© 2011John Wiley & Sons
Food and Beverage Cost Control, 5th
Edition
Dopson, Hayes, & Miller
Chapter 1
Managing Revenue
and...
© 2011John Wiley & Sons
Food and Beverage Cost Control, 5th
Edition
Dopson, Hayes, & Miller
Main Ideas
 Professional Food...
© 2011John Wiley & Sons
Food and Beverage Cost Control, 5th
Edition
Dopson, Hayes, & Miller
Professional Foodservice Manag...
© 2011John Wiley & Sons
Food and Beverage Cost Control, 5th
Edition
Dopson, Hayes, & Miller
Figure 1.1 Management Task Che...
© 2011John Wiley & Sons
Food and Beverage Cost Control, 5th
Edition
Dopson, Hayes, & Miller
Profit: The Reward for Service...
© 2011John Wiley & Sons
Food and Beverage Cost Control, 5th
Edition
Dopson, Hayes, & Miller
Profit: The Reward for Service...
© 2011John Wiley & Sons
Food and Beverage Cost Control, 5th
Edition
Dopson, Hayes, & Miller
Raw materials and
labor
Finish...
© 2011John Wiley & Sons
Food and Beverage Cost Control, 5th
Edition
Dopson, Hayes, & Miller
Profit: The Reward for Service...
© 2011John Wiley & Sons
Food and Beverage Cost Control, 5th
Edition
Dopson, Hayes, & Miller
Profit: The Reward for Service...
© 2011John Wiley & Sons
Food and Beverage Cost Control, 5th
Edition
Dopson, Hayes, & Miller
Profit: The Reward for Service...
© 2011John Wiley & Sons
Food and Beverage Cost Control, 5th
Edition
Dopson, Hayes, & Miller
Profit: The Reward for Service...
© 2011John Wiley & Sons
Food and Beverage Cost Control, 5th
Edition
Dopson, Hayes, & Miller
Profit: The Reward for Service...
© 2011John Wiley & Sons
Food and Beverage Cost Control, 5th
Edition
Dopson, Hayes, & Miller
Four Major Foodservice Expense...
© 2011John Wiley & Sons
Food and Beverage Cost Control, 5th
Edition
Dopson, Hayes, & Miller
Four Major Foodservice Expense...
© 2011John Wiley & Sons
Food and Beverage Cost Control, 5th
Edition
Dopson, Hayes, & Miller
Figure 1.3 Renaud Hotel Operat...
© 2011John Wiley & Sons
Food and Beverage Cost Control, 5th
Edition
Dopson, Hayes, & Miller
Percentages
 Numbers can be d...
© 2011John Wiley & Sons
Food and Beverage Cost Control, 5th
Edition
Dopson, Hayes, & Miller
Percentages
 Percent (%) mean...
© 2011John Wiley & Sons
Food and Beverage Cost Control, 5th
Edition
Dopson, Hayes, & Miller
Figure 1.4 Forms of Expressing...
© 2011John Wiley & Sons
Food and Beverage Cost Control, 5th
Edition
Dopson, Hayes, & Miller
Percentages
 Divide the numbe...
© 2011John Wiley & Sons
Food and Beverage Cost Control, 5th
Edition
Dopson, Hayes, & Miller
Figure 1.5 Percent Computation...
© 2011John Wiley & Sons
Food and Beverage Cost Control, 5th
Edition
Dopson, Hayes, & Miller
Percentages in Foodservice
 P...
© 2011John Wiley & Sons
Food and Beverage Cost Control, 5th
Edition
Dopson, Hayes, & Miller
Percentages in Foodservice
 A...
© 2011John Wiley & Sons
Food and Beverage Cost Control, 5th
Edition
Dopson, Hayes, & Miller
Profit Formula
 Put in anothe...
© 2011John Wiley & Sons
Food and Beverage Cost Control, 5th
Edition
Dopson, Hayes, & Miller
Understanding the Income
(Prof...
© 2011John Wiley & Sons
Food and Beverage Cost Control, 5th
Edition
Dopson, Hayes, & Miller
Understanding the Income
(Prof...
© 2011John Wiley & Sons
Food and Beverage Cost Control, 5th
Edition
Dopson, Hayes, & Miller
Figure 1.6 Pat's Steakhouse
Re...
© 2011John Wiley & Sons
Food and Beverage Cost Control, 5th
Edition
Dopson, Hayes, & Miller
Figure 1.8 Pat’s Steakhouse Co...
© 2011John Wiley & Sons
Food and Beverage Cost Control, 5th
Edition
Dopson, Hayes, & Miller
Common Percentages Used
in a P...
© 2011John Wiley & Sons
Food and Beverage Cost Control, 5th
Edition
Dopson, Hayes, & Miller
Understanding the Budget
 Bud...
