OH 9-1 Agenda Test 1 – Handout & questions Chapter 8 Controls in Beverage Purchasing, Receiving, Storing & Issuing Chapter 9 Controls in Beverage Production Chapter 10 Costs in Labor

OH 9-2 Controls in Beverage Purchasing, Receiving, Storing, Issuing & Production OH 9-2

OH 9-3 Chapter Learning Objectives Chapter 8 Identify the differences between a license and control state. Identify various alcoholic beverages within the three classifications. Identify purchasing standards. Differentiate among the three receiving standards. Distinguish receiving techniques. Distinguish storage principles. Distinguish issuing practices. Overview of non-alcoholic beverage purchasing

OH 9-4 Licensed State vs. Control State Licensed State : The state will issue a license to a distributor that allows them to sell the product Understand the purchasing & distribution for the state in which you are employed or own a bar or restaurant Control State : Alcohol is sold through a state- run distribution center Wholesale & retail Turn to page 113 in the text for advantages of each

OH 9-5 Franchise State An additional factor in a licensed state Laws regarding selling of specific brands of product

OH 9-6 Classification of Alcoholic Beverages Beer Domestic & Imported Beer Lager & Ale Wine Grape(s) & sugar content give flavor profiel Vintage Wine: all grapes grown in one season Less than 5% is intended to be stored/aged, most should be consumed within the first year

OH 9-7 Classification of Alcoholic Beverages con’t Spirits Fermented, distilled & aged Proof designates how much alcohol is in the product Range 0-200, is equivalent to two times the alcohol content; thus 100 proof is 50% alcohol

OH 9-8 Purchasing Standards Quantity Case vs. broken or mixed cases Delivery time line and usage Quality User needs & specifications Brand, Vintage & Alcohol content Cost Effected by type of state control Size of bottles

OH 9-9 Receiving Standards Similar to food receiving Quantity – count everything!!! Quality – specifications, temperature, dates, seals Cost – invoice matches quote

OH 9-10 Storage Similar to food storage Product quality Rotation of stock Some product needs to be stored at room temperature, others under refrigeration. Know the requirements for each product Wines stored at angle

OH 9-11 Storage con’t Product accessibility Organized Conveniently located to use Protection of product from theft Secure Controlled - issue Accountabilty

OH 9-12 Non-Alcoholic Beverages Coffee & Soda Brand Franchaise

OH 9-13 Chapter Learning Objectives Chapter 9 Distinguish the value of beverage production control. Differentiate among different bars. Distinguish between different glassware and the value of this in beverage production. Identify different production controls. Calculate beverage inventory. Identify government controls for beverages. Explain dramshop laws. Differentiate between well brands and call brands. Identify different methods of inventory valuation. Evaluate the positives and negatives of extensive wine service.

OH 9-14 Types of Bars Front Bar – Customer interaction Service Bar – Back of the house Catering Bar- customer service but smaller inventory Cash Bar, Open Bar, Hosted Bar

OH 9-15 Issuing Controls Automated beverage-dispensing machine Service gun Shot Class/Jigger Free Pour Recipes

OH 9-16 Government Controls Laws for retail distribution Age Hours of service Dry county: no alcohol can be sold Blue Law: Prohibit sale on Sunday Number & types of licenses issued Marketing Dramshop laws: third party liability page 132

OH 9-17 Other Cost Control Measures Well Brands vs. Call Brands Accurate transfer of product Expansive inventory/Wine Service page 134 in text

OH 9-18 Monitoring Beverage Operations Cost Method – Same as with food cost method Opening Inventory + Purchases + Transfers In – Transfers Out – Closing Inventory Liquid Measure – Daily inventory vs. sold amt. Most common with automatic alcohol dispensing equipment Sales Value – Based on pre-determined yield per bottle

OH 9-19 Workbook Chapters 8 & 9 Turn to page 40 in your workbook

OH 9-20 Controlling Labor Costs Chapters 10 & 11 in Asch text book 9 OH 9-20

OH 9-21 Chapter Learning Objectives Distinguish between fixed, variable, and semivariable costs. Salaried vs. Hourly employees Explain how payroll cost, Federal Insurance Contribution Act (FICA), Medicare, and employee benefits make up labor cost. Describe the components and factors to consider in the development of a master schedule. Explain the difference between a master schedule and a crew schedule.

