Chap 8

© 2011 John Wiley & Sons Food and Beverage Cost Control, 5th
Edition
Dopson, Hayes, & Miller
Chapter 8
Controlling Other
Expenses

Edition
Main Ideas
 Managing Other Expenses
 Fixed, Variable, and Mixed Other Expenses
 Controllable and Noncontrollable Other Expenses
 Monitoring Other Expenses
 Reducing Other Expenses
 Technology Tools

Edition
Managing Other Expenses
 Other expenses are those items that are neither
food, beverage, nor labor.
 Other expenses can account for a significant
amount of the total cost of operating your
foodservice unit.
 You must look for ways to control all of your
expenses, but sometimes the environment in which
you operate will act upon your facility to influence
some of your costs in positive or negative ways.

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 In the past, serving water to each guest upon arrival in a
restaurant was simply SOP (standard operating procedure)
for many foodservice operations. The rising cost of energy
has caused many foodservice operations to implement a
policy of serving water on request rather than with each
order.
 Energy conservation and waste reduction are two examples
of attempts to control and reduce other expenses.

Edition
 Each operation will have its own unique list of required
other expenses.
 Other expenses can constitute almost anything in the
foodservice business.
 If cost groupings are used, they should make sense to the
operator and should be specific enough to let the operator
know what is in each category.
 Operators can use their own categories, or follow those used
in the Uniform System of Accounts for Restaurants (USAR)

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 While there are many ways in which to consider
other expenses, two views of these costs are
particularly useful for the foodservice manager.
 They are:
1. Fixed, variable, or mixed
2. Controllable or noncontrollable

Edition
Fixed, Variable, and Mixed Other Expenses
 A fixed expense is one that remains constant
despite increases or decreases in sales volume.
Figure 8.1 Jo Ann's Fixed Rent
For Period: 1/1 - 6/30
Month Rent Expense Sales Rent %
January $8,000 $121,000 6.61%
February 8,000 120,000 6.67
March 8,000 125,000 6.40
April 8,000 130,000 6.15
May 8,000 164,000 4.88
June 8,000 156,000 5.13
6-Month Average 8,000 136,000 5.88

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 A variable expense is one that generally increases
as sales volume increases, and decreases as sales
volume decreases.
Figure 8.2 Jo Ann's Variable Rent
Month Sales Rent % Rent Expense
January $121,000 5.00% $6,050
February 120,000 5.00 6,000
March 125,000 5.00 6,250
April 130,000 5.00 6,500
May 164,000 5.00 8,200
June 156,000 5.00 7,800
6-Month Average 136,000 5.00 6,800

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 A mixed expense is one that has properties of both
fixed and variable expenses.
Figure 8.3 Jo Ann's Mixed Rent
Month Sales
Fixed Rent
Expense
1% Variable
Rent Expense
Total Rent
Expense
January $121,000 $5,000 $1,210 $6,210
February 120,000 5,000 1,200 6,200
March 125,000 5,000 1,250 6,250
April 130,000 5,000 1,300 6,300
May 164,000 5,000 1,640 6,640
June 156,000 5,000 1,560 6,560
6-Month Average 136,000 5,000 1,360 6,360

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 The following shows how fixed, variable, and mixed
expenses behave as sales volume increases.
Expense As a Percentage of
Sales
Total Dollars
Fixed
Expense
Decreases Remains the Same
Variable
Expense
Remains the Same Increases
Mixed
Expense
Decreases Increases

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 Percents can be computed for other expenses as
follows:
Other Expenses
Total Sales = Other Expense Cost %

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 If an operator feels that a fixed expense percentage
is too high, he or she must either increase sales or
negotiate better rates.
 Normal variations in expense percentage that relate
only to whether an expense is fixed, variable, or
mixed should not be of undue concern to
management. It is only when a fixed expense is too
high or a variable expense is out of control, that
management should act. This is called
management by exception.

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Controllable and Noncontrollable Other
Expenses
 A noncontrollable expense is one that the manager
can neither increase nor decrease
 A controllable expense is one in which decisions
made by the manager can have an effect of either
increasing or reducing the expense.
 Management should focus its attention on
controllable rather than noncontrollable expenses.