© 2011John Wiley & Sons
Food and Beverage Cost Control, 5th
Edition
Dopson, Hayes, & Miller
Understanding the Budget
 Per...
© 2011John Wiley & Sons
Food and Beverage Cost Control, 5th
Edition
Dopson, Hayes, & Miller
 The 28-day-period approach t...
© 2011John Wiley & Sons
Food and Beverage Cost Control, 5th
Edition
Dopson, Hayes, & Miller
Understanding the Budget
 Per...
© 2011John Wiley & Sons
Food and Beverage Cost Control, 5th
Edition
Dopson, Hayes, & Miller
Figure 1.11 Camp Eureka One-We...
© 2011John Wiley & Sons
Food and Beverage Cost Control, 5th
Edition
Dopson, Hayes, & Miller
Figure 1.12 Camp Eureka Perfor...
© 2011John Wiley & Sons
Food and Beverage Cost Control, 5th
Edition
Dopson, Hayes, & Miller
Understanding the Budget
 “In...
© 2011John Wiley & Sons
Food and Beverage Cost Control, 5th
Edition
Dopson, Hayes, & Miller
Understanding the Budget
 If ...
© 2011John Wiley & Sons
Food and Beverage Cost Control, 5th
Edition
Dopson, Hayes, & Miller
Technology Tools
 Most hospit...
© 2011John Wiley & Sons
Food and Beverage Cost Control, 5th
Edition
Dopson, Hayes, & Miller
Technology Tools
 Variations ...
© 2011John Wiley & Sons
Food and Beverage Cost Control, 5th
Edition
Dopson, Hayes, & Miller
Technology Tools
 Not all inf...
© 2011John Wiley & Sons
Food and Beverage Cost Control, 5th
Edition
Dopson, Hayes, & Miller
Summary
 Professional Foodser...
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Chap 1

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Dopson, Hayes, & Miller
@2011 John Wiley & Sons

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  • 65,500 – 58,400 = 7,100 profit
  • “ Profit is not a dirty word” Dave Thomas founder of Wendy’s
  • Your sales are $75,000 The owner is looking for a desired profit of $7,500. What is your idea expense? 67,500 Your sales are $125,000 Your desired profit is 10% of sales. What is your ideal expense? $112,500
  • The owner of the Wendy’s franchise I worked for liked to call the P & L statement a grade card of your operation.
  • Know these formulas. You will use them a lot. p. 5 workbook
  • Stress estimate!
  • Chap 1

    1. 1. © 2011John Wiley & Sons Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller Chapter 1 Managing Revenue and Expense
    2. 2. © 2011John Wiley & Sons Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller Main Ideas  Professional Foodservice Manager  Profit: The Reward for Service  Four Major Foodservice Expense Categories  Percentages  Percentages in Foodservice  Profit Formula  Understanding the Income (Profit and Loss) Statement  Common Percentages Used in a P&L Statement  Understanding the Budget  Technology Tools
    3. 3. © 2011John Wiley & Sons Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller Professional Foodservice Manager  Management handles functions of product sales to product delivery.  Management of foodservice is more difficult than for manufacturing or retailing management counterparts.  The food service operator must serve as a food factory supervisor, and a cost control manager.
    4. 4. © 2011John Wiley & Sons Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller Figure 1.1 Management Task Checklist Task Foodservice Manager Manufacturing Manager Retail Manager 1. Secure raw materials Yes Yes No 2. Manufacture product Yes Yes No 3. Distribute to end- user Yes No Yes 4. Market to end- user Yes No Yes 5. Reconcile problems with end-user Yes No Yes
    5. 5. © 2011John Wiley & Sons Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller Profit: The Reward for Service  If management focuses on controlling costs more than on servicing guests, problems will certainly surface.  Do not get yourself in the mind-set of reducing costs to the point where it is thought that “low” costs are good and “high” costs are bad.
    6. 6. © 2011John Wiley & Sons Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller Profit: The Reward for Service  Efforts to reduce costs that result in unsafe conditions for guests or employees are never wise.  The question is whether costs are too high or too low, given management’s view of the value.
