chapter 12
Revenue
Prediction
Class Name
Instructor Name
Date, Semester
Foundations of Cost Control
Daniel Traster
Opening Question
If you managed a restaurant, what information
would you want to know to help you predict
how many guests to expect at tomorrow’s meal
services?
2
Forecasting Process
Collect as much historical data as possible
Adjust prior data using rolling averages or trends.
Make further adjustments based on qualitative factors to
create a final forecast
Record actual counts and other data to evaluate forecast’s
accuracy and to adjust future forecasting
3
Forecasting Process
• Historical quantitative data come from POS system or
reservation/walk-in book
• Qualitative data should be recorded daily in a log or
POS system
• Qualitative data includes:
― weather,
― special events,
― conventions,
― holidays,
― construction project,
― competition changes,
― marketing promotions
― …anything that might explain business fluctuations
4
Trends
• Start with customer count from the same day of the
week from the prior week or the prior year.
• Adjust based on historical trend percent increase or
decrease
Current customer count– prior count
% change
=
Prior customer count
5
Example 12a
Restaurant saw 347 customers the first Friday in
March this year and 360 the first Friday in March
last year. What is the percent change from last
year?
% change
=
347-360
=
-0.036 (3.6% decrease)
360
6
Using Trends
• Trends only significant if repeated over and over each
same day of the week
• Manager uses trend to calculate initial forecast
New Customer Count =
Prior Count X (1 + percent change in decimal form)
7
Example 12b
Business has consistent trend of 1.4% increase over
last year’s customer counts. If first Friday in March
last year saw 340 customers, how many should be
forecast for the first Friday in March this year?
New Count = 340 X (1 + 0.014) = 344.8 or 345
8
Rolling Averages
Use rolling averages when no trend is consistent
across weeks.
C1 + C2 + C3…+ CN
Rolling Average Count =
N
C = Customer count for that period
N = total number of periods counted
9
Example 12c
Business forecasts using rolling averages over 4
weeks. Guest counts for past 4 weeks have been
418, 437, 398, and 414. What is forecast for
upcoming week?
418 + 437 + 398 + 414
Rolling Average =
= 417
4
10
Adjusting for Qualitative Data
• Manager adjusts initial forecast based on qualitative
data
• Keep adjusting as new data comes in (weather report
changes, for example)
• Forecast 1-2 weeks our for schedule, 2-3 days out for
ordering, 1 day out for kitchen production schedule
11
Evaluating the System
Constantly compare the forecast to the actual
guest count to learn from mistakes and to make
more accurate forecasts in the future.
12
Forecasting Sales
• Converting customers to revenue helps to budget and
control costs
• Average Check = amount of revenue the average
person generates on a check
• Can calculate average check by server to identify
strong servers or average check by day, week, or
meal period to inform when to offer promotions
13
Average Check
Revenue for a Period
Average Check
=
Guests for that Period
14
Example 12d
Over past 4 Mondays, restaurant has served total
of 1,104 guests for lunch and brought in $12,385
from those 4 periods. What is average guest
check for Monday lunch during this period?
Average Check =
$12,385 ÷ 1,104
= $11.22
15
Uses for Average Check
• It is a control tool. If it changes much over time,
manager should research why and correct problems
or reinforce results
• When seating is limited, increasing average check
may be only way to improve profit
• Average check can forecast revenue
Forecast Revenue
= Forecast Guests X Average Check
16
Example 12e
Restaurant with average check of $47.58 forecasts
3,700 guests next month. How much revenue
should manager expect next month?
Forecast revenue =
3,700 X $47.58
= $176,046
17
Using Forecast Revenue
Using forecast revenue and target food cost %,
beverage cost %, and labor cost %, manager
can determine budget in dollars for a given
period of time.
18
Seat Turnover
When seating is maxed out, manager can serve
more customers in a period by increasing the seat
turnover or number of customers per seat in a
given period.
Customers Served in a Period
Seat Turnover =
Total Seats in Dining Room
19
Example 12f
Restaurant has 120 seats in dining room, but serves
280 guests at dinner. What is seat turnover for
dinner?
Seat Turnover = 280 ÷ 120 = 2.33
20
Seat Turnover (cont.)
