Chapter 2
The Control Process
Principles of Food, Beverage, and Labour Cost Controls,
Canadian Edition
Principles of Food, Beverage, and
Labour Cost Controls, Second
Canadian Edition
The Control Process
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2.1 Define control; examples and significance
2.2 List the four steps in the control
2.3 Cite eight control techniques
2.4 Describe the steps and prepare a budget
2.5 Explain significance of the cost–benefit ratio
in control decisions
• 2.6 Identify what to consider when deciding to
make a product in-house or outsource
Principles of Food, Beverage, and
Labour Cost Controls, Second
Canadian Edition
Learning Objectives
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• Control: Power over events to achieve or
prevent an outcome
• Cost Control: Process to regulate costs and
guard against excessive costs
• Standards: Rules or measures established for
making comparisons and judgments
• Standard cost: Cost of goods and services
identified, approved and accepted by
management
Principles of Food, Beverage, and
Labour Cost Controls, Second
Canadian Edition
Important Control Definitions
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• Standard procedures: Established as the
correct methods, routines and techniques for
day-to-day operations
• Budget: Realistic expression of management’s
goals and objectives expressed in financial
terms
• Control system: Collection of interrelated and
interdependent control techniques and
procedures
Principles of Food, Beverage, and
Labour Cost Controls, Second
Canadian Edition
Important Control Definitions
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1. Establish standards and standard procedures
for operation.
2. Train all individuals to follow established
standards and standard procedures.
3. Monitor performance and compare actual
performances with established standards.
4. Take appropriate action to correct deviations
from standards.
Principles of Food, Beverage, and
Labour Cost Controls, Second
Canadian Edition
Steps in the Control Process
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8.
Establishing standards
Establishing procedures
Training
Setting examples and directing
Observing and correcting employee actions
Requiring records and reports
Disciplining employees
Preparing and following budgets
Principles of Food, Beverage, and
Labour Cost Controls, Second
Canadian Edition
Control Techniques
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• The operating budget will detail the operational
direction and your expected financial results.
• The operating budget may be broken down into
shorter periods, to compare to actuals;
• Identify concerns
• Take remedial action
• Consider a flexible budget
Principles of Food, Beverage, and
Labour Cost Controls, Second
Canadian Edition
The Budget
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The Budget
Budgeted Revenue - Budgeted Expense = Budgeted Profit
Principles of Food, Beverage, and
Labour Cost Controls, Second
Canadian Edition
• Just as the income statement tells you about
your past performance, the budget is developed
to help you achieve your future goals.
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• To prepare the budget and stay within it,
assures you meet predetermined profit levels.
• The effective foodservice operator builds a
flexible budget, monitors it closely, modifies it
when necessary, and achieves the desired
results.
Principles of Food, Beverage, and
Labour Cost Controls, Second
Canadian Edition
The Budget
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Developing the Budget
1. Prior period operating results
2. Examine the external environment to assess any
conditions that could affect sales volume in future
3. Review any planned changes in the operation that
would affect sales volume
4. Determine the nature and extent of changes in cost
levels
5. Have the projections for sales, costs and profits
approved by management
Principles of Food, Beverage, and
Labour Cost Controls, Second
Canadian Edition
To establish any type of budget, have the following
information available:
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Monitoring the Budget
• In general, the budget should be monitored in
each of the following three areas:
2. Expense
3. Profit
Principles of Food, Beverage, and
Labour Cost Controls, Second
Canadian Edition
1. Sales
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• As business conditions change, changes in the
budget are to be expected. This is because
budgets are based on a specific set of
assumptions, and as these assumptions
change, so too does the budget that follows
from the assumptions.
Principles of Food, Beverage, and
Labour Cost Controls, Second
Canadian Edition
Monitoring the Budget
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• Budgeted profit must be realized if the operation
is to provide adequate returns for owner and
investor.
• The primary goal of management is to generate
the profits necessary for the successful
continuation of the business. Budgeting for
these profits is a fundamental step in the
process.
Principles of Food, Beverage, and
Labour Cost Controls, Second
Canadian Edition
Monitoring the Budget
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• The cost/benefit ratio is the relationship
between the costs incurred in instituting and
maintaining a control system, and the benefits
or savings derived by doing so.
• Benefits must always exceed costs. Before
instituting any new procedures for control,
management should first determine that the
anticipated savings will be greater than the cost
of the new procedures.
Principles of Food, Beverage, and
Labour Cost Controls, Second
Canadian Edition
Cost/Benefit Ratio
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• Consider quality standards
• Reliability and service of distributor
• Compare true cost of house-preparation
• Raw ingredients
• Labour
• Skilled staff
• Utility and energy
• Customer satisfaction
• Staff morale
Principles of Food, Beverage, and
Labour Cost Controls, Second
Canadian Edition
In-House or Outsource
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Budget, p. 51
Control, p. 40
Control process, p. 42
Control system, p. 57
Cost control, p. 41
Cost–benefit ratio, p. 60
Flexible budget, p. 57
Make in-house versus outsource
determination, p. 62
• Operating budget, p. 52
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Procedures, p. 47
Quality standards, p. 46
Quantity standards, p. 46
Sales control, p. 43
Standard cost, p. 47
Standard procedures, p. 47
Standards, p. 46
Static budget, p. 53
Training, p. 48
Principles of Food, Beverage, and
Labour Cost Controls, Second
Canadian Edition
Key Terms
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Principles of Food, Beverage, and
Labour Cost Controls, Second
Canadian Edition
Chapter Web Links
• Food Cost Control: http://foodcostcontrol.blogspot.com/
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Principles of Food, Beverage, and
Labour Cost Controls, Second
Canadian Edition
Copyright
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