Managing Resources

2. 49 Managing Resources

3. Objectives • Evaluate the processes a chef must monitor and control to manage food costs. • Demonstrate how to cost a recipe.

4. Managing Resources continued To meet financial goals, chefs must successfully manage a variety of resources

5. Managing Resources Resources used in the course of business become a cost to the establishment The two most important cost areas are food cost and labor cost

6. Managing Food Cost • Food costs can be affected either favorably or unfavorably depending on the management of the following functions: • Purchasing • Receiving • Storage • Production • Recipe costing

7. Purchasing continued The goal of purchasing is to assure that the kitchen gets the right product at the right price and in the right quantity Product specifications ensure that the exact product called for in a recipe is always the product being purchased

8. Purchasing Before deciding how much to purchase, an inventory is taken to determine what is on hand Many operations simplify this decision by setting a par stock

9. Competitive Bidding Vendors compete against each other for business, which motivates them to sell at the lowest possible price Chefs and purchasers compare the price of products of at least two different vendors When comparing prices, the prices quoted must be for products of the same type and quality

10. Receiving continued The purpose of receiving is to ensure that what has been ordered is what is being delivered Many establishments use a purchase order (PO) system to obtain food and supplies Most products are delivered with an invoice from the vendor

11. Receiving • The individual receiving the delivery should • inspect products for proper quality • check the invoice to be sure the items listed are being delivered in the quantities stated

12. Storage Proper storage of food product is part of sanitation and safe food handling and also helps to reduce costs Proper storage reduces food waste from spoilage and theft

13. Spoilage continued Spoilage is reduced by ensuring that products are stored under the best conditions for maximum shelf life

14. Spoilage continued Verify that refrigerators and freezers are working properly Foods should be stored in the temperature range that is ideal for that particular product

15. Spoilage Product rotation also helps reduce food cost Older products should be moved to the front to be used first and newer products moved to the back

16. Theft continued Theft or misuse of products can account for a great deal of lost food product Many operations keep a security camera aimed at food storage and production areas

17. Theft Keeping coolers and storerooms locked when the kitchen is not open is a basic practice of good security

18. Issuing Products are drawn from storage by a process called issuing Requisitions are used to formally request product from storerooms Only those who are directly responsible for an area’s food cost should be allowed to requisition product

19. Production Overproducing menu items wastes food, while underproducing may result in lost sales Every meal period, the chef must decide how much food to prepare

20. Forecasting Before cooks can begin their mise en place, the chef must forecast the next meal service Most restaurants keep logs of the numbers of customers and menu items sold This data is used to predict the number of guests for the next meal period and how many menu items to prepare

21. Production Sheets continued A production sheet is posted in the kitchen before preparation for each meal begins Cooks refer to this sheet to know how many portions they need to prepare

22. Production Sheets At the end of the meal period, the number of unused items is noted on the production sheet This information helps the chef forecast for the next meal period

23. Costing Recipes continued When developing or evaluating a recipe, knowing the cost of each ingredient is helpful in controlling costs If the recipe cost is high, the chef can see which ingredients are expensive and consider cheaper substitutes

24. Costing Recipes continued Preparing standardized recipes and calculating their cost must be done before prices are assigned to menu items The cost of menu items is calculated on a regular basis Chefs often use standardized recipe cost sheets or software programs to calculate recipe food costs

25. Costing Recipes Number assigned to the recipe for filing or computer purposes Name of the recipe as it appears on the menu Recipe yield divided by the portion size Serving size that is served to the customer

26. Yield continued When ingredients are trimmed, peeled, boned, or cut, that loss of product must be added in to the cost of the recipe

27. Yield continued The as purchased (AP) and edible portion (EP) amounts are used in the yield test process

28. Yield Once the yield test is performed, the yield percentage can be calculated This yield percentage tells the chef how much usable product, or EP, he or she can expect from a given amount of AP product

29. Objective • Summarize how labor costs are managed in a foodservice operation.

30. Labor Cost continued The most important tool in controlling labor cost is the staff schedule Before creating the schedule, the chef must forecast the expected volume of business for the week

31. Labor Cost continued The chef assigns workers for each shift and determines the labor cost for the week If the amount is higher than the amount budgeted, the schedule must be adjusted

32. Labor Cost The actual labor cost is kept in check by enforcing rules regarding the time clock or time sheet Chefs must understand labor laws and, in some cases, union work rules when scheduling and managing labor cost

33. Objectives • Calculate food and labor cost percentages. • Explain why food cost percentage is a measure of a chef’s performance.

34. Measuring Performance Profit and loss statements and food cost percentages are used to measure the success of a chef’s cost control efforts

35. Profit or Loss? The performance of the operation is ultimately measured in the profit and loss statement (P&L) The P&L lists the business’ sales and expenses, which determine whether the business is operating at a profit or loss

36. Food and Labor Cost Percentage continued Food cost percentage shows the portion of food sales that was spent on food expenses Because the amount of food used varies with the amount of business, the cost of food used is typically measured against food sales

37. Food and Labor Cost Percentage continued Food Costs ÷ Food Sales = Food Cost Percentage Food cost percent is closely monitored in most foodservice establishments

38. Food and Labor Cost Percentage continued • Labor cost percentage measures the amount of food sales spent on labor during a specific period of time • Labor cost includes • Cost of payroll • Payroll taxes • Employee benefits such as insurance

39. Food and Labor Cost Percentage The formula to calculate labor cost percentage is Labor Costs ÷ Food Sales = Labor Cost Percentage

40. Restaurant Management Software Measuring financial performance involves many, frequent calculations Most operations use software to track food and labor cost, which is integrated with the restaurant’s POS system An integrated system aids the management of resources

41. Review • What are the two most important costs that chefs and kitchen managers must manage? • Food cost • Labor cost continued

42. Review • What must chefs focus on to manage food costs effectively? • Purchasing • Receiving • Storage • Issuing • Production • Recipe costs continued

43. Review • What is the most important tool in controlling labor costs? • Staff schedule continued

44. Review • How is a chef’s ability to control costs measured? • In the profit and loss statement continued

45. Review • What is the formula for food cost percentage? • Food Costs ÷ Food Sales = Food Cost Percentage continued

46. Review • Suppose a restaurant’s food costs for the month of October were $41,650 and food sales for that time were $113,587. What is the food cost percentage for October? • Food Costs ÷ Food Sales = Food Cost Percentage • $41,650 ÷ 113,587 = 0.367  100 = 36.7% continued

47. Review • What is the formula for labor cost percentage? • Labor Costs ÷ Food Sales = Labor Cost Percentage continued

48. Review • Suppose a restaurant’s labor costs for the month of July were $28,070 and food sales for that time were $118,637. What is the labor cost percentage for July? • Labor Costs ÷ Food Sales = Labor Cost Percentage • $28,070 ÷ 118,637 = 0.236  100 = 23.6%