1. The Control Process Slide 1 / 32 BAC-4131 Food and Beverage Management Cost Control: The Control Process Wednesday, March 02, 2011

2. Recap of the previous session What is average sale per customer? What is Directly variable cost? Describe non-controllable cost. Define sales mix. Explain Total sales per seat. Explain the features of labor cost. What is Basic food cost and Food cost %age. Slide 2 / 32 BAC-4131 Food and Beverage Management Cost Control: The Control Process Wednesday, March 02, 2011

3. Learning objectives KCM Define control and discuss the significance in food and beverage management. Enlist the responsibility for control in the food and beverage operation. Give examples of control techniques used in F & B service operation. Prepare an operating budget. Imbibe the significance of the cost benefit ratio. Slide 3 / 32 BAC-4131 Food and Beverage Management Cost Control: The Control Process Wednesday, March 02, 2011

4. Scope Introduction to Control. Cost Control. Control Techniques. Budgets. Preparing an operating budget. The Cost/Benefit ratio. Examples Control Measures. Slide 4 / 32 BAC-4131 Food and Beverage Management Cost Control: The Control Process Wednesday, March 02, 2011

5. Introduction to Control Control is a process used by managers to direct, regulate, and restrain the actions of people so that the established goals of an enterprise can be achieved. The first step is to establish the objectives and goals. Slide 5 / 32 BAC-4131 Food and Beverage Management Cost Control: The Control Process Wednesday, March 02, 2011

6. Examples of Goals Financial success. Operating the best restaurant in the city. Providing insurance for health to all employees. Implementation of safety policy. Reduction of overtime. Food cost control. Slide 6 / 32 BAC-4131 Food and Beverage Management Cost Control: The Control Process Wednesday, March 02, 2011

7. Cost Control Cost control is defined as the process used by managers to regulate costs and guard against excessive costs. The process is chain oriented from Purchasing, Receiving, Storing, Issuing, preparing for sale and includes Training and scheduling. The process may vary from establishment to establishment. The goal is to eliminate excessive costs. Slide 7 / 32 BAC-4131 Food and Beverage Management Cost Control: The Control Process Wednesday, March 02, 2011

8. Causes of excessive cost Two principal causes of excessive costs are inefficiency and waste: The following are the main places are where excessive costs are found: Material Labor Overhead expenses. Slide 8 / 32 BAC-4131 Food and Beverage Management Cost Control: The Control Process Wednesday, March 02, 2011

9. Steps taken while administering sales control Ensuring that the serving staff know the proper prices of food. Ensuring that the staff documents the orders and maintains KOT’s in the proper manner. Ensure that service staff KOT’s and Kitchen KOT’s match. Keep a tab food quantity leaving the kitchen for service. Slide 9 / 32 BAC-4131 Food and Beverage Management Cost Control: The Control Process Wednesday, March 02, 2011

10. Control Techniques Establishing standards. Establishing Procedures. Training. Setting examples. Observation, correction employee actions. Record keeping. Disciplining employees. Preparing and following budgets. Slide 10 / 32 BAC-4131 Food and Beverage Management Cost Control: The Control Process Wednesday, March 02, 2011

11. Control Process The Control System is a term used to describe that collection of interdependent control techniques and procedures in use in a given food and beverage operation. Most control systems are based on Standard Operating Procedures. SOP’s used for financial operation are more stringent than the ones used for the general operation. Slide 11 / 32 BAC-4131 Food and Beverage Management Cost Control: The Control Process Wednesday, March 02, 2011

12. Establishing standards Standards are defined as rules or measures established for making comparisons and judgments. The standards are usually set by the management which are useful in judging the extent to which results meet the expectations. Quality Standards. Quantity standards. Cost standards. Slide 12 / 32 BAC-4131 Food and Beverage Management Cost Control: The Control Process Wednesday, March 02, 2011

13. Quality Standards Quality standards are used to define the degree of excellence of raw materials, finished products and , by extension, work. USDA standard Grading in food products 1 2 3 or A B C. Grading in case of alcoholic beverages with age. Grading done in employees against levels of skill. Slide 13 / 32 BAC-4131 Food and Beverage Management Cost Control: The Control Process Wednesday, March 02, 2011

14. Quantity standards Quantity standards are defined as measures of weight, count, or volume used to make comparisons and judgments. Quantity Standard in food and beverage are for: Ingredients. Recipe. Portion size. Slide 14 / 32 BAC-4131 Food and Beverage Management Cost Control: The Control Process Wednesday, March 02, 2011

15. Cost standard Standard Cost is defined as the cost of goods or services identified, approved, justified and accepted by the management. These costs are both idealistic and real value. The basic method of calculating standard costs in food and beverage services is Recipe calculation. Used for measuring effectiveness of the operation. Slide 15 / 32 BAC-4131 Food and Beverage Management Cost Control: The Control Process Wednesday, March 02, 2011

16. Establishing procedures Procedures are methods employed to prepare products or perform jobs. Procedures are also standardized. Purchases. Receiving. Storage. Production. Service Slide 16 / 32 BAC-4131 Food and Beverage Management Cost Control: The Control Process Wednesday, March 02, 2011

