Controlling Food and Labor Costs

requisition method equation

(Storeroom issues/ day) + (direct purchases/day)= gross cost of food/day cost = (gross cost of food/day)/ ( number of meals served) direct purchases- good that did not go into storage, we need immediately that day and taken straight into production storeroom issues- ingredient taken into production for the day

labor cost influences...

- Employee meals - Type and extent of service - Hours of service - Facility design - Personnel policies and productivity - Supervision

Pre controls

- Menu (main internal control) - Type of service - Purchasing & receiving - Storage - Production & portion

recipe method

- Standardized recipes can be used to determine food cost

labor issues

- competent personnel do not seek out foodservice jobs - economy & demographic changes - difficult to find "meaning" in a labor intensive job -very physically demanding job -challenge

cost control after

-Post-costing menus-> look at pre-costing and see if it was accurate -Using leftovers properly ( skins, peels, extra meat no made) -Daily/weekly control procedures

cost control programs

-Provide information for daily decisions -Monitor efficiency -Inform management of income, expenses & budget variations -Prevent fraud & theft -Basis of knowing future direction, not past -Prevention, NOT correction after something happens -Maximize profit, NOT minimize loss

purchasing and receiving

-appropriate specifications (grade, colors, types, ripeness, size, etc.) -best price you can get -deliveries checked against PO to make sure what you asked for is what was delivered -delivered items match specifications that were requested

storage

-comparison of turnover rates- replace stuff, remove or add to inventory -opportunity for theft is decreased by not accessible to everyone, only certain authority clearance can remove stuff from storage room -controlled requisition procedures-> how has authority to grant procedures to occur - minimize spoilage

cost control during

-maintain portion control -all revenue is account for and recorded

men/ menu costing/ selling price

-number of choices offered -food and labor costs for each item -identify most profitable items -watch number of sales for each item -possible changed in merchandising of food items if things aren't going well with a food menu choice

cost control before

-set up a Budget -Assigning labor-> how many people are needed -Pre-costing menus and recipes-> how much food will cost to make projected amount of meals for that day

Production & Portions

-standardized recipes-(are tested and make same amount each time ) -adequate equipment -accurate forecasts used-(forecast ingredient needs) -portion sizes established-( employees trained in portion control, portioning utensils available and understood- scooper and disher sizes) -using leftovers-( to mitigate turnover rate being low) -monitoring waste -pre-waste: during production of food ( save skins) - post-waste: thrown away at the end of service/ when the person is done eating

managing costs through

-watching and controlling controllable costs - using budget or projections to review against actual financial status to see if standards are being met - all activities of the foodservice department need to be reviewed

objectives

1. determine factors affecting food costs 2. calculate food cost parameters 3. identify practical measures to control food cost 4. determine factors affecting labor costs 5. Relate cost control and cost analysis to functions of management 6. Identify practical measures to control labor costs 7. Recognize the use of staffing and scheduling to control labor

requirements for cost control

1. good accounting system - have accurate info -timely -appropriate financial reports -basic accounting principles 2. understand financial reports as a manager 3. Standards for comparison -internal standards- goals set by manager for the company -benchmark- compare success to other organizations who are similar 4. Identify why costs are different 5. Take corrective action is standards are not being met

fine dining

1.4

FTE

1.55 employees needed for everyday coverage of full time employees FTE x 0.55= actual number needed or part time FTE x 1.55= total # of employees that you need

schools

15 meals/labor hours

acute care:

3.5

quick service:

9.5 meals/ labor hour

Inventory Method

Beg Inv. of month+ purchases= goods avail. for sale - End Inv. of month= cost food consumed

requisition method

Determine total cost of direct and indirect issues to service areas internal document that tracks when food is moving in and out of storage

work schedule

Is an outline of work to be performed by an individual stated procedures in time requirements for his or her duties

Meal equivalent

Number of snacks or nourishment a or beverages it takes to equal one meal onsite foodservice: divide by specific number commercial: divide total dollar sales by prototype meal cost and then divide by number of meals

full time equivalent (FTE)

Number of total hours worked in a week divided by 40 (the number of hours worked by one full-time employee) to determine the number of full-time equivalent employees minimum number of employees needed, does not account for days off = # of FTE employees represents an equivalent based on hours - 8 hours/day -40 hours/week -2080 hours/year

relief employees

Part-time employees -often teenagers/ college kids -split shift: people come in for morning shift, leave, and then come back for dinner shift Temps or leased employees -through an agency -more expensive option -agency usually pays for benefits

noncontrollable costs

are those that a manager cannot control

food cost is the cost of food....

as purchased

food is an

asset

controllable costs

costs over which a food service manager has control over such as the amount of labor, and ingredient cost

Staffing

deciding the appropriate number and types of employees needed for the operation for the work to be accomplished

employee meals

discount or 'at cost' meal values =labor cost.... not food cost -deduct cost of meals sold from food cost -add as "labor" as an employee benefit

labor is the most

expensive category in foodservice cost

staffing indicates

full time equivalent (FTE)

Scheduling

having the proper number of workers on duty assigning employees telling them when to show up

variable costs

increase when sales volume increases and decreases when a sales volume decreases ex. food cost

more difficult to adjust.....

labor to varying sales

challenge of labor issues

lower labor costs by improving productivity and providing satisfactory wages to attract and retain competent employees some are 7/days a week some are 24 hours a day peaks in service demand additional staffing seasonal variations in customer base highly perishable products labor intensive activities large number of unskilled personnel to manage b/c people don't wan't to work in foodservice

Types of Schedules

master, shift, production

productivity:

meals/ labor hour

indirect costs (overhead)

not as easily attributed to a specific area

type of service

operation differences: -peak mealtimes vary by type of service -special events require additional staff types: -self-service vs. full service -assembly/serve (cook chill or cook freeze) vs. conventional kitchen

master

overall plan (big picture) includes days off , rotation of weekend days common, account for vacations, holidays, and overtime needed

Food Cost % Formula

raw food cost/ daily income or sales revenue

fixed costs

remain constant despite increase or decrease in sales volume ex. rent

Shift-scheduling

shows the staffing pattern of the operation per time period 2 shifts (7-3 and then 3-11 pm) morning and afternoon shifts might not use efficient meal time changes though

staggering schedules

start at different times and can accommodate meal times when slower

Controllable costs are

those costs over which a manager has control

direct costs

those that are easily attributed to a specific area of an operation

labor costs

together with food= around 75% of total costs -labor is around 50-70% of costs total -focus on dollar amounts too

overtime

uncontrolled use drives up labor cost sometimes used for poor scheduling practices employees can create a need for using OT