OH 9-22 Chapter Learning Objectives continued List the factors that affect labor cost. Explain how direct factors, such as business volume, affect labor cost. Calculate turnover rate percentage, total dollars for labor costs, dollars available for scheduling, and hours available for scheduling. Explain how indirect factors, such as quality and productivity standards, affect labor costs.

OH 9-23 Types of Costs Fixed costs Stay the same regardless of increases or decreases in volume Variable costs Increase or decrease with increases or decreases in volume Semivariable costs Part fixed and part variable; also increase or decrease (but at a slower rate) with increases or decreases in volume

OH 9-24 Fixed and Variable Payroll Costs

OH 9-25 Total Labor Cost Consists Of Pay Includes employee’s hourly wages Includes management salaries Other Payroll Costs Includes payroll taxes and assessments Includes benefits costs

OH 9-26 Types of Employees Salaried – “Exempt” from overtime Fixed cost & non-controllable Hours worked do not impact salary paid Hourly – “Non-Exempt” receive overtime Variable cost and controllable by pay & hours worked Full Time: Guaranteed hours Part Time: Flexible hours, sometimes no benefits

OH 9-27 Outsourcing Contract for goods or services Financial Services, Payroll, Marketing, Seasonal, Cleaning, Maintenance of Equipment, Pest Control, Linens, Landscaping, etc.

OH 9-28 Compensation Current – paid upon scheduled worked Deferred Compensation – stock options, 401 K, retirement/pensions, vacation & sick Direct Compensation – pay for hours worked Indirect Compensation – Insurance benefits, holiday/vacation/sick pay, Education assistance, childcare, meals, flexible schedules, telecommuting, moving expense, signing bonus, etc.

OH 9-29 Payroll Taxes and Assessments Federal Insurance Contribution Act (FICA) Federal retirement and medical benefit program Paid through payroll taxes Includes contributions from employees and employers Currently set at a 6.2% employee/employer match

OH 9-30 Payroll Taxes and Assessments continued Medicare Federal health-care program Paid through payroll taxes Includes contributions from employees and employers Currently set at a 1.5% match

OH 9-31 Payroll Taxes and Assessments continued Federal and state programs May be related to worker’s injury or compensation and/or unemployment insurance programs City or local programs May be related to taxes on gross payroll or other special assessments

OH 9-32 Common Employee Benefits Paid holidays Paid vacations Paid sick or personal days Health insurance Life insurance Disability insurance Dental insurance Vision insurance Company-funded retirement programs

OH 9-33 Labor Cost Percentage Restaurant managers must relate the dollars spent for labor to the sales generated by those labor dollars. Labor cost÷Sales=Labor cost percent

OH 9-34 Estimated Daily Payroll Cost Percent Step 1 – Divide weekly management cost by the number of days open per week to determine the daily management cost. Step 2 – Add the variable (hourly) labor used per day to the daily fixed labor calculated in Step 1 above. Step 3 – Divide the daily payroll costs by the estimated daily sales to determine the estimated daily payroll cost percent.

OH 9-35 Budget as Cost Control Tool Budgets help control spending. They are best prepared after evaluating Menu items to be served Expertise needed to execute the menu Methods of food preparation Type of service Facility’s location Impact of holidays

OH 9-36 Factors Directly Affecting Labor Costs Sales levels Time tracking Time sheets Timecards Advanced electronic methods Schedules and schedule modifications Overtime Benefits offered Labor contracts

OH 9-37 Another Factor Directly Affecting Labor Costs Employee turnover The number of employees hired to fill one position in a year’s time Persons hired per year ÷ Average number of employees =Turnover Turnover x 100= Turnover rate percent

OH 9-38 Another Factor Directly Affecting Labor Costs continued Employee turnover example 300 hired÷100 needed=3 3 x 100=300%

OH 9-39 Factors Indirectly Affecting Labor Costs Adherence to Standards Standards of employee performance are similar to standards of food quality. Just as food standards can be quantified, so can worker productivity be quantified.