17. Training Training is a process whereby managers teach employees to how is work done given the standards and procedures established. Training is in-depth, structured, difficult, frustrating, time consuming and lastly cost intensive. Training produces tangible goods and vice versa bad or untrained staff are detrimental to the system. Slide 17 / 32 BAC-4131 Food and Beverage Management Cost Control: The Control Process Wednesday, March 02, 2011

18. Setting Examples Example setting: Is a process of establishing standards and procedures. The procedures are a set of instructions presented in a sequential manner. Standards a benchmark for tasks either for every activity to be carried out in the operation. Procedures can be altered but standards remain uniform for an operation. Slide 18 / 32 BAC-4131 Food and Beverage Management Cost Control: The Control Process Wednesday, March 02, 2011

19. Observing and correcting employees The result for not adhering to standards are evident from: Rise in Food and Beverage cost. Rise in consumption values. Inventory accumulation. Pilferage habit form. Setting a bad example. Slide 19 / 32 BAC-4131 Food and Beverage Management Cost Control: The Control Process Wednesday, March 02, 2011

20. Records and reporting Usually are observation details and citations by the internal policy management and audit team. External audits for systems. Analysis of income statements. Careful analysis of requisitions. Careful analysis of inventories. Slide 20 / 32 BAC-4131 Food and Beverage Management Cost Control: The Control Process Wednesday, March 02, 2011

21. Disciplining Employees Discipline is defined as an action taken to admonish, chastise or reprimand an employee for work performance or personal behavior incompatible with established standards. Discipline arrives when corrective action fails or if there is serious diversion from standards laid out. Used as a control technique. Slide 21 / 32 BAC-4131 Food and Beverage Management Cost Control: The Control Process Wednesday, March 02, 2011

22. Budgets A Budget is defined as a financial plan and is described as a realistic expression of management goals and the objectives are defined in financial terms. Both Income and Expenses are budgeted. Cash flow budgets. Sales Budgets. Capital budget. Advertizing budgets. Slide 22 / 32 BAC-4131 Food and Beverage Management Cost Control: The Control Process Wednesday, March 02, 2011

23. Budget in Food and Beverage Operating budget: Is a forecast of sales activity and an estimate of costs that will be incurred in the process of generating sales. A financial plan for the said period. Begins with the historical information or financial records. In case or organizational restructure and non availability of data the previous experience of managers and alternative sources Slide 23 / 32 BAC-4131 Food and Beverage Management Cost Control: The Control Process Wednesday, March 02, 2011

24. Types of Budgets Static Budget: The one that is prepared assuming only one level of business activity for the period. It contains anticipated values about inputs and outputs that are conceived before the period in question begins. Flexible Budgets: Based on the actual costs for # of units sold in the current year and not on higher or lower estimates. BAC-4131 Food and Beverage Management Cost Control: The Control Process Slide 24 / 32 Wednesday, March 02, 2011

25. BAC-4131 Food and Beverage Management Cost Control: The Control Process Slide 25 / 32 Wednesday, March 02, 2011

26. Preparing an operating budget Segregation of fixed and variable costs: As salaries and wages are considered semi-variable costs they must be partitioned into their fixed and variable components. 60% of Rs. 1,85,000.00 which is Rs. 111,000.00 to be taken as fixed component of salaries & wages. 40 % of Rs. 1,85,000.00 which is Rs. 74,000.00 to be taken a variable component of salaries and wages. BAC-4131 Food and Beverage Management Cost Control: The Control Process Slide 26 / 32 Wednesday, March 02, 2011

27. Preparing an operating budget 4. 60 % of employee benefits of Rs. 46,250.00 which is Rs. 27,750.00 are taken as the fixed component. 5. 40 % of employee benefits of Rs. 46,250.00 which is Rs. 18,500.00. BAC-4131 Food and Beverage Management Cost Control: The Control Process Slide 27 / 32 Wednesday, March 02, 2011

29. The Cost/Benefit ratio The concept of the Cost/Benefit ratio is the relationship between costs incurred in instituting and maintaining a single control or control system and the benefits or savings derived by doing so. No control measure can be instituted without a cost. BAC-4131 Food and Beverage Management Cost Control: The Control Process Slide 29 / 32 Wednesday, March 02, 2011

30. Examples Control Measures Lower Payback control measures: Relocation of cashier’s desk. Locking of front and back doors. Installing a modern time clock. Higher payback control measures Installing new locking system. Hiring new Food and Beverage controller. Incorporation of radical stores procedures. BAC-4131 Food and Beverage Management Cost Control: The Control Process Slide 30 / 32 Wednesday, March 02, 2011

31. Considerations before implementing a control systems Quantifiable and non Quantifiable effects. Time required. Immediate and long term benefits. Accuracy. BAC-4131 Food and Beverage Management Cost Control: The Control Process Slide 31 / 32 Wednesday, March 02, 2011

32. Questions  Comments BAC-4131 Food and Beverage Management Cost Control: The Control Process Slide 32 / 32 Wednesday, March 02, 2011