasts 3 to 5 days 4 to 12 months Variety meats—tongue, liver, heart, kidneys, chitterlings 1 to 2 days 3 to 4 months Pre-stuffed, uncooked pork chops, lamb chops, or chicken breasts stuffed with dressing 1 day Does not freeze well Soups & stews Vegetable or meat added 3 to 4 days 2 to 3 months Cooked meat leftovers Cooked meat & meat casseroles 3 to 4 days 2 to 3 months Gravy & meat broth 1 to 2 days 2 to 3 months Fresh poultry Chicken or turkey, whole 1 to 2 days 1 year Chicken or turkey, pieces 1 to 2 days 9 months Giblets 1 to 2 days 3 to 4 months Cooked poultry leftovers Fried chicken 3 to 4 days 4 months Cooked poultry casseroles 3 to 4 days 4 to 6 months Pieces, plain 3 to 4 days 4 months Pieces covered with broth, gravy 1 to 2 days 6 months Chicken nuggets, patties 1 to 2 days 1 to 3 months Pizza, cooked 3 to 4 days 1 to 2 months Stuffing, cooked 3 to 4 days 1 month
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Inventory Control  Volume or quantity discounts-savings.  Costs may include: storage costs, spoilage, deterioration, insect or rodent infestation or theft.  The operating calendar plays a large part in determining desired inventory levels.  Less than seven days per week  Closed for seasonal purposes  Stock Outages
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Inventory Control  Value of Inventory Dollars  Over-buy or “stockpile” inventory. An opportunity cost is the cost of foregoing the next best alternative when making a decision.  A state institution that is given its entire annual budget may find it advantageous to use its purchasing power to acquire large amounts of inventory at very low prices-stockpiling.  Fiscal year is 12 months long but may not follow the calendar year.
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Inventory Control  A purchase point is that point in time when an item should be reordered. This point is typically designated by one of two methods: 1. As needed (just in time) 2. Par level
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Inventory Control  As needed, or just in time method of determining inventory levels.  Prediction of unit sales  Sum of the ingredients (from standardized recipes) necessary to produce those sales.
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Inventory Control  Par levels-predetermined purchase points.  Minimum and maximum amounts  Minimum-working stock  Safety stock-25% to 50% over  4+2=6 (purchase point), order 4 to max = 10  Highly perishable items – as-needed basis  Longer shelf life – par level
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Purchasing  Purchasing is essentially a matter of determining the following: 1. What should be purchased? 2. What is the best price to pay? 3. How can a steady supply be assured?
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Purchasing  What Should Be Purchased?  Product specification (spec) – a detailed description of an ingredient or menu item.  Communicates in a very precise way with a vendor so that your operation receives the exact item requested every time.  Each menu item or ingredient should have its own spec.
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Purchasing  What to include in specs  Product name or specification number  Pricing unit  Standard or grade  Weight range/size – count  Processing and/or packaging  Container size  Intended use  Other information such as product yield
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Figure 3.8 Product Specification Product Name: Bacon; sliced Spec #: 117 Pricing Unit: lb. Standard/Grade: Select No.1 Moderately thick slice Oscar Mayer item 2040 or equal Weight Range: 14 - 16 slices per pound Packaging: 2/10 lb. Cryovac packed Container Size: Not to exceed 20 lb. Intended Use: Bacon, lettuce, and tomato sandwiches Other Information: Flat packed on oven-proofed paper Never frozen Product Yield: 60% Yield
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Figure 3.9 Selected Producer Container Net Weights Items Purchased Container Approximate Net Weight (lb.) Apples Cartons, tray pack 40-45 Asparagus Pyramid crates, loose pack 32 Beets, bunched ½ crates, 2 dozen bunches 36-40 Cabbage, green Flat crates (1 ¾ bushels) 50-60 Cantaloupe ½ wirebound crates 38-41 Corn, sweet Cartons, packed 5 dozen ears 50 Cucumbers, field grown Bushel cartons 47-55 Grapefruit, FL 4/5 bushel cartons & wirebound crates 42 ½ Grapes, Table Lugs and cartons, plain pack 23-24 Lettuce, loose leaf 4/5-bushel crates 8-10 Limes Pony cartons 10 Onions, green 4/5-bushel crates (36 bunches) 11 Oranges, FL 4/5-bushel cartons 45 Parsley Cartons, wax treated, 5 dozen bunches 21 Peaches 2-layer cartons and lugs, tray pack 22 Shallots Bags 5 Squash 1-layer flats, place pack 16 Strawberries, CA 12 one-pint trays 11-14 Tangerines 4/5 -bushel cartons 47 ½ Tomatoes, pink and ripe 3-layer lugs and cartons, place pack 24-33
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Purchasing  Product yield is the amount of product that you will have remaining after cooking, trimming, portioning or cleaning.
