Chapter 1

2. Chapter 1 Principles of Control in a Foodservice Operation

3. Learning Outcomes • Summarize the four basic functions of management. • Understand the role of cost control in the success of an operation. • Recall five areas in which basic math skills are used in a foodservice operation.

4. Introduction • The management function of control is essential to running a successful foodservice operation • Control refers to the effective management of resources

5. Functions of Management • There are four basic functions of management • Planning • Organizing • Leading • Controlling • All four functions are essential to running any type of business or operation continued

6. Functions of Management • Planningis the process of determining what an operation will be • Planning involves defining an operation’s goals and objectives and the steps that will be necessary to achieve them continued

7. Functions of Management • Organizing is the process of deciding • what tasks need to be completed • who will perform those tasks • how the tasks will be coordinated continued

8. Functions of Management • Leading is the process of directing people to meet the goals and objectives set in the planning phase • Leadership includes • motivating people • communicating effectively • providing feedback on employee performance • listening and responding to employee needs continued

9. Functions of Management • Controlling is the process of monitoring the performance of the operation against its plans • Controlling is accomplished by • setting measurable goals • measuring the results • comparing those results against the goals continued

10. Functions of Management • If results are not in line with goals, the reason should be determined and corrective action taken continued

11. Functions of Management • Control is an ongoing process in which the operation must • define its expected results • have a plan in place to achieve those results • provide the resources that enable it to meet its goals • modify its structure, methods, or tools to meet its plan and measure the results

12. Cost Control • Cost control is the process an operation uses to ensure that its forecasted sales and expenses conform to its plans, goals, and objectives • The successful foodservice manager balances quality with financial control to yield a profit for the business and secure its continued success continued

13. Cost Control • Cost control is a critical function that should be required of every foodservice operator • Many foodservice operations lack strong cost controls • To control costs and enhance profits, a manager needs to understand the relationship among cost, sales, and profit (or loss) continued

14. Cost Control • Cost, or expense, is the dollar amount spent to create the good or service being sold • Sales, or revenues, result from the exchange of goods or services for payment or promise to pay continued

15. Cost Control • Cost is subtracted from sales to determine whether the operation had a profit or a loss • Profit is the dollar amount remaining after all expenses have been paid continued

16. Cost Control • Aloss is the amount incurred when the expenses of an operation are greater than its sales • The successful manager understands where the numbers come from in the profit equation continued

17. Cost Control • Operations need to make enough money from sales to cover the costs of doing business • This is true for both for-profit and not-for-profit businesses • An operation can increase its profits in two ways • by increasing sales • by decreasing expenses continued

18. Cost Control • Math skills are used in • standardizing and converting recipes • purchasing food and supplies • determining staffing needs • determining selling prices continued

19. Cost Control • Math skills are used in • forecasting how much food to produce • controlling inventory • preparing budgets • analyzing customer satisfaction • evaluating sales results

20. Basic Math Review • A manager needs basic math skills to effectively run a foodservice operation through a strong cost-control system • These skills include the use of • fractions • decimals • percentages • ratios continued

21. Basic Math Review • Fractions, percentages, and decimals can be considered one in the same • They all deal with parts of a whole • A fraction is made up of • a numerator (the top number) • a denominator (the bottom number) • The numerator is the part and the denominator represents the whole continued

22. Basic Math Review • A percentage is another way of expressing a part of the whole • The word percent is from the Latin words per centum meaning “per hundred” • A percentage is another way of expressing a fraction in which the denominator is 100 • The percent symbol is used after a number when writing percentages (50%) continued

23. Basic Math Review • Decimals are another way of expressing a part of the whole • A decimal represents a fraction based on the number 10 • A decimal point separates the whole from the part • The number 5.67 represents five wholes and 67 parts continued

24. Basic Math Review • To express a decimal as a percentage • move the decimal point two places to the right • add the percent symbol • Decimals and percentages show the same relationship continued

25. Basic Math Review • To convert a percentage to a decimal, move the decimal point two places to the left • Both percentages and decimals can also be expressed as fractions continued

26. Basic Math Review • A ratio expresses how one number relates, or compares, to another • X:Y is stated “the ratio is X to Y” • A ratio can be written in a number of ways

27. Practical Foodservice Applications • Percentages, ratios, fractions, and decimals are used every day in foodservice operations to control costs • A ratio expresses how one number relates, or compares, to another • For example, the ratio 2:7 can express that a baker sells two sugar cookies for every seven chocolate chip cookies continued

28. Practical Foodservice Applications • Many foodservice operations base the selling price of a menu item on the cost of the food used to make it • They want to limit the food cost to a certain percentage of the selling price—a food cost percentage • A common food cost percentage used by foodservice operations is 30 percent continued

29. Practical Foodservice Applications • The foodservice operator can determine the selling price by using a calculation in which X is the selling price • For example, if the food cost is $10, and the food cost percentage is 30 percent, the operator sells the menu item for $33.33 • The $10 food cost divided by X equals 30 percent continued

30. Practical Foodservice Applications • When making decisions about which food products to purchase, a manager often compares the prices of two or more products • Factors such as pack size and product yield must be taken into consideration when comparing product prices • The manager must determine the best price per unit continued

31. Practical Foodservice Applications • For each option being considered • determine the total amount or weight per package or case • calculate the price per unit, such as per pound • compare the prices to find the best buy continued

32. Practical Foodservice Applications • To compare prices between a processed and a raw product, managers must consider the yield • Product yield is the amount of a product that is usable after cooking or other processing continued

33. Practical Foodservice Applications • Ways to find the product yield vary by product • For a fresh roast, for example, the yield would be affected by the amount of fat to be trimmed off continued

34. Practical Foodservice Applications • The manager needs to determine the price per unit, such as per pound, for the amount of the product yield • This is calculated by dividing the purchase price by the product yield • The prices can then be compared • Another common calculation in foodservice management is determining the cost to produce a meal continued

35. Practical Foodservice Applications • The cost to produce a meal includes the costs of food and labor per meal served • The food cost per meal can be calculated by dividing the cost of food to prepare meals by the number of meals served continued

36. Practical Foodservice Applications • The labor cost per meal is calculated using a similar equation • Labor costs are divided by the number of meals served continued

37. Practical Foodservice Applications • When comparing actual performance to goals, a manager looks at the variance • The varianceis the difference between a budgeted amount and an actual amount • Variances are calculated for revenues, expenses, and profit continued

38. Practical Foodservice Applications • A manager may want to determine the variance as a percentage difference • To do so, the variance amount is divided by the budgeted amount • The result is multiplied by 100 continued

39. Practical Foodservice Applications • A manager is also responsible for evaluating quality • A quality measure rates the level of perceived value placed on the parameter being evaluated • One quality measure, or parameter, is customer satisfaction • An operation often surveys its customers to learn their views on its performance continued

40. Practical Foodservice Applications • Customer satisfaction is often expressed as a percentage • For example, the number of “excellent” service ratings may be stated as a percentage of the total ratings • A manager records and compares the results of quality measures over time to monitor the success of the operation

41. Key Terms Review • planning • organizing • leading • controlling • cost control • cost • sales • profit • loss • fraction • percent • decimal • ratio • product yield • variance • quality measure