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Monitoring Other Expenses
 When managing other expenses, two control and
monitoring alternatives are available. They are:
1. Other expense cost %
2. Other expense cost per guest

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 The cost per guest formula is of value when
management believes it can be helpful, or the lack
of sales figure makes the computation of other
expense percentage impossible.
Other Expenses
Total Sales = Other Expense Cost %
Other Expense
Number of Guests Served = Other Expense Cost
Per Guest

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Figure 8.4 Fixed, Variable, and Mixed Expense Behaviors as Sales Volume
Increases
Expense As a Percentage of Sales Total Dollars
Fixed Expense Decreases Remains the Same
Variable Expense Remains the Same Increases
Mixed Expense Decreases Increases

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Figure 8.5 Chez Scot Linen Cost %
Month Total Sales Linen Cost Cost %
January $ 68,000 $ 2,720 4.00%
February 70,000 2,758 3.94
March 72,000 2,772 3.85
April 71,500 2,753 3.85
May 74,000 2,812 3.80
Total 355,500 13,815 3.89
Figure 8.6 Chez Scot Linen Cost per Guest
Month Linen Cost Number of Guests Served Cost per Guest
January $ 2,720 2,566 $ 1.06
February 2,758 2,508 1.10
March 2,772 2,410 1.15
April 2,753 2,333 1.18
May 2,812 2,305 1.22
Total 13,815 12,122 1.14

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Figure 8.7: Average Paper Product Cost
Institution Cost of Paper
Products
Number of
Students
Paper Product
Cost per Student
O. University $140,592.00 8,080 $17.40
C. State University 109,200.00 6,500 16.80
P. University 122,276.00 7,940 15.40
University of T. 184,755.00 11,300 16.35
A. State University 61,560.00 3,600 17.10
5-University Average 123,676.60 7,484 16.53
Juanita’s Institution 77,220.00 4,680 16.50

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Figure 8.8: Six-Column Cost of Paper Products
Juanita’s Institution Date: 4/1–4/8
Other Expense Cost
Number of Guests
Served
Cost per Guest
Weekday Today To Date Today To Date Today To Date
Monday $ 145.50 $ 145.50 823 823 $0.18 $0.18
Tuesday 200.10 345.60 751 1,574 0.27 0.22
Wednesday 417.08 762.68 902 2,476 0.46 0.31
Thursday 0 762.68 489 2,965 0 0.26
Friday 237.51 1,000.19 499 3,464 0.48 0.29
Saturday 105.99 1,106.18 375 3,839 0.28 0.29
Sunday 0 1,106.18 250 4,089 0 0.27
Monday 157.10 1,263.28 841 4,930 0.19 0.26
Total 1,263.28 4,930 0.26

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 Increasingly, foodservice managers are finding that
creative “Green” initiatives benefit their operations
in many ways, including those that reduce other
expenses. “Trayless dining” is just such an
example.
 Trayless operations experience a 30-50% reduction
in food and beverage waste.
 Without trays to wash, water consumption is also
decreased, resulting in a decrease in other expenses
such as water, utilities, and cleaning products.

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Reducing Other Expenses
 It is useful to break down other expenses into four
categories: food and beverage, labor, facility
maintenance, and occupancy when devising
strategies to lower costs.
 In general, fixed costs related to food and beverage
operations can only be reduced when measuring
them as a percent of total sales. This can be done
only by increasing the total sales figure.

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Figure 8.9 Igloo's Fixed and Variable Other Expenses
Sales
Fixed
Expense
Variable
Expense (10%)
Total Other
Expense
Other
Expense
Cost %
$ 1,000 $ 150 $ 100 $ 250 25.00%
3,000 150 300 450 15.00
9,000 150 900 1,050 11.67
10,000 150 1,000 1,150 11.50
15,000 150 1,500 1,650 11.00

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 Labor related expenses can also be considered
partially fixed and partially variable.
 To reduce costs related to labor, it is necessary to
eliminate wasteful labor-related expenses.
 However, if an operator attempts to reduce costs too
much he or she may find the best workers employed
elsewhere.
 Reducing employee benefits while attempting to
retain a well-qualified workforce is simply
management at its worst.

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 A properly designed and implemented preventative
maintenance program can go a long way toward
reducing equipment failure and thus decreasing
equipment and facility-related costs.
 Proper care of mechanical equipment prolongs its
life and reduces operational costs.