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Purchasing  What Is the Best Price to Pay?  The best price is more accurately stated as the lowest price that meets the long-term goals of both the foodservice operation and its vendor.  Make vs. Buy decisions  Bid sheet – comparison shopping  Price comparison sheet – after you have received bids from your suppliers, you can compare those bids
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Figure 3.10 Bid Sheet Vendor: Buyer: Vendor’s Address: Buyer’s Address: Vendor’s Telephone #: Buyer’s Telephone #: Vendor’s Fax #: Buyer’s Fax #: Vendor’s E-Mail: Buyer’s E-Mail: Item Description Unit Bid Price 109 Rib, 19-22#, Choice Pound 110 Rib, 16-19#, Choice Pound 112A Ribeye Lip on 9-11#,Choice Pound 120 Brisket, 10-12# Deckle off, Choice Pound 164 Steamship Round, 60#, Square bottom, Choice Pound 168 Inside Round, 17-20#, Choice Pound 184 Top Butt, 9-11#, Choice Pound 189A Tender, 5# Avg. Pound 193 Flank Steak, 2# Avg., Choice Pound 1184b Top Butt Steak, 8 oz., Choice Pound 1190a Tenderloin Steak, 8 oz., Choice Pound 109 Rib, 19-22#, Certified Angus Beef, Choice Pound 123 Short Ribs, 10# Pound 180 Strip, 10-12#, Choice Pound Bid Prices Fixed From: ______ to ______ Salesperson Signature: _________________________ Date: ____________
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Figure 3.11 Price Comparison Sheet Vendors Category: Produce A. Bill’s Produce Date bid: 1/1/ B. Davis Foods C. Ready Boy Price Comparison Sheet Item Description Unit A B C Best Bid ($) Best Company Last Price Paid Lettuce, Iceberg, 24 ct. case $9.70 $10.20 $9.95 $9.70 A $9.50 Lettuce, Red Leaf, 24 ct. case 10.50 10.25 10.75 10.25 B 10.10 Mushroom, Button, 10 lb. bag 15.50 15.75 16.10 15.50 A 15.75 Mushroom, Portabello, 5 lb. bag 19.00 19.80 18.90 18.90 C 19.00 Onion, White medium, 50 lb. bag 20.25 20.00 20.50 20.00 B 19.80 Pepper, Green Bell, 85 ct. case 28.90 29.50 30.10 28.90 A 27.00 Potato, Russet Idaho, 60 ct. case 12.75 12.50 12.20 12.20 C 12.85 Reviewed by: M. Hayes
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Purchasing  Bid sheets and price comparison sheets are a good place to start.  Other determining factors: vendor dependability, quality of vendor service, and accuracy in delivery
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Purchasing  Minimum order requirement is the smallest order that can be placed with a vendor who delivers.  If the minimum order requirement cannot be met using the lowest prices, then the manager may have to choose the supplier with the next highest price to fill a complete order.
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Purchasing  How can a steady supply be assured?  Suppliers have a variety of prices based on the customer to whom they are quoting them.  It is simply in the best interest of a supplier to give a better price to a high volume customer.  Cherry Pickers – how suppliers describe the customer who gets bids from multiple vendors, then buys only those items each vendor has “on sale” or for the lowest price.
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Purchasing  Slow pay means high pay.  Vendors can be great source of information related to new products, cooking techniques, trends and alternative product usage.
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Purchasing  One vendor versus many vendors  Staples and non-perishables are best purchased in bulk from one vendor.  Orders for meats, produce, and some bakery products are best split among several vendors, perhaps with a primary and secondary vendor in each category so that you have a second alternative should the need arise.