OH 9-40

OH 9-41 Some Productivity Standards Sales÷ Number of person-hours = Sales per person- hour Covers÷ Number of person-hours = Covers per person- hour Total sales per server ÷ Covers sold by server =Sales per cover

OH 9-42 Creating Schedules Perform historic sales analysis with Yearly and monthly data from past income statements Hourly, daily, and weekly point-of-sale (POS) data If no POS is available, undertake a guest check analysis.

OH 9-43 Creating Schedules continued Sales Projections An estimate of future sales Include increases or decreases to historical sales patterns Consider national and local economic trends

OH 9-44 Forecasting Labor Costs— A Three Step Process Step 1 – Determine total available labor dollars. Step 2 – Subtract costs of employee benefits and taxes. Standard labor cost percent x Projected sales = Dollars available for labor – Benefits and taxes = Remaining payroll available

OH 9-45 Forecasting Labor Costs Step 3 – Subtract fixed labor costs. Payroll dollars available – Fixed cost salaries = Dollars available for variable-cost employees Employee schedules are planned with this dollar amount to help ensure targeted labor costs are met!

OH 9-46 Master Schedules Identify the Number of Required Employees Forecasting servers Divide estimated number of covers by the number of service hours to assess the covers per hour. Divide covers per hour by the number of covers for each server. Adjust, based on the employees’ skill. Est. number of covers ÷ Number of service hours =Covers per hour ÷ Covers per server =Number of servers

OH 9-47 Master Schedules Identify the Number of Required Employees continued Forecasting other positions Subtract servers’ cost from the dollars available for variable-cost employees. Divide the result by the average wage per hour. Dollars available for variable-cost employees – Server cost = Dollars available for other positions ÷ Average wage per hour = Number of hours available for other positions

OH 9-48 Validating the Master Schedule The labor percent forecasted by the master schedule must match company standards. Fixed payroll + Variable payroll =Total payroll + Taxes and benefits =Total labor cost Total labor ÷Sales=Total labor cost percent

OH 9-49 Creating the Crew Schedule Include specific employee names and reporting times Should be distributed well in advance Must ensure balance and equity for all employees

OH 9-50 Creating the Crew Schedule continued Goals of the crew schedule Build flexibility. Use accurate sales projections to ensure the right number of staff are assigned at the right times. Consider legal restraints and company policies.

OH 9-51 How Would You Answer the Following Questions? 1. Effective managers seek to closely monitor and thus regulate their restaurant’s ( labor cost/labor cost percent ). 2. Labor costs include only the wages and salaries paid directly to the employees. ( True/False ) 3. A master schedule includes all of the following except A. Employee names B. Days of the week C. Employee shifts D. Employee positions 4. Employee turnover rates cannot be influenced by managers. ( True/False )

OH 9-52 Key Term Review Budget Covers per server Crew schedule Employee benefits Employee turnover Federal Insurance Contributions Act (FICA) Job description Labor contract

OH 9-53 Key Term Review continued Labor cost Labor cost percent Master schedule Medicare Overtime Payroll dollars Person-hour Productivity standard Quality standard Return chart

OH 9-54 Chapter Learning Objectives— What Did You Learn? Distinguish between fixed, variable, and semi- variable costs. Explain how payroll cost, FICA, Medicare, and employee benefits make up labor cost. Describe the components and factors to consider in the development of a master schedule. Explain the difference between a master schedule and a crew schedule.

OH 9-55 Chapter Learning Objectives— What Did You Learn? continued List the factors that affect labor cost. Explain how direct factors such as business volume affect labor cost. Calculate turnover rate percentage, total dollars for labor costs, dollars available for scheduling, and hours available for scheduling. Explain how indirect factors such as quality and productivity standards affect labor costs.