Principles of Control in a Foodservice Operation Chapter 1 Principles of Control in a Foodservice Operation

Learning Outcomes Summarize the four basic functions of management. Understand the role of cost control in the success of an operation. Recall five areas in which basic math skills are used in a foodservice operation.

Introduction The management function of control is essential to running a successful foodservice operation Control refers to the effective management of resources

Functions of Management There are four basic functions of management Planning Organizing Leading Controlling All four functions are essential to running any type of business or operation continued

Functions of Management Planning is the process of determining what an operation will be Planning involves defining an operation’s goals and objectives and the steps that will be necessary to achieve them continued

Functions of Management Organizing is the process of deciding what tasks need to be completed who will perform those tasks how the tasks will be coordinated continued

Functions of Management Leading is the process of directing people to meet the goals and objectives set in the planning phase Leadership includes motivating people communicating effectively providing feedback on employee performance listening and responding to employee needs continued

Functions of Management Controlling is the process of monitoring the performance of the operation against its plans Controlling is accomplished by setting measurable goals measuring the results comparing those results against the goals continued

Functions of Management If results are not in line with goals, the reason should be determined and corrective action taken continued

Functions of Management Control is an ongoing process in which the operation must define its expected results have a plan in place to achieve those results provide the resources that enable it to meet its goals modify its structure, methods, or tools to meet its plan and measure the results

Cost Control Cost control is the process an operation uses to ensure that its forecasted sales and expenses conform to its plans, goals, and objectives The successful foodservice manager balances quality with financial control to yield a profit for the business and secure its continued success continued

Cost Control Cost control is a critical function that should be required of every foodservice operator Many foodservice operations lack strong cost controls To control costs and enhance profits, a manager needs to understand the relationship among cost, sales, and profit (or loss) continued

Cost Control Cost, or expense, is the dollar amount spent to create the good or service being sold Sales, or revenues, result from the exchange of goods or services for payment or promise to pay continued

Cost Control Cost is subtracted from sales to determine whether the operation had a profit or a loss Profit is the dollar amount remaining after all expenses have been paid continued

Cost Control A loss is the amount incurred when the expenses of an operation are greater than its sales The successful manager understands where the numbers come from in the profit equation continued

Cost Control Operations need to make enough money from sales to cover the costs of doing business This is true for both for-profit and not-for-profit businesses An operation can increase its profits in two ways by increasing sales by decreasing expenses continued

Cost Control Math skills are used in standardizing and converting recipes purchasing food and supplies determining staffing needs determining selling prices continued

Cost Control Math skills are used in forecasting how much food to produce controlling inventory preparing budgets analyzing customer satisfaction evaluating sales results

Basic Math Review A manager needs basic math skills to effectively run a foodservice operation through a strong cost-control system These skills include the use of fractions decimals percentages ratios continued

Basic Math Review Fractions, percentages, and decimals can be considered one in the same They all deal with parts of a whole A fraction is made up of a numerator (the top number) a denominator (the bottom number) The numerator is the part and the denominator represents the whole continued

Basic Math Review A percentage is another way of expressing a part of the whole The word percent is from the Latin words per centum meaning “per hundred” A percentage is another way of expressing a fraction in which the denominator is 100 The percent symbol is used after a number when writing percentages (50%) continued

Basic Math Review Decimals are another way of expressing a part of the whole A decimal represents a fraction based on the number 10 A decimal point separates the whole from the part The number 5.67 represents five wholes and 67 parts continued

Basic Math Review To express a decimal as a percentage move the decimal point two places to the right add the percent symbol Decimals and percentages show the same relationship continued

Basic Math Review To convert a percentage to a decimal, move the decimal point two places to the left Both percentages and decimals can also be expressed as fractions continued

Basic Math Review A ratio expresses how one number relates, or compares, to another X:Y is stated “the ratio is X to Y” A ratio can be written in a number of ways

Practical Foodservice Applications Percentages, ratios, fractions, and decimals are used every day in foodservice operations to control costs A ratio expresses how one number relates, or compares, to another For example, the ratio 2:7 can express that a baker sells two sugar cookies for every seven chocolate chip cookies continued

Practical Foodservice Applications Many foodservice operations base the selling price of a menu item on the cost of the food used to make it They want to limit the food cost to a certain percentage of the selling price—a food cost percentage A common food cost percentage used by foodservice operations is 30 percent continued

Practical Foodservice Applications The foodservice operator can determine the selling price by using a calculation in which X is the selling price For example, if the food cost is $10, and the food cost percentage is 30 percent, the operator sells the menu item for $33.33 The $10 food cost divided by X equals 30 percent continued

Practical Foodservice Applications When making decisions about which food products to purchase, a manager often compares the prices of two or more products Factors such as pack size and product yield must be taken into consideration when comparing product prices The manager must determine the best price per unit continued

Practical Foodservice Applications For each option being considered determine the total amount or weight per package or case calculate the price per unit, such as per pound compare the prices to find the best buy continued

Practical Foodservice Applications To compare prices between a processed and a raw product, managers must consider the yield Product yield is the amount of a product that is usable after cooking or other processing continued

Practical Foodservice Applications Ways to find the product yield vary by product For a fresh roast, for example, the yield would be affected by the amount of fat to be trimmed off continued

Practical Foodservice Applications The manager needs to determine the price per unit, such as per pound, for the amount of the product yield This is calculated by dividing the purchase price by the product yield The prices can then be compared Another common calculation in foodservice management is determining the cost to produce a meal continued

Practical Foodservice Applications The cost to produce a meal includes the costs of food and labor per meal served The food cost per meal can be calculated by dividing the cost of food to prepare meals by the number of meals served continued

Practical Foodservice Applications The labor cost per meal is calculated using a similar equation Labor costs are divided by the number of meals served continued

Practical Foodservice Applications When comparing actual performance to goals, a manager looks at the variance The variance is the difference between a budgeted amount and an actual amount Variances are calculated for revenues, expenses, and profit continued

Practical Foodservice Applications A manager may want to determine the variance as a percentage difference To do so, the variance amount is divided by the budgeted amount The result is multiplied by 100 continued

Practical Foodservice Applications A manager is also responsible for evaluating quality A quality measure rates the level of perceived value placed on the parameter being evaluated One quality measure, or parameter, is customer satisfaction An operation often surveys its customers to learn their views on its performance continued

Practical Foodservice Applications Customer satisfaction is often expressed as a percentage For example, the number of “excellent” service ratings may be stated as a percentage of the total ratings A manager records and compares the results of quality measures over time to monitor the success of the operation

Key Terms Review planning organizing leading controlling cost control sales profit loss fraction percent decimal ratio product yield variance quality measure