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Purchasing  Ethics have been defined as the choices of proper conduct made by an individual in his or her relationships with others.  Is it legal?  Does it hurt anyone?  Am I being honest?  Would I care if it happened to me?  Would I publicize my action?  Kickbacks always hurt the company
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Purchasing  Daily Inventory Sheet  Items listed in your storage areas  Unit of purchase  Par value  Columns; on-hand, special order, and order amount  All pre-printed on the sheet
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Purchasing  The par value is listed so that you know how much inventory you should have in storage at any given time.  The amount to be ordered is calculated as follows: Par Value – On-Hand + Special Order = Order Amount
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Figure 3.12 Daily Inventory Sheet Item Description Unit Par Value On Hand Special Order Order Amount Hot Wings 15# IQF Case 6 2 3 7 Babyback Ribs 2-2 ½# Case 3 1.5 1 3 Sausage Links 96, 1 oz. Case 5 Drummies 2-5# Case 4 Bologna 10# avg. Each 3 Beef Pastrami 10# avg. Each 4 Slice Pepperoni 10# avg. Each 6 All-Beef Franks 8/1, 10# Case 7
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Purchasing  Regardless of your communication method, it is critical that you prepare a written purchase order, or record of what you have decided to buy. The purchase order (PO) should be made out in triplicate (3 copies.)
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Purchasing The written Purchase Order form should contain space for the following information: Purchase Order Information Item Name Spec #, if appropriate Quantity Ordered Quoted Price Extension Price Total Price of Order Vendor Information Purchase Order Number Date Ordered Delivery Date Name of Person who Placed Order Name of Person who Received Order Delivery Instructions Comments
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Purchasing  The advantages of a written Purchase Order are many and include the following: 1. Written verification of quoted price 2. Written verification of quantity ordered 3. Written verification of the receipt of all goods ordered 4. Written and special instructions to the receiving clerk, as needed 5. Written verification of conformance to product specification 6. Written authorization to prepare vendor invoice for payment
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Figure 3.13 Purchase Order Vendor: Purchase Order #: Vendor’s Address: Delivery Date: Vendor’s Telephone #: Vendor’s Fax #: Vendor’s E-Mail: Item Purchased Spec # Quantity Ordered Quoted Price Extended Price 1. 2. 3. 4. 5. 6. 7. 8. 10. 11. 12. 13. 14. 15. 16. Total Order Date: Comments: Ordered By: Received By: Delivery Instructions:
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Figure 3.14 Purchase Order Vendor: Scooter’s Produce Purchase Order #: 56 Vendor’s Address: 123 Anywhere Delivery Date: 1/3 Vendor’s Telephone #: 999-0000 Vendor’s Fax #: 999-0001 Vendor’s E-Mail: scootersproduce@isp.org Item Purchased Spec# Quantity Ordered Quoted Price Extended. Price 1. Bananas 81 30 lb. $ 0.24 lb. $ 7.20 2. Parsley 107 4 bunches 0.80/bunch 3.20 3. Oranges 101 3 cases 31.50/case 94.50 4. Lemons 35 6 cases 29.20/case 175.20 5. Cabbages 85 2 bags 13.80/bag 27.60 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. Total $307.70 Order Date: 1/1 Comments: Ordered By: Joshua David Entered on 1/1 Received By: Transmitted by Joshua David Delivery Instructions: After 1:00 p.m.
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Receiving  One individual places the order, while another individual is responsible for verifying delivery and acceptance of the product.  Auditors are individuals responsible for reviewing and evaluating proper operational procedures. They can determine the potential for fraud or theft.
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Receiving  Proper control procedures will minimize theft.  Proper receiving demands: 1. Proper location 2. Proper tools and equipment 3. Proper delivery schedules 4. Proper training
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Receiving  The receiving area must be large enough to allow for checking products delivered against both the invoice and purchase order.  Accessibility to equipment required to move products to their proper storage area and to dispose of excess packaging is important. Make sure the area stays free of trash and clutter, as these make it too easy to hide delivered food items.
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Receiving  Remember that the delivery person is also a potential thief.  The receiving area should be kept extremely clean, since you do not want to contaminate incoming food, or provide a carrying vehicle for pests. The area should be well lit and properly ventilated.  Receiving clerks should have the following equipment: scales, wheeled equipment, box cutter, thermometer, calculator and records area.
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Receiving  Scales should be of two types; those accurate to the fraction of a pound, and those accurate to the fraction of an ounce.  Some operators demand that deliveries be made only at certain times; these are called acceptance hours.  Refusal hours are the times that operators will not accept deliveries.
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Receiving  Receiving clerks should be trained to verify the following product characteristics: weight, quantity, quality, and price.  Receiving clerks should be required to weigh all meat, fish and poultry delivered, with the exception of unopened Cryovac (sealed) packages.  When an item is ordered by weight, it should be verified by weight.
