Control Analysis, Corrective Action And Evaluation
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The document discusses the process of controlling food and beverage costs through analysis, corrective action, and evaluation. It involves establishing standards, measuring actual costs, comparing the two to find variances, analyzing variances to identify potential problems, taking corrective action, and evaluating the effectiveness of the corrective action. Sources for establishing cost standards include industry averages, past financial statements, operating budgets, and in-house developed standards. Variances should be thoroughly analyzed to explain differences before taking corrective action.
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Control Analysis, Corrective Action And Evaluation
- 1. Control Analysis, Corrective Action and Evaluation Food & Beverage Management III Year Bhavin Parekh
- 5. The Control Process Establish Standard Operating Results Compute Actual Operating Results Compare Actual Operating Results with Standards If Equal Operation Running Perfectly (Ideal Case) ≠ Identify & Analyze the Variances Take Appropriate Corrective Action Evaluation
- 30. November December Food & Beverage Potential Savings Worksheet Month Food Cost Beverage Cost Actual Standard % Variance Potential Savings Actual Standard % Variance Potential Savings Cost Revenue % Cost Revenue % January 118545 330209 36 33 3 9576 13875 51772 27 21 6 3003 February March April May June July August September October
- 44. Implementation Find the Best possible Solution Identification of a Problem Assign Task Of Implementation Ensure Training & Tools Evaluation By Comparing with Standards Ask Why? Identify the Reasons Set as P&P
- 46. Sufficient Time Must be given Other Problems might Surface If Results are not as Expected? Implementation Find the Best possible Solution Identification of a Problem Assign Task Of Implementation Ensure Training & Tools Evaluation By Comparing with Standards Ask Why? Identify the Reasons Set as P&P
Editor's Notes
- Note: Every property is unique by itself and also operates in a unique Socio – Economic / Competitive Environment. Hence, when we use “Industry Wide Averages” for the purpose of Benchmarking or establishing Standard F&B Costs against which we will be comparing the Actual F&B Costs of the property, it does not give us a true picture of the Performance of the F&B Operation.
- Note: In this case, Mario has recorded a Higher Actual Food Cost % due to the fact that Mario is an Italian Restaurant situated in the Commercial District of Mumbai. The Restaurant has only two meal periods a day. It serves ethnic Italian Fare with a concentration on Seafood. Mario’s high Food Cost could be explained because of it’s adherence to Original ingredients which includes very expensive Herbs and ingredients like Truffles, Virgin Olive Oil etc. Also, with Prime ingredients like Lobster / King Prawns / Crabs, the Cost of Food is high as stiff competition in the area does not allow Mario to increase Contribution Margins by hiking up the Selling Price. Hence, Mario works on Narrow Margins in order to meet his Non – Food Costs and Profit Requirements. Hence, Mario must rely on his Restaurant Turnover for leveraging his N.F.C. and Profit Requirements.
- Note: In the Past, there were no Control Procedures in Place. Mario’s has no Standardization in terms of Ingredients, Recipe, Portion Control. Cost of Food & Beverage were higher as per the Past Financial Statements. Mario’s has now implemented Control Procedures in all areas of his operations. However, Mario has decided to “Benchmark” Costs of F&B from previous Financial Statements against which Current Actuals would be compared. Mario’s finds that Current Actuals are at par with Standards. Mario’s mistakes this for Operational Efficiency , when in reality, the Current Actuals should be far lower due to established Control Tools. In other words it means that Staff at Mario’s Diner does not follow the Set Control Procedures and requires Training. Such problems cannot be identified by comparisons with Past Financial Statements.
- Note: The Actuals and the Budgeted become truly comparable when the Profit % is incorporated in the Budgeted Figures. Profit Requirements must be factored into the Budget at the time of development. It is generally a Bottom – Up Budgeting Procedure that is followed wherein the Profit Requirements are determined first and then all other expenses are determined scientifically. This enhances our Control of the Operation. Simply comparing the Budgeted to the Actual Figures will not reveal Management inefficiencies or lapses in the Control procedure. When specific Profit % are decided upon and “Benchmarked” then control of Operations enhances. Explanation: Considering the above example: Let us say that we have “Benchmarked” a 20% Profit Requirement. Thus, having all other Control Systems in place and assuming that they are complied with, Base Selling Prices will decide Food Cost % and Beverage Cost %. If then, Actuals exceed the Budgeted, the problem area surfaces by mere comparison of figures.