    7. 7. © 2011John Wiley & Sons Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller Raw materials and labor Finished products Figure 1.2 Foodservice Business Flowchart Cash reserves Purchases Profits Supplies Produces Accounts receivable or cash Generates
    8. 8. © 2011John Wiley & Sons Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller Profit: The Reward for Service  Revenue is the amount of dollars you take in.  Expenses are the costs of the items required to operate the business.  Profit is the amount of dollars that remain after all expenses have been paid. Revenue - Expenses = Profit
    9. 9. © 2011John Wiley & Sons Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller Profit: The Reward for Service  The following terms will be used interchangeably: revenue and sales; expenses and costs.  All foodservice operations, including non-profit institutions, need revenue in excess of expenses if they are to thrive.  Profit is the result of solid planning, sound management, and careful decision-making. Revenue - Expenses = Profit
    10. 10. © 2011John Wiley & Sons Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller Profit: The Reward for Service  Desired profit is defined as  Profit that the owner wants to achieve on that predicted quantity of revenue.  Ideal Expense is defined as  Management’s view of the correct or appropriate amount of expense necessary to generate a given quantity of revenue. Revenue – Desired Profit = Ideal Expense
    11. 11. © 2011John Wiley & Sons Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller Profit: The Reward for Service  Revenue varies with  Number of guests  Amount of money spent by each guest  Increase revenue by  Increasing the number of guests served  Increasing the amount that each guest spends  Or a combination of both Revenue – Desired Profit = Ideal Expense
    12. 12. © 2011John Wiley & Sons Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller Profit: The Reward for Service  Environmental sustainability describes a variety of earth-friendly practices and policies designed to meet the needs of the present population without comprising the ability of future generations to meet their own needs.  Positive benefits that accrue when businesses incorporate green activities are significant and on the increase.
    13. 13. © 2011John Wiley & Sons Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller Four Major Foodservice Expense Categories  Food Costs  Costs associated with actually producing menu items  Largest or second largest expense category  Beverage Costs  Costs related to the sale of alcoholic beverages-beer, liquor, wine  May also include ingredients, mixers and garnishes
    14. 14. © 2011John Wiley & Sons Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller Four Major Foodservice Expense Categories  Labor Costs  Cost of all employees, including taxes  Labor costs are second only to food costs in total dollars spent  Some include the cost of management in this category. Others prefer to place the cost of managers in the Other Expense category.  Other Expenses  Include all expenses that are neither food, beverage nor labor, such as utilities, rent, linen, etc.
    15. 15. © 2011John Wiley & Sons Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller Figure 1.3 Renaud Hotel Operating Results This Year Last Year Revenue $1,106,040 $850,100 Expense 1,017,557 773,591 Profits 88,483 76,509
    16. 16. © 2011John Wiley & Sons Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller Percentages  Numbers can be difficult to interpret due to inflation. Therefore, the industry often uses percentage calculations.  You will be evaluated primarily on your ability to compute, analyze, and control these percent figures.
    17. 17. © 2011John Wiley & Sons Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller Percentages  Percent (%) means “out of each hundred.”  There are three (3) ways to write a percent:  Common Form  “%” sign is used, as in 10%  Fraction Form  the part, or a portion of 100, as in 10/100  Decimal Form  the decimal point (.), as in 0.10
    18. 18. © 2011John Wiley & Sons Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller Figure 1.4 Forms of Expressing Percent Percent Form 1% 10% 100% Common 1% 10% 100% Fraction 1/100 10/100 100/100 Decimal 0.01 0.10 1.00
    19. 19. © 2011John Wiley & Sons Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller Percentages  Divide the number that is the part by the number that is the whole. Part = Percent Whole
    20. 20. © 2011John Wiley & Sons Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller Figure 1.5 Percent Computation Possibilities Examples Results Part is smaller than the whole 61 100 = 61% Always less than 100% Part is equal to the whole 35 35 = 100% Always equals 100% Part is larger than the whole 125 50 = 250% Always greater than 100%
    21. 21. © 2011John Wiley & Sons Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller Percentages in Foodservice  Percentage of revenue that went to pay for expenses: Expense Revenue = Expense %
    22. 22. © 2011John Wiley & Sons Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller Percentages in Foodservice  As long as expense is smaller than revenue, some profit will be generated  Modified profit formula: Profit Profit % = Revenue Revenue - (Food and Beverage Cost + Labor Cost + Other Expenses) = Profit
    23. 23. © 2011John Wiley & Sons Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller Profit Formula  Put in another format, the equation looks as follows: Revenue (100%) - Food and Beverage Cost % - Labor Cost % - Other Expense % = Profit %
    24. 24. © 2011John Wiley & Sons Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller Understanding the Income (Profit and Loss) Statement  Profit and loss statement (P&L) lists revenue, food and beverage cost, labor cost, other expense, and profit.  The P&L is important because it indicates the efficiency and profitability of an operation.
    25. 25. © 2011John Wiley & Sons Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller Understanding the Income (Profit and Loss) Statement  The Uniform System of Accounts is used to report financial results in most foodservice units. This system was created to ensure uniform reporting of financial results.  Published by the National Restaurant Association.