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Figure 3.15 Ordered Item Ordered Unit Price Total Ordered Total Price Hamburger $2.25/lb. 10 lb. $ 22.50 N.Y. Strip Steak 7.00/lb. 20 lb. 140.00 Corned Beef 8.60/lb. 10 lb. 86.00 Total 40 lb. 248.50 Figure 3.16 Delivered Item Ordered Unit Price Total Delivered Actual Value Hamburger $2.25/lb. 15 lb. $ 33.75 N.Y. Strip Steak 7.00/lb. 10 lb. 70.00 Corned Beef 8.60/lb. 15 lb. 129.00 Total 40 lb. 232.75
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Receiving  The counting of boxes, cases, barrels, etc. should be routine. The counting of individual items in a box, such as lemons should be done periodically.  Checking for quality means checking the entire shipment for conformance to specifications.
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Receiving  In cases when the vendor is out of the spec item, clerks must know whether it is management’s preference to accept a product of higher quality, lower quality, or no product as a substitute.  Clerks need to be trained in two areas regarding pricing: matching PO unit price to invoice unit price, and verifying price extensions and total.  When the person responsible for purchasing food places an order, the confirmed quoted price should be recorded on the PO.
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Receiving  When a discrepancy is discovered, management should be notified immediately.  If management notification is not possible, both the driver and the receiving clerk should initial the “Comment” section of the PO, showing the difference in the two prices.  Shorting is the term used in the industry to indicate that an ordered item has not been delivered as promised.
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Receiving  A credit memo is simply a formal way of notifying the vendor that an item listed on the original invoice is missing, and thus the value of that item should be deducted from the invoice total.  A contract price is simply an agreement between buyer and seller to hold the price of a product constant over a defined period of time.  Extended price is simply the unit price multiplied by the number of units delivered.
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Figure 3.17 Credit Memo CREDIT MEMO Unit Name: Vendor: Delivery Date: Invoice #: Credit Memo #: Correction Item Quantity Short Refused Price Credit Amount Total Original Invoice Total: Less: Credit Memo Total: Adjusted Invoice Total: Additional Information: Vendor Representative: Vendor Representative Telephone #: Operation Representative: Operation Representative Telephone #:
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Receiving  Never assume extensions are correct because a computer did them!  If a supplier consistently shorts your operation, that supplier is suspect both in terms of honesty and lack of concern for your operation’s long-term success.  Training your receiving clerk to assess and evaluate quality products is a continuous process.
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Receiving  Some large operations use a receiving record when receiving food.  A receiving record generally contains the following information: name of supplier, invoice number, item description, unit price, number of units delivered, total cost, storage area, and date of activity.  Receiving reports can be helpful if it is important to record where items are to be delivered, or have been delivered.
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Figure 3.18 Hotel Pennycuff Receiving Report Date: 1/1 Supplier Invoice # Item Unit Price # of Units Total Cost Distribution A B C D E Dairy O T-16841 ½ pt. milk $ 0. 24 800 $ 192.00 75 600 125 --- Tom's Rice 12785 Rice (bags) 12.00 3 36.00 --- 1 --- 2 - - Barry's Bread J-165 Rye 0.62 25 15.50 --- 25 --- --- - - Wheat 0.51 40 20.40 20 --- 20 --- - - White 0.48 90 43.20 40 10 --- 40 - - Total units 958 135 636 145 42 0 Total cost $307.10 Distribution Key: Comments: A = Coffee Shop D = Storeroom B = Banquet Kitchen E = Sundry (nonfood items) C = Direct Use
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Part 2 Storage  Remember that storage costs money, in terms of the space for items and the money that is tied up in inventory items.  In most establishments, the storage process consists of four parts: placing products in storage, maintaining product quality and safety, maintaining product security, and determining inventory value.
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Storage  Most often, in foodservice, high perishability dictates that the same person responsible for receiving the items is the person responsible for their storage.  The two storage methods used are LIFO and FIFO.  When using the LIFO (last in, first out) method, the store-room operator intends to use the most recently delivered product before he or she uses any part of that same product previously on hand.
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Storage  FIFO (first in, first out) means that the operator intends to rotate stock in such a way that product already on hand is sold prior to the sale of more recently delivered products.  FIFO is the preferred storage technique for most perishable and non-perishable items. Failure to use FIFO can result in excessive product loss due to spoilage, shrinkage, and deterioration of quality.
