Beverage Cost Control System And Analysis

Chapter 13

 Beers

(lagers and ales)  Wines (red, white, rose)  Spirits

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 Fermentation:

Natural, chemical process by means of which sugars in a liquid are converted to ethyl alcohol and carbon dioxide  Distillation: Process by means of which alcohol is evaporated from a fermented liquid and then condensed and collected as a liquid Transparency 13-2

 To

maintain an appropriate supply of ingredients for producing beverage products  To ensure that the quality of ingredients purchased is appropriate to intended use  To insure that ingredients are purchased at optimum prices Transparency 13-3

       

Frequency with which management chooses to place orders Storage space available Funds available for inventory purchases Delivery schedules set by purveyors Minimum order requirements set by purveyors Price discounts for volume orders Price specials available Limited availability of some items

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 License

states: States in which beverage wholesalers (and sometimes manufacturers and distributors) are allowed to sell alcoholic beverages directly to foodservice establishments  Control states: States in which the state government actually sells some or all alcoholic beverages through its own network of stores, thus exercising complete control Transparency 13-5

 Quantity

of an item delivered must equal the quantity ordered  Quality of an item delivered must be the same as the quality ordered  Price on the invoice for each item delivered should be the same as the price quoted or listed when the order was placed Transparency 14-1

1. Maintain an up-to-date file of all beverage orders placed 2. Remove the record of an order from the file when a delivery arrives and compare it to the invoice presented by the delivery driver 3. Before the driver leaves, check brands, dates, or both, and count or weigh delivered goods 4. Compare the invoice to the order Transparency 14-2

5.Call to the attention of management and the delivery driver any broken or leaking containers and any bottles with broken seals or missing labels 6.Note all discrepancies between delivered goods and the invoice on the invoice itself 7.Sign the original invoice and return it to the driver. 8.Record the invoice on the beverage receiving report 9.Notify the person responsible for storing beverages that a delivery has been received Transparency 14-2 (cont’d)

 Prevent

pilferage  Ensure accessibility when products are needed  Preserve quality

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 Assign

the responsibility for the stored items to a single employee  Keep the beverage-storage facility locked at all times

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 To

ensure the timely release of beverages from inventory in the needed quantities  To prevent the misuse of alcoholic beverages between release from inventory and delivery to the bar

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Standards  Carefully set issue quantities  Issue beverages only to authorized people Standard Procedures  Establish par stocks for bars  Set up a requisition system Transparency 14-6

 To

ensure that all drinks are prepared according to management’s specifications  To guard against excessive costs that can develop in the production process

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 Shot

glass (plain or lined)  Jigger  Pourer  Automated dispenser

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Method I 1.Total number of ounces in bottle ÷ Standard portion size (ounces) = Number of drinks per bottle 2.Cost of bottle ÷ Result from Step 1 = Standard drink cost Method II 1.Cost of bottle ÷ Total number of ounces in bottle = Cost per ounce 2.Result from Step 1 × Standard portion size = Standard drink cost

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Each card should include:  Name of drink  Drink sales price  Drink cost  Cost percent  Quantity and cost of Individual Ingredients  Total quantity and cost of mixed drink  Type of glassware  Recipe procedure

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 Management

observes bar

operations  Designated employee observes others working at the bar and reports back to management  Individuals unknown to the bartender visit the bar, observe employees, and report back to management  Closed-circuit television systems permit observation from some Transparency 15-5

1.The Cost Approach  Cost percent methods  Monthly calculations  Cost calculations by category  Daily calculations 2.The Liquid Measure Approach  Ounce-control method 3.The Sales Value Approach  Actual sales record method  Average sales value method  Standard deviation method

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+ = – =  

Opening beverage inventory Beverage purchases this month Total available for sale this month Closing inventory this month Value of beverages issued to the bar

Bar inventory value at the beginning of the month – Bar inventory value at the end of the month = Bar inventory differential  

Value of beverages issued to the bar +/– Inventory differential = Cost of beverages consumed Beverage cost percentage = Beverage cost ÷ Beverage sales Transparency 16-2

Added to beverage cost  Food to bar (directs)  Storeroom issues  Mixers Subtracted from beverage cost  Managers’ drinks  Special promotions

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1.Determine bottle size and drink size 2.Calculate drinks per bottle 3.Multiply drinks per bottle by drink price to get sales value per bottle   Example Bottle size: 1 liter; drink size: 1 ounce 33.8 drinks per bottle 33.8 × $3.00 = $101.40

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By comparing the price of the alcohol sold as straight drinks to the price of the mixed drink, a more accurate picture of potential sales values emerges

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To find the differential:   Sales value of bottle of alcohol ÷ Number of ounces in bottle = sales value/ounce  Sales value/ounce x Number of ounces in mixed drink = Sales value of alcohol sold as straight drinks  If sales value of alcohol sold as straight drinks > sales price of mixed drink, then the difference between the two figures is the negative mixed drink differential  If sales value of alcohol sold at straight drinks < sales price of mixed drink, then the difference between the two figures is the positive mixed drink differential  Finally, multiply the +/– differential by the number of mixed drinks sold to determine the adjusted total bottle sales value for spirits

