OH 1-1 Agenda Welcome Ground Rules Warm Up Activity Syllabus NRAEF ManageFirst What is Cost Control?...

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Agenda

Welcome

Ground Rules

Warm Up Activity

Syllabus

NRAEF ManageFirst

What is Cost Control?

Next week

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Ground Rules

Be on time – start on time All cell phones, pagers and IPods should be

turned off during class No Internet use during class, unless part of

classroom activity Free to take a break if needed Appreciate other points of view Respect others’ desire to learn End on time

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Warm Up Activity

Break into groups of 2-3 students

Interview each other; as you will introduce each other to the class

Information you may wish to share: What is your degree path?

Hospitality Experience

Family, hobbies

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NRAEF ManageFirst Program

Competency GuideIS REQUIRED FOR THIS COURSE

How can this book help me?

Part of a certificate program

Industry-driven

Resume builder

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Who is the NRAEF?Educational arm of the National Restaurant Association

Bridge between academia and industry

Work with over 60,000 restaurant, hospitality and foodservice members companies



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Management-focused

Application-based, not just theory

Professional Profiles give you a “sneak peek” into the field

“Real world” activities help build job skills

Competency Guide Content



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Validated by over 200 restaurant, foodservice and hospitality organizations

Resume builder

Tangible accomplishment

Can give you a hiring advantage over peers who didn’t use ManageFirst

How will this certificate help me?



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Undergraduate students are eligible to apply for this scholarship who have earned at least one ManageFirst certificate (not including ServSafe® Food Safety and ServSafe Alcohol®) and are studying culinary arts and/or foodservice management.Award amount: $2,000Application and Instructions available at:http://www.nraef.org/scholarships/managefirst/

Academic Scholarship for NRAEF ManageFirst Program® Students

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MCC & ICA

NRAEF ManageFirst Core Credential TopicsCHRM 2475 Leadership: Hospitality & Restaurant ManagementCHRM 2460 Cost Management: Controlling Foodservice CostsCHRM 2470 Supervision: Human Resources Management & SupervisionCHRM 1020 Sanitation: ServSafe Food Safety

NRAEF ManageFirst Foundation TopicsCHRM 2480 Purchasing: Inventory and PurchasingCHRM 1140 Food Production: Food ProductionCHRM 2350 Nutrition: Nutition

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STUDENTS WINMCC/ICA WINSNRAEF WINSTHE INDUSTRY WINS

WIN WIN

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Let’s Take a Break

Be back in 15 minutes

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What Is Cost Control?

Controlling Foodservice Costs

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Chapter Learning Objectives

Describe the relationship between standards and controlling costs.

Identify the types of costs incurred by a restaurant or foodservice organization.

Classify foodservice costs as controllable or noncontrollable.

Describe and give examples of controllable and noncontrollable costs.

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Chapter Learning Objectives continued

Classify foodservice costs as variable, semivariable, or fixed.

Describe and give examples of variable, semivariable, and fixed costs.

Explain the basic foodservice cost control process.

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Characteristics of Controls

Contribute to profit making

Start with the menu

Affect all areas of the operation

Are formalized through a restaurant’s policies and procedures

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Cost Standards

Are used to compare actual results to planned results

Are established by management

Standards may be designed to Ensure a profit

Stay within the budget

Achieve planned quality levels

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Costs Impact Profit

Excessive costs reduce restaurant profitability.

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Types of Costs

Controllable Costs Food Labor Cleaning supplies

Noncontrollable Costs Insurance

Mortgage payments

Cost of licenses

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Types of Costs continued

Fixed Costs Do not vary with sales volume Do not change from one accounting period to the

next Variable Costs

Increases and decreases are directly related to sales volume

Semivariable Costs Increase or decrease with changes in sales volume,

but not in direct proportion Contain both fixed and variable components

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Variable Costs

Directly affect profitability

Can be controlled by management

Are compared to an established standard

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Prime Costs

Include those expenses classified as Food

Labor

Are directly controlled by management

Make up the majority of a restaurant’s total costs

Are directly related to profitability

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Prime Costs continued

The costs of food and labor are a restaurant’s greatest expenses.

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The Cost Control Process Steps

Step 1 – Collect sales and cost data.

Step 2 – Monitor and analyze sales and costs.

Step 3 – Take corrective action as appropriate.

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The Cost Control Process

Step 1 – Collect sales and cost data.

Yearly and monthly data are used for budgets and income statements.

Weekly and monthly data are used for purchasing and scheduling.

Meal period data are used for production planning.

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The Cost Control Process continued


Evaluate The line item’s name

Budgeted cost

Actual cost

Cost difference

Percentage difference

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Compare actual sales and costs to Budget (line item review)

Operational standards

Historical information

Identify variances

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Computation of Percent Difference

Actual cost of $48,000

Budgeted cost of $45,000

Actual cost – Budgeted cost = Cost difference

$48,000 – $45,000 = $3,000

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Computation of Percent Difference continued

Cost difference ÷

Cost budgeted = Percent

difference

$3,000 ÷ $45,000 = 0.067, or 6.7%

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Cost Variations

Can be preventable

May be unpreventable

Take corrective action on preventable cost variations

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Step 3 – Take corrective action as appropriate.

Variations from anticipated results may be Large and significant

Small, but still significant

Small and insignificant

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Corrective Actions for Cost Control

To reduce food cost

Reduce portion size.

Replace the item with a lower cost alternative.

Feature menu items with higher profit margins (lower costs).

Raise menu prices.

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Corrective Actions for Cost Control continued

To reduce food waste

Monitor portion control.

Monitor food storage and rotation.

Monitor food purchasing (buy appropriate amounts).

Minimize production errors.

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To reduce labor cost

Reduce the number of employees on the schedule.

Ask employees to end their shift early if they are not needed.

Cross-train staff.

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Do you think food or labor costs are higher in this restaurant?

Why?

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How Would You Answer the Following Questions?

1. Who is responsible for the size of a restaurant’s fixed expense?

2. Which of the following vary with sales volume?A. Fixed expenseB. Semivariable expenseC. Variable expenseD. Both B and C

3. Who is responsible for monitoring controllable costs?

4. What two components make up “prime cost?”

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Key Term Review

Control

Controllable cost

Corrective action

Cost of food sold

Fixed cost

Gross profit

Income statement

Labor expense

Line item review

Loss

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Key Term Review continued

Noncontrollable cost

Prime cost

Profit

Sales

Semivariable cost

Standard

Total expense

Variable cost

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Chapter Learning Objectives—What Did You Learn?

Describe the relationship between standards and controlling costs.

Identify the types of costs incurred by a restaurant or foodservice organization.

Classify foodservice costs as controllable or noncontrollable.

Describe and give examples of controllable and noncontrollable costs.

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Chapter Learning Objectives—What Did You Learn? continued

Classify foodservice costs as variable, semivariable, or fixed.

Describe and give examples of variable, semivariable, and fixed costs.

Explain the basic foodservice cost control process.

OH 1-1 Agenda Welcome Ground Rules Warm Up Activity Syllabus NRAEF ManageFirst What is Cost Control?...

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