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Figure 3.19 FIFO and LIFO Storage Systems Oldest Newest Oldest Newest Oldest Newest Newest Oldest Newest Oldest Newest Oldest FIFO LIFO Figure 3.20 FIFO Stocking System Tomato Sauce 2/10 Beets 2/10 Egg Noodles 2/18 Tomato Sauce 2/18 Beets 2/10 Egg Noodles 2/18 Tomato Sauce 2/18 Beets 2/18 Egg Noodles 2/22 Tomato Sauce 2/22 Beets 2/22 Egg Noodles 2/22
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Storage  Some operators require the storeroom clerk to mark or tag each delivered item with the date of delivery.  Some operators prefer to go even further when labeling some products for storage. These operators date the item and then also indicate the day (or hour) in which the product should be pulled from storage, thawed, or even discarded.
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons DATE HOUR PULL THAW DISC. MONDAYMONDAY Figure 3.21 Product Storage Label
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Storage  Products are generally placed in one of three major storage areas: dry storage, refrigerated storage, or frozen storage.  Dry storage areas should generally be maintained at a temperature ranging between 65F and 75F.  Shelving must be sturdy, easy to clean, and at least 6 inches above the ground to allow for proper cleaning beneath the shelving and to ensure proper ventilation.
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Storage  Dry goods should never be stored directly on the floor. Labels should face out for easy identification.  Refrigerator temperatures should generally be maintained between 32F (0C) and 36F (2C). Refrigerators actually work by removing heat from the contents, rather than “making” food cold.  Shelving must be at least six inches off the floor and slotted to allow for good air circulation.
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Storage  Freezer temperatures should be maintained between 0F and -10F (-18C and -23C).  Freezers must be regularly maintained, a process that includes cleaning inside and out, and constant temperature monitoring to detect possible improper operation.
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Storage  Regardless of the storage type, food and related products should be stored neatly in some logical order.  Food product quality rarely improves with increased storage time.  The primary method for ensuring product the quality of stored products is through proper product rotation and high standards of storeroom sanitation.
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Storage  Storage areas are excellent breeding grounds for insects, some bacteria, and also rodents, so insist on regular cleaning of all storage areas.  Both refrigerators and freezers should be kept six to ten inches from walls to allow for the free circulation of air.  Drainage systems in refrigerators should be checked at least weekly.
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Storage  In larger storage areas, hallways should be kept clear and empty of storage materials or boxes.  Some employee theft is impossible to detect – eating on the job (grape).  Make it difficult to remove food from storage without authorization.
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Storage  Most foodservice operators attempt to control access to the location of stored products.  It is your responsibility to see to it that the storeroom clerk maintains good habits in securing product inventory.  As a general rule, if storerooms are to be locked, only one individual should have access during any shift.
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Storage  It is not possible to know your actual food expense without an accurate inventory.  Issuing is the process of placing products into the production system.
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Storage  Valuing, or establishing a dollar value for your entire inventory is achieved by using the following inventory value formula:  Item amount may be determined by counting the item, as in the case of cans, or by weighing items, as in the case of meats. Item Amount x Item Value = Item Inventory Value
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Storage  If inventory amounts are overstated, or padded inventory, costs will appear artificially low until the proper inventory values are determined.  Either the LIFO or FIFO method determines item value.  When the LIFO method is used, the item’s value is said to be the price paid for the least recent (oldest) addition to item amount.
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Storage  If the FIFO method is used, the item value is said to be the price paid for the most recent (newest) product on hand.  FIFO is the more common method for valuing foodservice inventory.  The inventory valuation sheet should be completed each time the inventory is counted.
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Figure 3.22 Inventory Valuation Sheet Unit Name: Inventory Date: Counted By: Extended By: Item Unit Item Amount Item Value Inventory Value Page Total Page _______of______
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Storage  It is recommended that one person takes the actual physical inventory, and a different person extends the value of that inventory.  A physical inventory, one in which the food products are actually counted, must be taken to determine your actual food usage.
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Determining Actual Food Expense  Cost of food sold is the dollar amount of all food actually sold, thrown away, wasted or stolen. It is computed as follows:
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Figure 3.23 Formula for Cost of Food Sold Beginning Inventory Plus Purchases =Goods Available for Sale Less Ending Inventory =Cost of Food Consumed Less Employee Meals =Cost of Food Sold
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Determining Actual Food Expense  Beginning inventory is the dollar value of all food on hand at the beginning of the accounting period.  Purchases are the sum cost of all food purchased during the accounting period.  Goods available for sale is the sum of the beginning inventory and purchases.  Ending inventory refers to the dollar value of all food on hand at the end of the accounting period.
