Chapter 8
Controlling Other
Expenses
© 2008 John Wiley & Sons
Hoboken, NJ 07030
Food and Beverage Cost Control, 4th Edition
Dopson, Hayes, & Miller
Main Ideas
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Managing Other Expenses
Fixed, Variable, and Mixed Other Expenses
Controllable and Noncontrollable Other Expenses
Monitoring Other Expenses
Reducing Other Expenses
Technology Tools
© 2008 John Wiley & Sons
Hoboken, NJ 07030
Food and Beverage Cost Control, 4th Edition
Dopson, Hayes, & Miller
Managing Other Expenses
 Other expenses are those items that are neither
food, beverage, nor labor.
 Other expenses can account for a significant
financial expenditure.
 You must look for ways to control all of your
expenses, but sometimes the environment in which
you operate will act upon your facility to influence
some of your costs in positive or negative ways.
© 2008 John Wiley & Sons
Hoboken, NJ 07030
Food and Beverage Cost Control, 4th Edition
Dopson, Hayes, & Miller
Managing Other Expenses
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In the past, serving water to each guest upon arrival in a
restaurant was simply SOP (standard operating procedure)
for many foodservice operations. The rising cost of energy
has caused many foodservice operations to implement a
policy of serving water on request rather than with each
order.
Energy conservation and waste reduction are two examples
of attempts to control and reduce other expenses.
Source reduction is working with food manufactures and
wholesalers to reduce product packaging waste.
© 2008 John Wiley & Sons
Hoboken, NJ 07030
Food and Beverage Cost Control, 4th Edition
Dopson, Hayes, & Miller
Managing Other Expenses
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Each operation will have its own unique list of required
other expenses.
Other expenses can constitute almost anything in the
foodservice business.
Groupings, if used, should make sense to the operator and
should be specific enough to let the operator know what is in
each category.
Operators can use their own categories, or follow those used
in the Uniform System of Accounts for Restaurants (USAR)
recommended for use by the National Restaurant
Association.
© 2008 John Wiley & Sons
Hoboken, NJ 07030
Food and Beverage Cost Control, 4th Edition
Dopson, Hayes, & Miller
Managing Other Expenses
 While there are many ways in which to consider
other expenses, two views of these costs are
particularly useful for the foodservice manager.
 They are:
1. Fixed, variable, or mixed
2. Controllable or noncontrollable
© 2008 John Wiley & Sons
Hoboken, NJ 07030
Food and Beverage Cost Control, 4th Edition
Dopson, Hayes, & Miller
Fixed, Variable, and Mixed Other Expenses
 A fixed expense is one that remains constant
despite increases or decreases in sales volume.
 A variable expense is one that generally increases
as sales volume increases, and decreases as sales
volume decreases.
 A mixed expense is one that has properties of both
fixed and variable expenses.
© 2008 John Wiley & Sons
Hoboken, NJ 07030
Food and Beverage Cost Control, 4th Edition
Dopson, Hayes, & Miller
Fixed, Variable, and Mixed Other Expenses
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The following shows how fixed, variable, and mixed
expenses behave as sales volume increases.
Expense
As a Percentage of
Sales
Decreases
Total Dollars
Variable
Expense
Remains the Same
Increases
Mixed
Expense
Decreases
Increases
Fixed
Expense
© 2008 John Wiley & Sons
Hoboken, NJ 07030
Remains the Same
Food and Beverage Cost Control, 4th Edition
Dopson, Hayes, & Miller
Fixed, Variable, and Mixed Other Expenses
 Percents can be computed for other expenses as
follows:
Other Expenses
Total Sales
© 2008 John Wiley & Sons
Hoboken, NJ 07030
= Other Expense Cost %
Food and Beverage Cost Control, 4th Edition
Dopson, Hayes, & Miller
Fixed, Variable, and Mixed Other Expenses
 If an operator feels that a fixed expense percentage
is too high, he or she must either increase sales or
negotiate better rates.
 Variations in expense percentage that relate only to
whether an expense is fixed, variable, or mixed
should not be of undue concern to management. It
is only when a fixed expense is too high or a
variable expense is out of control, that management
should act. This is called management by
exception.
© 2008 John Wiley & Sons
Hoboken, NJ 07030
Food and Beverage Cost Control, 4th Edition
Dopson, Hayes, & Miller
Controllable and Noncontrollable Other
Expenses
 A noncontrollable expense is one that the manager
can neither increase nor decrease
 A controllable expense is one in which decisions
made by the manager can have an effect of either
increasing or reducing the expense.
 Management should focus its attention on
controllable rather than noncontrollable expenses.
© 2008 John Wiley & Sons
Hoboken, NJ 07030
Food and Beverage Cost Control, 4th Edition
Dopson, Hayes, & Miller
Monitoring Other Expenses
 When managing other expenses, two control and
monitoring alternatives are available. They are:
1. Other expense cost %
2. Other expense cost per guest
© 2008 John Wiley & Sons
Hoboken, NJ 07030
Food and Beverage Cost Control, 4th Edition
Dopson, Hayes, & Miller
Monitoring Other Expenses
Other Expenses
Total Sales
= Other Expense Cost %
Other Expense
Number of Guests Served = Other Expense Cost
Per Guest
 The cost per guest formula is of value when
management believes it can be helpful, or the lack
of sales figure makes the computation of other
expense percentage impossible.