- Involvement of the Management would show the commitment from the TOP to resolve a particular problem. In this manner, the Management of a particular Department would Re – Prioritize the Goals and Objectives of the Department and Streamline Operations to achieve the New Set of Goals. Management influence can help pass the message down to the lowest rung of Staff, so that everyone involved works in the same direction towards achieving the same Objective. They help mould and re-orient “Staff Level” thinking to the new Priorities of the Management in order to achieve Organizational Goals.
- Resistance to Change: Case I Mystery Guest at the Hyatt Hyatt has a Mystery Guest who comes in at least 2 times a year and Audits the Facilities and Services of the Property he is visiting in accordance with the Brand Standards of the Hotel Chain. At the Grand Hyatt, Muscat the F&B Mystery Audit Report was very poor, showing that Service Brand Standards were not followed by the Room Service Stewards. It was upon the In – Room Dining Manager to show a Positive Improvement in the Audit scores during the next Survey. Brand Standards were already in place, but in order to get the staff involved and ensuring they adhere to it during each order delivery, they had to taught by means of using a Principle of Adult Learning which is “WIIFM” – What’s in it for me? The In Room Dining Manager told the staff that a better score in the next Survey would earn the Outlet as a whole the appreciation of the Management and a personal letter from the General Manager. Along with that, if Brand Standards were to be incorporated into the Day to Day Operations and followed in every Order Delivery, it would reduce Guest Complains, earn them better Guest Recommendations leading to rewards and finally a better Tip Pool due to improved Service Quality and Standards. Case II Beverage Cost Control in In Room Dining The Room Service Operation of the Grand Hyatt, Muscat had a small bar to itself from where Alcohol Service was effected. It was a 24 – Hour Operation. The Department was manned by 3 Supervisors (One for every shift). In – Room Dining Beverage Sales (Ideal) never matched up to the Actual Sale computed at Month End (Actual Monthly Beverage Cost) by the Cost Controller. There was always a “SHORT” i.e. Physical Inventory revealed that the Actual Consumption always fell short of the Ideal Consumption. This was a loss of Revenue $$$ to the Operation which was eventually recovered from the Room Service Credit Tips. It fell upon the new In Room Dining Manager to reduce Beverage Costs and to exercise a better control over the Bar Operation. After studying the situation, the Manager suggested a number of steps for Better Controlling the Bar and reducing the Inventory Discrepancy at the month end. The Manager introduced proper Portion Control Tools like Jiggers and Pourers in order to ensure that Over – Pouring is avoided. Also, he planned to take up a number of Training Sessions for ensuring reduction in Spillages while making and serving the drinks. Most important of all, he introduced an Shift Wise Inventory System for which the Shift Supervisor would be responsible. At the Beginning of each Shift, the Supervisor, say “X” would take a Physical Inventory of Alcoholic Beverages. This would be tallied with the Ideal Closing Stock of the Previous Shift. If there were any discrepancies, the out going Shift Supervisor would have to give an explanation for the same. At the end of X’s Shift he would close the Inventory based upon the Sale during his shift which would be the Ideal Closing Balance and a New Supervisor responsible for the next shift would take the Physical Opening Inventory. In this manner, every Supervisor was held responsible for Beverage Consumption during his shift. The result was that Beverage Consumption was now more closely regulated by the Supervisor on Shift which included monitoring of Spillages, Misuse, Internal Consumption, Over Pour etc. Beverage Costs were reduced in the Outlet and the Discrepancies if any were properly documented and given to the Cost Controller at the time of the month end inventory. Satisfactory explanations convinced the F&B Manager that there was no Misuse / Theft of Alcohol and this did not warrant the need of Recovery for discrepancies from the Credit Tips. When the In – Room Dining Manager introduced the Shift Wise Inventory System, there was a lot of resistance from the Supervisors. The Manager took them into confidence and explained to them that this would be beneficial for them in the sense that they would get more Tips at the end of the month. This ensured their support for the new System. This is a Real Life example of “What’s In It For ME?” Principle.