Setting the Table by Danny Meyer paper

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Managing for Profit Chapter 13

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

The Budget Process

• Requires managers to consider future external events and their financial impacts.

• Challenges managers to recognize the importance of sales when projecting expenses and allows them to carefully prioritize competing sales demands.

A well prepared operating budget is critical because it:

Book Title Author name

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

The Budget Process

• Creates a standard (benchmark) against which to compare actual versus budgeted performance.

• Helps managers establish an appropriate menu pricing structure.

• Communicates a realistic estimate of future financial results to owners so they can evaluate the restaurant as an investment.

A well prepared operating budget is critical because it:

Book Title Author name

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

The Budget Process

Importance of Budgeting Sales

Budgeted sales

Budgeted expense

Budgeted profit

Book Title Author name

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

The Budget Process

Budgeting Sales

Step 5 Estimate impact of price changes on revenue

Step 4 Estimate long-term effect of menu changes on revenue

Step 3 Evaluate changes in external environment

Step 2 Evaluate changes in internal environment

Step 1 Review revenue data from previous years

Book Title Author name

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

The Budget Process

Monitoring the Budget

Variance is the difference between actual and planned results.

Actual $

expense

Budgeted $

expense $

Variance

Actual expense

Budgeted expense

Variance %

Book Title Author name

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

The Budget Process

Monitoring the Budget

Step 4: Take corrective action, if appropriate

Step 3: Determine cause(s) of the variance

Step 2: Identify areas of significant variance

Step 1: Compare actual results from income statement to the budget

Book Title Author name

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

The Budget Process

Monitoring the Budget

Book Title Author name

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

The Budget Process

Return on Investment (ROI)

$100,000 $1,000,000 10% ROI

$100,000 $2,000,000 5% ROI

Book Title Author name

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

The Budget Process

Considerations for revising the budget

1 • The opening or closing of a competitor.

• Opening, by the same or different ownership, of an identical restaurant in the property’s market area.

3 • A significant and long-term change in major

menu ingredient prices.

Book Title Author name

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

The Budget Process

Considerations for revising the budget

• Significant and unanticipated increases in fixed expenses, such as insurance or taxes.

• Unplanned road construction that significantly affects consumers’ abilities to reach the restaurant.

Book Title Author name

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

The Budget Process

Considerations for revising the budget

• Natural disasters (floods/hurricanes) that significantly affect forecasted sales.

7 • Significant changes in operating hours.

Book Title Author name

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

The Budget Process

Considerations for revising the budget

8 • Permanent changes in service style that

appreciably affect labor costs.

9 • Changes in financial statement formats and/or

bases for allocation of financial resources.

10 • The loss of especially skilled or talented

employees.

Book Title Author name

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

The Corrective Action Process

Model for Corrective Action

Book Title Author name

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

The Corrective Action Process

Decision Making Process The Decision Making (Problem Solving) Process • Step 1:

• Define the Problem • Step 2:

• Generate Solution Alternatives • Step 3:

• Evaluate Solution Alternatives • Step 4:

• Select the “Best” Solution Alternative • Step 5:

• Implement the Best Solution Alternative • Step 6:

• Evaluate the Effectiveness of the Solution

Book Title Author name

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

The Corrective Action Process

Tactics to Implement Change

Continuous quality improvement (CQI) Ongoing efforts within the restaurant to better meet or exceed guests’ expectations and to define ways to perform work with better, less-costly and faster

methods.

Book Title Author name

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

The Balance Sheet: Summary of Financial Status

The balance sheet provides a summary of financial sustainability.

It also indicates the amount of retained earnings: the amount of profits made that have not been withdrawn from the business.

Assets Liabilities Owner’s Equity

Book Title Author name

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

The Balance Sheet: Summary of Financial Status

• Current assets

• Property and equipment

• Other assets

Three types of assets:

Book Title Author name

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

The Balance Sheet: Summary of Financial Status

Current Ratio

Measures the ability of a restaurant to meet its short-term debt.

Current assets

Current liabilities

Current ratio

Book Title Author name

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

The Balance Sheet: Summary of Financial Status

Solvency Ratio Shows the relationship of a restaurant's assets to

its liabilities

Total assets

Total liabilities

Solvency ratio