© 2008 John Wiley & Sons
Hoboken, NJ 07030
Food and Beverage Cost Control, 4th Edition
Dopson, Hayes, & Miller
Reducing Other Expenses
 It is useful to break down other expenses into four
categories: food and beverage, labor, facility
maintenance, and occupancy when devising
strategies to lower costs.
 In general, fixed costs related to food and beverage
operations can only be reduced when measuring
them as a percent of total sales. This can be done
only by increasing the total sales figure.
© 2008 John Wiley & Sons
Hoboken, NJ 07030
Food and Beverage Cost Control, 4th Edition
Dopson, Hayes, & Miller
Reducing Other Expenses
 Labor related expenses can also be considered
partially fixed and partially variable.
 To reduce costs related to labor, it is necessary to
eliminate wasteful labor-related expenses.
 However, if an operator attempts to reduce costs too
much he or she may find the best workers employed
elsewhere.
 Reducing employee benefits while attempting to
retain a well-qualified workforce is simply
management at its worst.
© 2008 John Wiley & Sons
Hoboken, NJ 07030
Food and Beverage Cost Control, 4th Edition
Dopson, Hayes, & Miller
Reducing Other Expenses
 A properly designed and implemented preventative
maintenance program can go a long way toward
reducing equipment failure and thus decreasing
equipment and facility-related costs.
 Proper care of mechanical equipment prolongs its
life and reduces operational costs.
© 2008 John Wiley & Sons
Hoboken, NJ 07030
Food and Beverage Cost Control, 4th Edition
Dopson, Hayes, & Miller
Reducing Other Expenses
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One way to help ensure that costs are as low as possible is to
use a competitive bid process before awarding contracts for
serviced you require.
In the area of maintenance contracts, for areas such as
kitchen or mechanical equipment, elevators, or grounds, it is
recommended that these contracts be bid at least once per
year.
Air-conditioning, plumbing, heating and refrigerated units
should be inspected at least yearly, and kitchen equipment
should be inspected at least monthly for purposes of
preventative maintenance.
© 2008 John Wiley & Sons
Hoboken, NJ 07030
Food and Beverage Cost Control, 4th Edition
Dopson, Hayes, & Miller
Reducing Other Expenses
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Occupancy costs refer to those expenses incurred by the
foodservice unit that are related to the occupancy of and
payment for the physical facility it occupies.
For the foodservice manager who is not the owner, the
majority of occupancy costs will be noncontrollable.
The owner should find ways to control occupancy costs such
as rent and interest on debt, if possible.
If occupancy costs are unrealistically high, no amount of
effective cost control can help “save” the operation’s
profitability.
© 2008 John Wiley & Sons
Hoboken, NJ 07030
Food and Beverage Cost Control, 4th Edition
Dopson, Hayes, & Miller
Technology Tools
 Depending upon the specific food service operation,
these costs can represent a significant portion of the
operation’s total expense requirements. As a result,
controlling these costs is just as important as
controlling food and labor-related costs.
 Software and hardware that can be purchased to
assist in this area include applications that relate to:
1. Assessing and monitoring utilities cost
2. Minimizing energy costs via the use of motion-activated
sensors
3. Managing equipment maintenance records
© 2008 John Wiley & Sons
Hoboken, NJ 07030
Food and Beverage Cost Control, 4th Edition
Dopson, Hayes, & Miller
Technology Tools
4. Tracking marketing costs/benefits
5. Menu and promotional materials printing - hardware and
software
6. Analysis of communications costs (telephone tolls)
7. Analysis of all other expense costs on a per-guest basis
8. Analysis of all other expense costs on a “cost per dollar
sale” basis
9. Comparing building/contents insurance costs across
alternative insurance providers
10. Software designed to assist in the preparation of the
income statement, balance sheet, and the statement of
cash flows.
© 2008 John Wiley & Sons
Hoboken, NJ 07030
Food and Beverage Cost Control, 4th Edition
Dopson, Hayes, & Miller
Technology Tools
11. Income tax management
12. Income tax filing
 At the minimum, most independent operators
should computerize their records related to taxes at
all levels to ensure accuracy, safekeeping, and
timeliness of required filings.
© 2008 John Wiley & Sons
Hoboken, NJ 07030
Food and Beverage Cost Control, 4th Edition
Dopson, Hayes, & Miller
Summary
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



Managing Other Expenses
Fixed, Variable, and Mixed Other Expense
Controllable and Noncontrollable Other Expenses
Monitoring Other Expenses
Reducing Other Expenses
Technology Tools
© 2008 John Wiley & Sons
Hoboken, NJ 07030
Food and Beverage Cost Control, 4th Edition
Dopson, Hayes, & Miller