Food and Beverage Management
Positioning Your Menus
For Business Success
1
Learning Outcome
Explain how menus are designed in relation to dayparts.
Discuss ways to optimize usage of space resources.
Perform calculations to evaluate daypart revenue.
Evaluate the importance of food and beverage sales
revenue forecasting.
Forecast net income.
Understand how food and beverage costs is calculated
by applying forecasts to standard recipes.
Realize the value of forecasts to enable proactive
decision making.
2
Dayparts
• Dining habits traditionally recognize breakfast, lunch,
and dinner as food-service.
• Dayparts:
• Breakfast between 6:30 AM to 9:30 AM
• Lunch between 11:30 AM and 1:30 PM
• Dinner between 5:30 PM to 10:00 PM
• Averages only 9.5 hours of a 24-hour period
– 40% of the day
– Facilities are underutilized by nearly 60%
– What affects your decision to what extent you will
utilize your physical space assets
3
Maximum Utilization of Dayparts
• The strategy that involves maximum utilization of your
physical space assets are
• Plan to capture existing demand for established
dayparts
• Create product and service offerings that optimize
the revenue during existing day parts
• Create services that can generate revenue between
those established dayparts
• Reduce total cost during a percentage of the other
hours between those established dayparts
• The numerous possibilities point to the need for a wellresearched, market-driven business vision
4
Revenue generation between traditional Dayparts
• What options are available to generate revenue or reduce total
cost during a percentage of the other hours between those
established dayparts.
• Strategies can include:
– Dining room as rental space for meetings, cooking classes,
product launches or other social activities
– Offer brunch, afternoon tea, or post-dinner late-night meals
– Producing ingredients or recipes for retail sale
– Using your kitchen to prepare banquet food to be served offpremises
– Casual staff on hour rates
– Full timers that work peak period split shifts
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5.2
Maximized Space Utilization
Dayparts
• No matter how you use your restaurant during the
time available, your menu must support your plan for
Seat turnover
• The number of customer served during a specific
period of time divided by the number of available
seats.
• Seat turnover needs to be considered based on
• Your vision and mission
•
Your concept
•
Your financial forecast and financial sustainability
The most expensive item in operating your restaurant is
the empty seat.
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The summary of daypart
In summary, strategic operators should:
Use generally recognized dayparts solely as a guide
Conduct market research to identify opportunities to
optimize utilization of their physical space and other
resources
Decide how these opportunities may fit with their
existing business vision
Enact changes to create an enhanced vision better
aligned with the market and their resources
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Evaluating Daypart Utilization
• Average total revenue per daypart
• Average food only revenue per daypart
• Average beverage only revenue per daypart
• More detailed:
• Average total revenue per hour
• Average food only revenue per hour
• Average beverage only revenue per hour
• As you calculate operating data to obtain important
information that assist you to analyze opportunities for
financial improvement.
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5.3
Calculation of Average Total Revenue per Daypart
Placeholder image
The Menu Life Cycle
5.4
Calculation of Average Revenue per Hour in Breakfast
Daypart
Using the data from Figure 5-3 and the methodology
from Figure 5-4, calculate average daily revenue per
hour for the remaining dayparts.
Assume lunch is a 2-hour daypart. Assume dinner is a
4.5-hour daypart
Lunch = $2,064.52
Result :2 = $1,032.26
Dinner = $3,548.39
Result :4.5 = $788.53
This are averages looking at each hour in exactly the
same way. Dayparts performance can be captured
reflecting the actual sales
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5.6
Captured Average Hourly Breakfast Revenue
Evaluating Daypart Utilization
What is Prime cost ?
Is composed of food cost, beverage cost, and direct labor
cost
Knowing the prime cost helps operators with?
Calculate profitability of daypart
The commitment to daypart decisions
Group task in class
Evaluate the prime cost of serving breakfast per hour use 5.6
data and
Breakfast F&B cost 28% of revenue
Direct labor cost 35% of revenue
Answer if it is profitable to be open from 6:30 AM to 7:30 AM?
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Calculate Breakfast Daypart Details
Total Breakfast Revenue
1129.03
F&B cost 28%
1129.03=:100=11.29x28=
316.12
Labor cost 35%
1129.03=:100=11.29x35=
395.16
Total prime cost daypart breakfast
711.28
Gross profit
417.75
Day part evaluation 6.30 to7.30 am income 60.40$
Food Cost 28%
60.40 = :100= 0.604 x 28 =16.91 (variable cost)
Labor Cost 35%
1129.03= :100= 11.290x35: 3 =131.71 (fixed cost)
Total prime cost
148.62
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Forecasting Revenue
• Your menu drives revenue and your income.
