Setting the Table by Danny Meyer paper

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Cost Control Chapter 11

David K. Hayes | Allisha A. Miller | Jack D. Ninemeier

The Professional Restaurant Manager

Book Title Author name

The Professional Restaurant Manager, 1e David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier

Managing Food and Beverage Costs

Cost of goods sold: food

The actual cost of the food used to generate food revenue for a specific time period; also called

adjusted food cost or net food cost.

Cost of goods sold: beverage

The actual cost of the beverages used to generate beverage revenue for a specific time period; also called adjusted beverage cost or net beverage

cost

Book Title Author name

The Professional Restaurant Manager, 1e David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier

Managing Food and Beverage Costs

Managers Calculate Cost of Goods Sold:

To compare the operating budget with

actual costs

To include as an entry on the property’s income statement

Book Title Author name

The Professional Restaurant Manager, 1e David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier

Managing Food and Beverage Costs

Calculation of Cost of Goods Sold

Income statement

A summary of the restaurant’s profitability that details revenues generated, costs incurred and

profits or losses realized during a specific accounting period

Also called a profit and loss statement (P&L) or an income and expense statement

Book Title Author name

The Professional Restaurant Manager, 1e David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier

Managing Food and Beverage Costs

Calculation of Cost of Goods Sold

Book Title Author name

The Professional Restaurant Manager, 1e David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier

Managing Food and Beverage Costs

Food and Beverage Cost Percentages

Food-cost percentage The percentage of food revenue used to purchase

the food that generated the revenue.

Beverage-cost percentage The percentage of beverage revenue used to

purchase the beverage that generated the revenue.

Book Title Author name

The Professional Restaurant Manager, 1e David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier

Managing Food and Beverage Costs

Food and Beverage Cost Percentages

Prime costs The term used to describe the sum of food and

beverage costs plus labor costs.

Book Title Author name

The Professional Restaurant Manager, 1e David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier

Managing Food and Beverage Costs

Food and Beverage Cost Percentages

COGS: food

(Unadjusted)

Food revenue

Food cost %

(Unadjusted)

COGS: Bev.

(Unadjusted)

Bev. revenue

Bev. cost %

(Unadjusted)

Book Title Author name

The Professional Restaurant Manager, 1e David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier

Managing Food and Beverage Costs

Concerns About Cost of Goods Sold

Inventory turnover rate The speed with which food or beverage inventory is turned into revenue within a specific time period

* Average inventory = (Beginning inventory + Ending inventory) ÷ 2

Cost of goods sold

(food or beverage)

Average inventory (food or

beverage)*

Inventory turnover

rate

Book Title Author name

The Professional Restaurant Manager, 1e David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier

Managing Food and Beverage Costs

Concerns About Cost of Goods Sold

Book Title Author name

The Professional Restaurant Manager, 1e David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier

Managing Food and Beverage Costs

Factors Affecting Costs

Menu Food preparation methods

Desired service levels

Quality of employee training

Book Title Author name

The Professional Restaurant Manager, 1e David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier

Managing Food and Beverage Costs

Five-Step Labor Control System

• Select productivity measuresStep 1

• Forecast revenues Step 2

• Establish staffing requirementsStep 3

• Schedule staffStep 4

• Evaluate labor control resultsStep 5

Book Title Author name

The Professional Restaurant Manager, 1e David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier

Managing Food and Beverage Costs

Five-Step Labor Control System

Lunch and Dinner Labor Cost Percentages Meal Period Cost of Labor Revenue Labor Cost % Lunch $2,500.00 $5,000.00 50.0% Dinner $4,000.00 $12,000.00 33.3% Total $6,500.00 $17,000.00 38.2%

Cost of Labor Revenue

Labor Cost %

Book Title Author name

The Professional Restaurant Manager, 1e David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier

Managing Food and Beverage Costs

Five-Step Labor Control System

Total Revenue

Total Labor Hours Used

Revenue per

Labor Hour

Total Labor Dollars

Number of Guest Served

Labor Dollars

per Guest

Book Title Author name

The Professional Restaurant Manager, 1e David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier

Managing Food and Beverage Costs

Five-Step Labor Control System

Guest Served

Labor Hours Used

Guests Served

per Labor Hour

Book Title Author name

The Professional Restaurant Manager, 1e David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier

Managing Food and Beverage Costs

• Days and dates covered • Employees’ first and last names • Days to work and scheduled days off • Start and stop times • Total hours to work • Requested vacation time or personal days off • On/off days for salaried personnel • Date of schedule preparation • Name of manager preparing/approving the schedule

Effective employee schedules should always indicate:

Book Title Author name

The Professional Restaurant Manager, 1e David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier

Managing Food and Beverage Costs

• Develop a productivity target and schedule to meet it

• Determine forecasted revenue • Schedule for the needs of guests first and

employees second • Avoid scheduling overtime whenever possible • Use part-time employees for peak-volume

periods

When preparing employee schedules:

Book Title Author name

The Professional Restaurant Manager, 1e David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier

Managing Food and Beverage Costs

• Minimize split shifts • Grant employee schedule requests when

possible • Be fair when scheduling preferred work periods • Comply with all applicable laws and company

policies • Communicate scheduling decisions in a timely

manner

When preparing employee schedules:

Book Title Author name

The Professional Restaurant Manager, 1e David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier

Managing Other Costs

Variable Costs and Fixed Costs

• Food • Labor

Variable costs are those that change in direct proportion to changes in revenue.

• Rent • Insurance

Fixed costs are those that do not vary as revenue changes.

Book Title Author name

The Professional Restaurant Manager, 1e David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier

Managing Other Costs

Common Restaurant Costs