CHAPTER ELEVEN: BUDGETING AND CONTROLLING COSTS Back- of-the- House Operations Front- of- the- House Operations Controlling Food, Beverage, and Labor Costs Guest Check Control

Front of the House All areas with which guests come in contact: –Lobby –Corridors –Elevators –Guest Rooms –Restaurants –Bars –Meeting Rooms –Restrooms

Front of the House Operations: Hosts, Bartenders, Servers, Bussers Opening/ Closing Manager Curbside Appeal refers to the first impression of the restaurant Daily Flash Reports: accurate records of daily sales from previous years

Back of the House Operations The area of the restaurant that the guest does not usually see The Kitchen The Dishwashing Area Storage Receiving Area

Back of the House Technology Inventory Payroll Food and beverage Costing Menu Software Managers Station

PURPOSE OF BUDGETING To “do the numbers” and more accurately forecast if the restaurant will be viable

FORECASTING SALES Sales volume has two components:  The average guest check  Guest counts

BUDGETING COSTS Costs may be budgeted according to two main categories:  FIXED: unaffected by change in sales volume.  VARIABLE: change proportionately according to sales

CONTROLLABLE EXPENSES Term used to describe the various expenses that can be changed in the short term: e.g.. variable expenses; payroll; operating expenses; marketing; heat; light; repairs and maintenance

LABOR COSTS Dependent on type of restaurant and amount of service given Staffing periods vary Payroll and related costs fall into  Variable  Fixed

UNIFORM SYSTEMS OF ACCOUNTS FOR RESTAURANTS (USAR)) Benefits are : Outlines a uniform classification and presentation of operation results Is a time-tested system

UNIFORM SYSTEMS OF ACCOUNTS FOR RESTAURANTS (USAR)  Allows for easier comparisons to foodservice industry statistics  Provides a turnkey accounting systems

PRE-OPENING  A consideration in the construction and opening of a new facility.  Initial purchase of equipment including cutlery, china, glassware  Hiring and training personnel  Pre-opening advertising

Cash Flow can be achieved by:  Collecting cash and account receivable as quickly as possible  Disbursing cash and paying account as slowly as possible  Improving inventory turnover  Consolidating cash reserves to use money more efficiently and profitably

SEAT TURNOVER Varies with the style of operation and what the operator is tying to accomplish:  Rapid-turnover style  Fast-turnover style

GUEST CHECK CONTROL Without check control, a server can give food and beverages away or sell it and keep the income Each check must be accounted and at least a spot check of the additions and correct prices made Guest check auditing Having servers act as their own cashiers

POINT-OF-SALE SYSTEM ADVANTAGES:  Saves trips/time  Problem of illegibly written orders  Food-servers remain on the floor  Cost-control device

POINT-OF-SALE SYSTEM ADVANTAGES:  Improve efficiency  Handle inventory control, accounts, employee records  Inform operators when items are running short

FINANCIAL MANAGEMENT Mergers Ratio analysis  Quick ratio  Cash management

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