Why is and adequate revenue stream
necessary ?
• To ensure required cash flow to pay bills.
•
Because a long-term trend of insufficient
revenue is a business killer.
• You must be able to predict revenue by using
forecasting tools.
– Simplest form - a subjective best guess (guesstimate)
– Supported with data - a valuable predictive tool
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A Worksheet For Forecasting Revenue
• Once menu items and their prices have been
established, a worksheet can be developed for
forecasting revenue.
• Sales mix
• Number forecasted of a particular item (45 pumpkin
cheesecake) : the total number of items forecasted (168
desserts) x100 = menu mix % for an item.
•
45 Pumpkin cheese cakes sold : 168 x100 total sold desserts =26.78%
• Rows 33 and 42 list the same menu item, but at
different prices
• Row 33 is the standard price, row 42 is the “Happy
Hour” price.
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5.7
Malt Beverages Menu Engineering Worksheet
A Worksheet For Forecasting Revenue
• For purposes of analysis and menu
engineering, a separate worksheet should be
prepared for each menu category.
• The level of menu categorization should be
based on the perceived competition
between menu items.
• Main courses don’t often compete with
appetizers.
• Appetizers tend to compete with Soups and
Salads.
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5.8
Appetizers Menu Engineering Worksheet
5.9
Desserts Menu Engineering Worksheet
Historical Item Sales, with Adjustments
• In Figure 5-9 , you might see a pattern where
approximately 45 slices of pumpkin
cheesecake are sold during each period.
• You might anticipate this level of sales in
future forecast periods.
• This is a valid assumption only if
• customer traffic remains consistent.
• The customer base are the same, the menu
offerings did not change and the sales staff
are not directed to explore different strategies
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Historical Item Sales, with Adjustments
• The objective approach is based on historical
customer traffic data.
• This technique requires three distinct steps:
– Step 1. Forecast total guest traffic for the period.
– Step 2. Apply historical demand for individual menu
categories to predict total category demand.
– Step 3. Apply menu mix history to the predicted category
demand.
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New Forecast Calculation
For the actual period (see 5.9) we had 200 guest visiting the
restaurant.
168 of this customers selected a dessert (See 5.9)
168 : 200 x 100= 84% of visiting customers purchased a
dessert
The pumpkin pie represented 26.8% of the sales mix (see 5.9)
168:100x 26.8 = 45 Pumpkin cheesecake
Due to bad management a competitor went bankrupt and
you predict to get some of the market share.
Increase in guest visits of 19 covers (guesstimate)
How much pumpkin cheese cake pies will you new sales
forecast reflect?
You do not forecast any dessert sales % and sales mix %
changes
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New forecast calculation
New Guest forecast?
84% of 219 Guest order a dessert
How many desserts sold forecasted?
219:100x 84=184 desserts
How many pumpkin cheese cake sells forecasted if sales mix
is constant with actual sales 26.8%
184:100x 26.8 = 49.3 cheese cake sold
New forecast entry 49 cheese cakes
The results of these steps can be entered into a menu
engineering worksheet to quantify forecasted sales
revenue
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5.11
Dessert Forecasts Entered into a Menu Engineering
Worksheet
Assess the accuracy of your forecasts
• It is important to assess the accuracy of your
forecasts periodically.
• Sales Ratio
• Comparison of forecasted and actual bottled
beer sales
• Calculate a ratio actual sales : forecasted sales=ratio
• Forecast revisions based on historical
variances
• Multiply forecasted sales by ratio= new sales forecast
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5.12
Comparison of Forecasted and Actual Bottled Beer
Sales
5.13
Forecast Revisions Based on Historical Variances
The effect on underestimating Forecasting
Forecasting can be imprecise and constant validation
against actual will ensure that you learn to predict your
business performance.
