1. Budgeting Labor Costs  Labor is a semivariable, controllable cost. Labor costs are tied to sales, but not directly.  Most operations have both full-time and part-time staff.  Operations must be aware of the fluctuations in their sales so as to have just the right amount of staff on hand to handle customers efficiently,  It is an important part of the management function to make sure that payroll cost is in line with the budgeted standard.  Ideal labor cost is the standard the restaurant uses to budget for staffing needs; it represents what management predicts will happen. 1 3.3 Chapter 3 | Cost Control

2. Labor Cost Factors  Business volume, or the amount of sales an operation is doing for a given time period, impacts labor costs.  Employee turnover is the number of employees hired to fill one position in a year’s time.  Quality standards also affect labor cost. Quality standards are the specifications of the operation with regard to products and service.  A restaurant or foodservice operation must meet operational standards. If an employee does not prepare a product that meets the operation’s standards, the item must be redone. This costs money, in terms of wasted product and lost productivity. 2 3.3 Chapter 3 | Cost Control

3. Scheduling  A master schedule is a template that shows the number of people needed in each position to run the restaurant or foodservice operation for a given time period.  To make the best estimates for a reasonable master schedule, it also needs to consider current trends.  After determining the anticipated sales, management determines the payroll dollars, which are the number of dollars available for payroll for a scheduling period.  A crew schedule is a chart that shows employees’ names and the days and times they are to work.  A contingency plan helps an operation remain efficient and productive even during adverse conditions. 3 3.3 Chapter 3 | Cost Control

4. Section 3.3 Summary  Operations must be aware of the fluctuations in their sales so as to have just the right amount of staff on hand to handle customers efficiently.  Four primary factors affect labor costs:  Business volume  Employee turnover  Quality standards  Operational standards  Scheduling depends greatly on how much revenue an operation is bringing in and how much revenue an operation expects to bring in. 4 3.3 Chapter 3 | Cost Control

5. Quality Standards for Purchasing and Receiving  Purchasing: Prior to ordering, receiving, and storing quality products, consider where the products were grown or produced.  Those with purchasing responsibility should seek suppliers who are considered to be ethical, reliable, and financially stable.  Receiving: Once purchase orders have been made, the next step is to receive the item in the most efficient, safe, and effective way possible.  Well-defined receiving procedures ensure that an operation receives only the products that meet its established standards for quality and quantity. 5 3.4 Chapter 3 | Cost Control

6. Quality Standards for Storing  Storing: It’s critical that operations create quality standards for proper storage.  Monitor perishable food daily to preserve its quality.  Some food items have manufacturer’s recommendations for storing the product.  Store food with proper labels, and rotate all products in storage following the FIFO (first in, first out) system.  In addition to checking the food in the storage facilities, the storage facilities themselves should be checked regularly to make sure they are clean and functioning properly and efficiently. 6 3.4 Chapter 3 | Cost Control

7. Quality Standards for Food Production and Service  Standard-portion sizes, standardized recipes, and standard-portion costs are all food-production standards.  It is important that managers ensure that standards are met throughout the foodservice cycle.  It is important that operations have quality assurance measures in place right up to the service stage of the food-flow process.  The key to identifying deviations from standard recipes and presentations is regular monitoring and the understanding by the staff that it is the responsibility of everyone in the establishment to ensure quality. 7 3.4 Chapter 3 | Cost Control

8. Quality Standards for Inventory  Taking physical inventory means counting and recording the number of each item in the storeroom.  Closely monitor inventory to ensure that products are ordered as they are needed.  Carefully monitoring inventory also helps ensure that no product goes to waste. Minimizing waste keeps costs down and sales up.  Determine actual food costs by opening and closing inventories for a given period.  Use the latest purchase price (FIFO), actual purchase price, weighted average purchase price, or last in, first out (LIFO) method to determine the value of the closing inventory. 8 3.4 Chapter 3 | Cost Control

9. Section 3.4 Summary  It is important to take cost-control measures in all aspects of the food-flow process, from purchasing to service.  Standardizing food production helps to ensure quality standards as well, because each item is gauged on one standard.  Closely monitor inventory to ensure that products will be ordered more efficiently as they are needed. 9 3.4 Chapter 3 | Cost Control