• Impacted by slow kitchen service or understaffed or
slow dining room staff
• Guest service should not be so rushed that it reduces
check average; service must remain efficient but
comfortable for guests
• Seat turnover can be used with forecast to decide
how many (if multiple) dining rooms to open or when
to expand dining room
21
Menu Mix
• Menu Mix % = % of sales that come from each menu
item
• It is usually divided by menu category and is
relatively consistent with a meal period across same
days of the week
Caveat: may change seasonally or with weather, and
definitely with menu change
22
Menu Mix Formula
Number of that item sold
Menu Mix %
=
Total number of items sold
Note: Number of each item sold and total sold come
from POS system or sales receipts
23
Example 12g
Restaurant typically sells 140 desserts each
Monday. Of those, 37 are usually sorbet. What
percent of desserts are the sorbets?
Menu Mix %
= 37 ÷ 140
= 0.264 or 26.4%
24
Menu Mix (cont.)
• Menu mix usually calculated against total in a menu
category
• Manager must calculate % of guests who purchase
food from each menu category
Guests buying that category
% buying category =
Total guests
25
Example 12h
Of the 330 guests in a restaurant one night, only
140 buy dessert. What percent bought dessert?
% buying dessert
= 140 ÷ 330
= 0.424 or 42.4%
26
Forecasting Number of Menu Items Sold
from Menu Mix Percents
Step 1
Guest
Forecast
Percent
buying a
category of
food
Number of
dishes in that
category
forecast to
be sold
27
Forecasting Number of Menu Items Sold
from Menu Mix Percents
Step 2
Number of
dishes in a
category
forecast to be
sold (step 1)
Menu Mix %
for an item
Number of
that item
forecast to be
sold
28
Example 12i
Historically, 42% of guests order dessert Thursday
night. Of those, 37% are sorbet. How many sorbets
should the pastry chef plan for next Thursday if the
guest forecast is 370 guests?
1. No. ordering dessert = 370 X 0.42 = 155.4
2. No. of sorbets = 155.4 X 0.37 = 57.5 or 58 sorbets
29
Forecasting Kitchen Production
• Manager uses forecast menu mix sales to plan
kitchen production
• Manager should adjust forecast based on qualitative
data, desire to have a buffer, or desire to run out of
certain foods to avoid leftovers.
• Accurate production schedule minimizes leftovers,
waste, purchases, and labor costs
30
Menu Analysis for Increased Profitability
Menu Analysis is process through which managers
compare each menu item’s profitability and
popularity
• Making the most profitable items the most
popular ones helps to maximize overall profit
• Menu Analysis is best done over a long time
period (several months or a year)
31
Calculating Popularity
Work with only one menu category at a time…
1. Start with number of each item sold (in one category); add total
items sold and divide by number of menu items in that category.
This is “average number of each menu item sold”
2. Popularity Benchmark = average number of each menu item
sold X 70% or 0.7
3. High popularity items sell more items than benchmark; low
popularity items sell fewer items than benchmark
32
Calculating Profitability, Part 1
Contribution =
Margin (CM)
Item Sales Price –
Item Food (or
Beverage) Cost
Menu CM = No. sold (for an item) X CM (for that item)
33
Calculating Profitability
Still working with only one menu category at a time…
4. For each item, calculate item CM = item sales price – item food cost.
5. For each item, calculate Menu CM = number of item sold X its item CM. Add all menu
CM’s together to get menu CM total.
6. Calculate Average Weighted Menu CM = total menu CM ÷ total number of items sold (in
that menu category)
7. An item is “high profitability” if its item CM is higher than the average weighted menu
CM. Item is “low profitability” if its item CM is lower than the average weighted menu CM.
34
Using Menu Analysis
• To make an item more popular: move its location on
the menu or suggestive sell it.
• To make an item more profitable: adjust its portion
size or sales price.
• Can always rework a menu item or replace it entirely
35
Menu Analysis Categories
Star
• high popularity, high profitability. Leave these items alone.
Plowhorse
• high popularity, low profitability. May increase sales price,
reduce food cost, or leave alone if it is a signature dish/draw.
Puzzle
• low popularity, high profitability. Relocate on menu, highlight
on menu, rework menu description, suggestive sell.
Dog
• low popularity, low profitability. Often requires a change:
increase sales price, suggestive sell, or replace with a dish that
still meets the needs of the customers who used to order the
dog. (e.g., replace a vegetarian dish with another vegetarian
dish)
36
Reconciling Kitchen Production with Sales
• Kitchen production schedules can be used to
reconcile food produced against food sold.
• All food prepared by kitchen must be accounted for
to protect against theft.
• Kitchen Production Sheet uses menu mix % and
forecast to predict how many of each dish will be
sold.
37
Example 12j
Restaurant forecasts 130 guests for dinner
tomorrow. 42% of guests usually order dessert. Use
chart on next slide to calculate the number of
each dessert forecast to be sold.