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Calculations 1. Average inventory = (Opening inventory + Closing inventory) ÷ 2 2. Turnover rate = Cost of beverages sold for a period ÷ Average inventory for the period Generally accepted turnover rates Spirits—1.5 Beers—2.0 Transparency 16-6

 Optimize

the number of sales  Maximize profit  Control revenue

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 To  To  To  To  To

socialize conduct business eat enjoy entertainment relax or kill time

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 Establishing

drink prices that will maximize gross profit  Influencing customers’ selections

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 Dram

shop laws are state statutes that hold the serving establishment and the server financially liable for damages to third parties resulting from the serving of alcoholic beverages to intoxicated customers  Given these laws and changing social attitudes that encourage responsible drinking, managers try to optimize sales rather than Transparency 17-4

         

Working with an open cash drawer Under-ringing sales Overcharging customers Undercharging customers Overpouring Underpouring Diluting bottle contents Bringing one’s own bottle into the bar Charging for drinks not served Drinking on the job

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



Current Compensation o Direct: salaries, wages, tips, bonuses, commissions o Indirect: paid vacations, health benefits, life insurance, free meals, free living accommodations, use of employer-operated recreational facilities, discounts on accommodations at other properties within a chain Deferred Compensation o Pension benefits o Social Security Transparency 18-1

        

Labor turnover rate Training Labor legislation Labor contracts Use of part-time staff Outsourcing Sales volume Location Equipment

      

Layout Preparation Service Menu Hours of operation Weather Competent management

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Labor turnover rate = Number of departing employees ÷ Total number of employees on staff   Break-even for staying open an additional hour = Fixed costs ÷ (1 – Variable rate)

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With all full-time staff: Wages: 4 dishwashers × 35 hours × $7 per hour = $980 Benefits: $980 × 20% = $196 Total labor cost: $1,176

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With full-time and part-time staff: Full-time dishwashers

Wages: 2 dishwashers × 35 hours × $7 per hour = $490 Benefits: $490 × 20% = $98 Part-time dishwashers Wages: 10 shifts × 7 hours × $4.50 per hour = $315 Benefits: $315 × 10% = $31.50 Total labor cost: $934.50 Transparency 18-4 (cont’d)

1. 2. 3.

Organize the enterprise Prepare job descriptions Schedule employees

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Interviews and observations are designed to provide information about the following:  Job objectives  Specific tasks required

to achieve

objectives  Performance standards  Knowledge and skills necessary  Education and experience required Transparency 19-2

Answer three questions  What is to be done?  When is it done?  Where is it done? Contain three parts 1.Heading that states the job title and the department in which the job is located 2.Summary of the duties of the job (typically in paragraph form) 3.List of the specific duties assigned to the job

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1.Determine the number of employees needed to serve a specified number of covers in a certain time period Example: 8 servers for 500 covers in a threehour lunch period 2.Standard work hours = Number of servers × Number of hours 8 servers × 3 hours = 24 work hours

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Number of standard work hours × Hourly wage = Standard cost Example: 24 hours × $4.00 per hour = $96 standard cost

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         

Objectives Approaches to training Training methods Instructional timetables Location Lesson plans Trainer preparation Trainee preparation Training session(s) Evaluation

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 On-the-job  Structured

versus off-the-job versus unstructured  Individual versus group In general, trainers first select a training approach; then they employ a variety of training methods that compliment the approach Transparency 20-2

Studies show that people tend to prefer learning things in one of three ways:  By  By

hearing information (oral) seeing information (visual)  By doing the skill (kinesthetic)

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Therefore, an effective training should use a variety of methods:

        

Lecture Demonstration Role playing Individual assignments Field trips Seminars Case studies Panels Programmed instruction Transparency 20-3 (cont’d)

Since people learn better when they understand the need for learning, an introduction to any training should always include:  Objectives of the training  Instructional method being  Skills

used

trainees will learn Transparency 20-4

1. General background 2. Specific duties of a job 3. Specific procedures for carrying out the duties 4. Summary

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1. Customers 2. Employees 3. External agencies/organizations/groups 4. Managers

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 Government

agencies  Chain organizations  Food critics  Rating organizations

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1.Meet with appropriate staff to point out the problem and to determine its cause 2.Identify all appropriate corrective measures that might be adopted 3.Select the best corrective measure from among the alternatives 4.Institute the selected measure 5.Monitor performance to be sure that the corrective measure has the desired effect

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 Inadequate

performance  Unsuitable standards  Inappropriate organization

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          

Improper materials provided to workers Lack of required equipment or tools Need for additional training Inadequate management or supervision Poor union/management relations Personal problems away from the job Difficulties with interpersonal relations on the job Inadequate compensation Illness Poor working conditions Improper work schedules

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