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Determining Actual Food Expense  Cost of food consumed is the actual dollar value of all food used, or consumed, by the operation.  Employee meal cost is actually a labor-related, not food-related cost. Free or reduced-cost employee meals are a benefit much in the same manner as medical insurance or paid vacation.  It is important to note that ending inventory for one accounting period becomes the beginning inventory figure for the next period.
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Figure 3.24 Recap Sheet Cost of Food Sold Accounting Period: to Unit Name: Beginning Inventory $ PLUS Purchases $ Goods Available for Sale $ LESS Ending Inventory $ Cost of Food Consumed $ LESS Employee Meals $ Cost of Food Sold $
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Determining Actual Food Expense  Food or beverage products may be transferred from one food service unit to another – kitchen to bar and vice versa.  Transfers out of the kitchen are subtracted from the cost of food sold and transfers into the kitchen are added to the cost of food sold.
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Figure 3.25 Recap Sheet Cost of Food Sold Accounting Period: 1/1 to 1/31 Unit Name: Your Ice Cream Store Beginning Inventory $ 23,225 PLUS Purchases $ 39,000 Goods Available for sale $ 62,225 LESS Ending Inventory $ 27,500 LESS Transfers Out $ 4,500 PLUS Transfers In $ 3,775 Cost of Food Consumed $ 34,000 LESS Employee Meals $ 725 Cost of Food Sold $ 33,275
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Determining Actual Food Expense  A foodservice operation’s cost of food consumed is affected by a variety of factors. One such factor relates to the “source reduction” decisions made by the operation’s suppliers.  “Source reduction” is utilized by suppliers to minimize the amount of resources initially required to package, store and ship the items they sell. The result of effective source reduction is a lessened impact on the environment and lower product costs
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Determining Actual Food Expense  The formula used to compute actual food cost percentage is as follows: Cost of Food Sold Food Sales = Food Cost%
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Determining Actual Food Expense  Food Cost % represents that portion of food sales that was spent on food expenses.  The physical inventory may be taken as often as desired to estimate the daily cost of food sold.
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Determining Actual Food Expense  Six-column form used to estimate food cost % on a daily or weekly basis. Six Column Food Cost % Estimate 1. Purchases Today Sales Today = Cost % Today 2. Purchases to Date Sales to Date = Cost % to Date
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Figure 3.26 Six-Column Form Date: Weekday Today To Date Today To Date Today To Date
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Figure 3.27 Six-Column Food Cost Estimate Date: 1/1–1/7 Sales Purchases Cost % Weekday Today To Date Today To Date Today To Date Monday $ 850.40 $ 850.40 $1,106.20 $1,106.20 130.0% 130.0% Tuesday 920.63 1,771.03 841.40 1,947.60 91.4 110.0 Wednesday 1,185.00 2,956.03 519.60 2,467.20 43.8 83.5 Thursday 971.20 3,927.23 488.50 2,955.70 50.3 75.3 Friday 1,947.58 5,874.81 792.31 3,748.01 40.7 63.8 Saturday 2,006.41 7,881.22 286.20 4,034.21 14.3 51.2 Sunday 2,404.20 10,285.42 0 4,034.21 0 39.2 Total 10,285.42 4,034.21 39.2
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Technology Tools  This chapter focused on managing food-related costs by controlling the areas of purchasing, receiving, storage, and issuing.  There are a variety of software programs that are available that can assist in these areas such as: 1. Recipe Software can maintain and cost standardized recipes as well as maintain and supply dietary information by portion. 2. Menu Programs can create and print physical menus and even produce purchase orders based on selected menus.
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Technology Tools 3. Purchasing Software can compare bids and make purchase recommendations based on best cost/best value. 4. Receiving Software can prepare a daily receiving report and maintain receiving histories. 5. Storage/Inventory Assessment Programs can maintain product inventory values by food category and even compute LIFO or FIFO inventory values. 6. Cost of Goods Sold Programs can compare forecasted to actual cost of goods sold as well as well as maintain employee meal records.
  • Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller © 2011 John Wiley & Sons Summary Part 1  Menu Item Forecasting  Standardized Recipes  Inventory Control  Purchasing  Receiving Part 2  Storage  Determining Actual Food Expense  Technology Tools