Number ordering dessert
=130 X 0.42
= 54.6 or 55 guests ordering dessert
38
Example 12j Chart
Dessert
Menu Mix %
Strawberry
Cheesecake
14.5%
Chocolate Mousse
18.7%
Crème Brulee
23.1%
Pecan Pie
19.9%
Ice Cream Sundae
23.8%
Forecast Count
39
Example 12j Answer
Dessert
Menu Mix %
Forecast Count
Strawberry
Cheesecake
14.5%
8.0
Chocolate Mousse
18.7%
10.3
Crème Brulee
23.1%
12.7
Pecan Pie
19.9%
10.9
Ice Cream Sundae
23.8%
13.1
40
Converting Forecast Menu Mix Count to
Kitchen Production Schedule
Manager must adjust
numbers to account for
qualitative factors
Chef must factor in prior
leftovers (portions on
hand) and create a
“buffer” in case forecast
is off slightly
41
Kitchen Production Sheet
Adjusted Forecast
• made by manager the day before service based on
most recent qualitative data
Portions on hand
• reusable leftovers from prior shift
Buffer
• determined in advance by chef to cover most services
without running out of a menu item
See Table 12.3 in the Text.
42
Kitchen Production Sheet
Portions to Prepare
• adjusted forecast + buffer – portions on hand
Total Available
• portions to prepare + portions on hand
Leftovers
• is completed at end of shift to record food not sold (for
reconciling sales) and to ensure none are “lost” before next
shift
• Having too many leftovers regularly is cause to adjust buffers
or forecasting processes
See Table 12.3 in the Text.
43
Example 12j converted to
Kitchen Production Sheet
Dessert
Forecast
Count
Adjusted
Forecast
Portions
on
Hand
Buffer
Portions
to
Prepare
Total
Available
Cheese
-cake
8.0
8
3
5
10
13
Mousse
10.3
12
0
5
17
17
Brulee
12.7
14
0
5
19
19
Pie
10.9
11
1
5
15
16
Sundae
13.1
12
5
5
12
17
Leftovers
44
Kitchen Production Sheet Notes
• If kitchen runs out of food and additional portions are
made during service, “additional production” should
be recorded on the form
• If a dish is 86’ed, manager should record when this
occurs to determine if it represents good or bad
forecasting
45
Mishaps and Sales Reconciliation
• When no errors occur during service, dishes sold =
number available for sale – leftovers
• Errors often occur and should be recorded on a Food
Mishap Report a.k.a. Void Sheet
• Void Sheet lists all items rendered unusable during
service; for each item lost, it includes
―the name of server,
―item name,
―reason for void,
―and possibly check number, date, and time of
mishap
46
Voids
Voids occur when food is dropped on floor,
customer rejects it for improper cooking, customer
dislikes the taste, or cook ruins it and removes it
from circulation
• Every void must be accounted for to ensure it isn’t
being stolen
• Trusted employee or manager should verify
(visually) that each item is legitimately ruined
before entering it on Void Sheet
47
Voids
Reasons for voids:
• Lots of a voids coming from a single employee
suggest the employee needs retraining
• Lots of voids across the staff may suggest an
understaffed business
48
Food and Sales Reconciliation Form
At end of service or day, manager should complete a
food and sales reconciliation form to confirm that all
portions prepared by kitchen are accounted for as
sales, voids, or leftovers.
See Table 12.5 in text, which shows sample
food and sales reconciliation form.
49
Part of Example 12j as Food and Sales
Reconciliation Form
Kitchen Production
Food
Portions on
Hand
Portions
Prepared
Add. Prep
Total
Available
Leftovers
Portions
Consumed
Cake
3
10
0
13
1
12
Mousse
0
17
0
17
2
15
Brulee
0
19
0
19
5
14
Pie
1
15
0
16
1
15
Notes
Sales Accounting
Food
Portions
Sold
Voids
Total
Output
Portions
Consumed
Difference
Cake
12
0
12
12
0
Mousse
14
1
15
15
0
Brulee
12
1
13
14
1
Sundae
18
0
18
18
0
See Susie
Food and Sales Reconciliation Form
• Info on Form comes from Kitchen Production Sheet,
Void Sheet, POS system/guest checks, and physical
inventory of kitchen stations
• Total Output (portions sold + voids) should match
Portions Consumed (sent out from kitchen)
• Any discrepancy should be investigated
51
Reconciliation Form (cont.)
• Regularly forgetting to enter voids or checks missing
from the same employee may be a sign of theft or
signal a need for retraining
• POS systems record which server orders each dish, so
missing checks are not an issue. Missing food is
easier to track to a specific server.
52