    26. 26. © 2011John Wiley & Sons Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller Figure 1.6 Pat's Steakhouse Revenue $400,000 Expenses Food and Beverage Cost $150,000 Labor Cost 175,000 Other Expense 25,000 Total Expense $350,000 Profit $ 50,000 Figure 1.7 Pat's Steakhouse P&L Revenue $400,000 100% Food and Beverage Cost $150,000 37.50% Labor Cost 175,000 43.75% Other Expense 25,000 6.25% Total Expense $350,000 87.50% Profit $50,000 12.50%
    27. 27. © 2011John Wiley & Sons Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller Figure 1.8 Pat’s Steakhouse Costs and Profit as a Percentage of Revenues
    28. 28. © 2011John Wiley & Sons Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller Common Percentages Used in a P&L Statement 1. Food and Beverage Cost Revenue = Food and Beverage Cost % 2. Labor Cost Revenue = Labor Cost % 3. Other Expense Revenue = Other Expense % 4. Total Expense Revenue = Total Expense % 5. Profit Revenue = Profit %
    29. 29. © 2011John Wiley & Sons Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller Understanding the Budget  Budget  An estimate of projected revenue, expense, and profit.  The budget is known as the plan.  All effective managers, whether in the commercial (for profit) or non-profit sector, use budgets.
    30. 30. © 2011John Wiley & Sons Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller Understanding the Budget  Performance to budget is the percentage of the budget actually used. Figure 1.9 Candy Purchases Weekday Budgeted Amount % of Total Monday $1.00 14.28% Tuesday $1.00 14.28% Wednesday $1.00 14.28% Thursday $1.00 14.28% Friday $1.00 14.28% Saturday $1.00 14.28% Sunday $1.00 14.28% Total $7.00 100.00%
    31. 31. © 2011John Wiley & Sons Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller  The 28-day-period approach to budgeting  13 equal periods of 28 days each Understanding the Budget Figure 1.10 Common Foodservice Budget Periods Budget Period Portion % of Total One week One day 1/7 or 14.3% Two-week period One day One week 1/14 or 7.1% 1/2 or 50.0% One month 28 days 30 days 31 days One week One day One day One day 1/4 or 25.0% 1/28 or 3.6% 1/30 or 3.3% 1/31 or 3.2% Six months One month 1/6 or 16.7% One year One day One week One month 1/365 or 0.3% 1/52 or 1.9% 1/12 or 8.3%
    32. 32. © 2011John Wiley & Sons Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller Understanding the Budget  Percentages are used to compare actual expense with the budgeted amount, using the formula: Actual Budget = % of Budget
    33. 33. © 2011John Wiley & Sons Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller Figure 1.11 Camp Eureka One-Week Budget Item Budget Actual Meals served 3,780 3,700 Revenue $6,993 $6,993 Food Expense $2,600 $2,400 Labor Expense $2,800 $2,900 Other Expense $ 700 $ 965 Profit $ 893 $ 728
    34. 34. © 2011John Wiley & Sons Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller Figure 1.12 Camp Eureka Performance to Budget Summary Item Budget Actual % of Budget Meals Served 3,780 3,700 97.9% Revenue $ 6,993 $ 6,993 100.0% Food Expense $ 2,600 $ 2,400 92.3% Labor Expense $ 2,800 $ 2,900 103.6% Other Expense $ 700 $ 965 137.9% Total Expenses $ 6,100 $ 6,265 102.7% Profit $ 893 $ 728 81.5%
    35. 35. © 2011John Wiley & Sons Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller Understanding the Budget  “In-line” with the budget vs. “significant” variation to the budget.  A significant variation is any variation in expected costs that management feels is an area of concern.
    36. 36. © 2011John Wiley & Sons Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller Understanding the Budget  If significant variations with planned results occur, management must: 1. Identify the problem 2. Determine the cause 3. Take corrective action
    37. 37. © 2011John Wiley & Sons Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller Technology Tools  Most hospitality managers would agree that an accurate and timely income statement (P&L Statement) is an invaluable aid to their management efforts.  There are a variety of software programs on the market that can be used to develop this statement.
    38. 38. © 2011John Wiley & Sons Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller Technology Tools  Variations include programs that can compare actual results to budgeted figures or forecasts, to prior- month performance, or to prior-year performance.  P&L’s can be produced for any time period, including months, quarters, or years.  Most income statement programs will have a budgeting feature and the ability to maintain historical sales and cost records.
    39. 39. © 2011John Wiley & Sons Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller Technology Tools  Not all information should be accessible to all parties, and security of cost and customer information can be just as critical as accuracy.  To effectively manage an operation, a manager will need to communicate with employees, guests, and vendors. Thus, the software you will need includes office products for word processing, spreadsheet building, faxes, and e-mail.
    40. 40. © 2011John Wiley & Sons Food and Beverage Cost Control, 5th Edition Dopson, Hayes, & Miller Summary  Professional Foodservice Manager  Profit: The Reward for Service  Four Major Foodservice Expense Categories  Percentages  Percentages in Foodservice  Profit Formula  Understanding the Income (Profit and Loss) Statement  Common Percentages Used in a P&L Statement  Understanding the Budget  Technology Tools

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