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Figure 8.10 Typical Energy Usage Pattern
Cooking 32%
Heating (building) 19%
Cooling (building) 18 %
Heating (water) 13%
Refrigeration 11%
Lighting 6%
Administrative 1%
Total 100%

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Figure 8.11 Ten Commonsense Energy Tips for Restaurateurs
1. Turn It Off
• Turn off lights, cooking equipment, and exhaust fans when they are not
being used.
• Activate the standby mode for office equipment, in-house computers,
and printers to effectively put these pieces of equipment “to sleep”
when not in use.
2. Keep It Closed
• Keep refrigerator doors closed.
• Keep back doors, if any, to the kitchen closed to minimize heat and
cooling loss.
3. Turn It Down
• Set air-conditioning units at 76°F (24.5°C) for cooling.
• Set heating systems at 68°F (20°C) for heating.
• Reduce the temperature of your hot water heater (where appropriate).
• Adjust heating/cooling temperature settings when you close your
operation for the night.
4. Vent It
• Use ceiling fans to help recirculate dining room air.
• Retrofit exhaust hoods with both low and high speed fans, in dishroom
areas and in food preparation and cooking areas.
5. Change the Bulbs
• Replace incandescent bulbs with fluorescent. They use 75% less
electricity and last 10 times as long.
• Install photocell light sensors (motion detectors) where appropriate
(storage areas and the like) to activate lighting only when needed.

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Figure 8.11 Ten Commonsense Energy Tips for Restaurateurs (continued)
6. Watch the Water
• Run dishwashers only when they are full.
• Replace/repair leaking faucets immediately.
• Insulate all hot water pipes.
• Install “water-saver” spray nozzles in dish areas.
7. Cook Right
• Stagger preheat times for equipment to minimize surcharges for high
energy use.
• Bake during off-peak periods.
• Idle cooking equipment (between meal periods) at reduced
temperatures where appropriate.
8. Seal It
• Caulk and weatherstrip cracks and openings around doors, windows,
vents, and utility outlets.
• Check freezer, refrigerator, and walk-in seals and gaskets for cracks or
warping. Replace as needed.
9. Maintain It
• Change air filters on a regular basis (monthly during peak heating and
cooling seasons).
• Clean grease traps on ventilation equipment.
• Clean air-conditioner and refrigeration condenser/evaporator coils at
least every three months.
• Oil, lube, clean, and repair equipment as needed to maximize operating
efficiency.
10. Get Help
• Take advantage of any advisory services offered by your local utility
company and governmental agencies.
• Talk to your heating, ventilation, and air-condition (HVAC) repair person
for tips on minimizing energy and maintenance costs with your
particular HVAC system. It’s like getting a free energy management
consultant!

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 One way to help ensure that costs are as low as possible is to
use a competitive bid process before awarding contracts for
serviced you require.
 In the area of maintenance contracts, for areas such as
kitchen or mechanical equipment, elevators, or grounds, it is
recommended that these contracts be bid at least once per
year.
 Air-conditioning, plumbing, heating and refrigerated units
should be inspected at least yearly, and kitchen equipment
should be inspected at least monthly for purposes of
preventative maintenance.

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Figure 8.12 Equipment Inspection Report
Unit Name: Your Restaurant Time Period: 1/1 - 1/31
Item Inspected
Inspection
Date
Inspected
By Action Recommended
A. Refrigerator #6 1/1 D. H. Replace gasket
B. Fryer 1/7 D. H. Inspected, no maintenance
needed
C. Ice Machine 1/9 D. H. Drain, de-lime
D.
E.

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 Occupancy costs refer to those expenses incurred by the
foodservice unit that are related to the occupancy of and
payment for the physical facility it occupies.
 For the foodservice manager who is not the owner, the
majority of occupancy costs will be noncontrollable.
 The owner should find ways to control occupancy costs
such as rent and interest on debt, if possible.
 If occupancy costs are unrealistically high, no amount of
effective cost control can help “save” the operation’s
profitability.

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Technology Tools
 Depending upon the specific food service operation,
these costs can represent a significant portion of the
operation’s total expense requirements. As a result,
controlling these costs is just as important as
controlling food and labor-related costs.
 Software and hardware that can be purchased to
assist in this area include applications that relate to:
1. Assessing and monitoring utilities cost
2. Minimizing energy costs via the use of motion-activated
sensors
3. Managing equipment maintenance records
4. Tracking marketing costs/benefits

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Technology Tools
5. Menu and promotional materials printing - hardware and
software
6. Analysis of communications costs (telephone tolls)
7. Analysis of all other expense costs on a per-guest basis
8. Analysis of all other expense costs on a “cost per dollar
sale” basis
9. Comparing building/contents insurance costs across
alternative insurance providers
10. Software designed to assist in the preparation of the
income statement, balance sheet, and the statement of
cash flows.
11. Income tax management
12. Income tax filing

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Technology Tools
 At the minimum, most independent operators
should computerize their records related to taxes at
all levels to ensure accuracy, safekeeping, and
timeliness of required filings.

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Summary
 Managing Other Expenses
 Fixed, Variable, and Mixed Other Expense
 Controllable and Noncontrollable Other Expenses
 Monitoring Other Expenses
 Reducing Other Expenses
 Technology Tools

Chap 8

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