You will get better while doing
Effect of Underestimating
insufficient inventory
operational resources may not be available
advertised items and services not available
demand exceeds production forecast
Outcome
customer dissatisfaction
staff under unnecessary stress
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Effect on Forecast overestimating
Effect on overestimating
excess food and beverage production
food spoilage
quality loss
extra costs
excessive labor cost due to inaccurate schedules
anticipated revenues that do not materialize can result
in a shortage of cash flow
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Assess the accuracy of your forecasts
• It must be noted that the results of any forecasting
process should be questioned prior to accepting
them and mobilizing purchasing, recipe production,
employee scheduling and operational support
•
Factors that have an effect on forecasting:
– Area or regional events … can increase or decrease business
– Holidays… can increase or decrease business
– Public works construction, e.g. street repair in front of your
restaurant
– Weather… can increase or decrease business
– Managerial intuition (comes with experience supported by
understanding historical data)
– It is acceptable if not appropriate to modify
forecasts!
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Calculating Net Income
• Net income is
• The revenue remaining after all costs and expenses
have been deducted.
• Expenses result from consumption of inventory (food,
beverage, and supplies) , labor costs, occupancy
costs, taxes, insurance, and other operating costs .
• The next element of forecasting involves costing the
menu items anticipated being sold during the period.
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Calculating Food And Beverage Costs
To start estimating (potential) food and
beverage costs you first need to
put a value on your inventory.
This is best achieved by capturing the
actual purchase price of each item/ ingredient
used
This process is most effectively accomplished
with the help
of the suppliers price list or using the actual
receiving data information of existing stock.
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Elaborating Recipes
Certain inventory items/ ingredients are cooked or otherwise
transformed to become ingredients in recipes.
Conversion recipes
Whole Oranges to Orange Juices
Sup Recipes
Chicken bones become chicken stock with the additional use of
other ingredients.
It is useful to prepare recipe cards for these items and cost them out
in units used in other recipes
Yield tests/ butcher tests
Calculate whole meat cuts that become steaks
Conversion/yield and sub recipes ensure
that we are applying the correct value to the recipe
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The Recipes
Once the costs of inventory items and subrecipes are established, the next step is to
record and cost recipes for all menu items
What ever format is used there are
fundamental/standard information on a
recipe card that should be uniform.
What are these?
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Standard Recipe information
Recipe Name
Yield is the number of portions produced by this recipe
Batch Cost is the total cost to produce all portions on the recipe
Portion Cost is the cost to produce one serving portion of the recipe
Sales Price is the price a customer will be charged for one portion
Cost % is the relationship between Portion Cost and Sales Price (Cost % =
(Portion Cost ÷ Sales Price) x 100
Recipe Unit is the volume or weight hat an ingredient is measured by (For
accurate calculation this should be in liters & kilogram avoid pcs, cups and spons)
Amount is the number of recipe units required to produce the desired
recipe yield
Unit Cost is the actual cost of one unit of an ingredient
Total Ingredient Cost is the cost for the number of ingredients used in the
recipe Total Ingredient Cost = Amount (of Ingredients) x Unit Cost (of Ingredients)
Preparation Method is the steps required to prepare the recipe
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Forecast Worksheets
Once recipe costs have been calculated they
should be updated on a continuous basis. This
practice will assure that recipe costs are
reflective of the most current ingredient
prices.
When menu price, food cost, and forecast
number of items sold are determined, then
that data is entered into a Sales Forecast
Worksheet
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5.18
Forecast Worksheet
Forecast Worksheets
• Once all the data has been entered into the
Sales Forecast Worksheet, the totals for sales
of food and cost of sales (food) (and all the
other categories) can be entered into the
Income Statement .
• Cell D30 of Figure 5-20 indicates the dollar
amount remaining after Total Cost of Sales
have been subtracted from Total Sales.
• The difference of this equation is referred to as
• gross profit.
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5.20
Pro
Forma
Statement
of Income
with
Sample
Data
(Sales
and Cost
of Sales
Only)
Controllable expenses
From gross F&B profit to net Profit
Other expenses need to be considered for deduction
Fixed and or Variable salaries
Employee benefits
Other controllable expense
Marketing, Legal, Consultancy
Rent and other occupancy expenses
Cleaning, Electricity, Gas, Water, Maintenance
Bank and loan Interest
Depreciation of Assets
Taxes
42
5.19
Hierarchical
Linkage of
Software
Putting It All Together
• The importance of positioning your menus
within an informed context.
– Understand the impact of Dayparts
– How menus function at different times of day
– The basics of revenue generation
– How costs and expenses diminish revenue
• If you are able to predict net income prior to
each operating period, then your potential for
success is improved.
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