Principles of Food and Beverage Management

Food and BeverageManagement: Analysis and Decision Making

Chapter 10

Learning ObjectivesAfter completing this chapter, you should be able to:

• Explain how enhanced quality should be the focus of anoperation’s improvement philosophy.

• Explain a three-step process for analyzing a restaurant orfoodservice operation and establishing financial priorities.• Describe procedures for corrective action plans.

• Describe basic procedures for implementing change.

Chapter 10 Food and Beverage Management: Analysisand Decision Making

QUALITY AS AN IMPROVEMENT PHILOSOPHYManagement Decision Making

Chapter 10 Food and Beverage Management: Analysisand Decision Making

Evaluating Quality

Chapter 10 Food and Beverage Management: Analysisand Decision Making

A CLOSE LOOK AT FINANCIAL ANALYSISSet Expectations

Annual Operating Budget

The Budget Team

Budgeting Revenues

Budgeting Expenses

Chapter 10 Food and Beverage Management: Analysisand Decision Making

Chapter 10 Food and Beverage Management: Analysisand Decision Making

Assess the Actual Situation

Analyze the Variance

Chapter 10 Food and Beverage Management: Analysisand Decision Making

Chapter 10 Food and Beverage Management: Analysisand Decision Making

Revenue Analysis

Expense Analysis

Profit Analysis

Chapter 10 Food and Beverage Management: Analysisand Decision Making

Budget Revisions

Chapter 10 Food and Beverage Management: Analysisand Decision Making

CORRECTIVE ACTION PROCESSIdentify Problems

Chapter 10 Food and Beverage Management: Analysisand Decision Making

Managers MathAnswer the Questions:

Chapter 10 Food and Beverage Management: Analysisand Decision Making

Chapter 10 Food and Beverage Management: Analysisand Decision Making

Make Decisions

Chapter 10 Food and Beverage Management: Analysisand Decision Making

PROCEDURES FOR IMPLEMENTING CHANGEOvercoming Resistance to Change

Managing Change

Chapter 10 Food and Beverage Management: Analysisand Decision Making

Quality Improvement in Action: Implement Rollouts

Chapter 10 Food and Beverage Management: Analysisand Decision Making

Managers Are Decision Makers

Chapter 10 Food and Beverage Management: Analysisand Decision Making - Summary

1. Explain how enhanced quality should be the focus of an operation’s improvement philosophy.

• A quality system involves several steps: establish standards, identify defects, track defects, and implement a problem-solving strategy to correct defects that occur.

• Spot checking strategies by the manager and chef are useful for evaluating quality.

• They might, for example, order the same meal during two different shifts and see whether the meal is the same.

• They should evaluate the plating, speed of delivery, and quality, and confirm that a standardized recipe was followed.

• Managers may take daily or weekly notes to record their findings and communicate issues to the appropriate staff members.

Chapter 10 Food and Beverage Management: Analysisand Decision Making - Summary

2. Explain a three-step process for analyzing a restaurant or foodservice operation and establishing financial priorities.

• A three-step analysis process for establishing corrective action priorities includes developing a budget, assessing the situation using the income statement, and analyzing for variances.

• Budgets are prepared with input from the management team.

• The basic process includes estimating revenues and then forecasting expenses (including fixed, variable, and mixed costs) to determine profits.

• Experienced managers use historical information and their knowledge about internal and external changes to develop budget benchmarks.

• Income statements reflect the operation’s efficiency and profitability.

Chapter 10 Food and Beverage Management: Analysisand Decision Making - Summary

2. Explain a three-step process for analyzing a restaurant or foodservice operation and establishing financial priorities continued…

• Significant variances between budget expectations and actual performance reflected by the income statement require analysis.

• Analysis should include both dollar figures and profit percentages.

• If basic assumptions have changed, the budget should be revised.

Chapter 10 Food and Beverage Management: Analysisand Decision Making - Summary

3. Describe procedures for corrective action plans.

• Sometimes corrective action is necessary to reduce variances.

• First, problems must be identified to determine those that most affect profitability.

• Managers must then make decisions about how to address unacceptable variances most effectively.

• One decision-making process involves defining the problem, determining and evaluating solution alternatives, selecting and implementing the best alternative, and evaluating its effectiveness.

Chapter 10 Food and Beverage Management: Analysisand Decision Making - Summary

4. Describe basic procedures for implementing change.

• Employees may resist the changes required.

• Managers can use several strategies to overcome resistance to change.

• First, the process will be easier if the manager has involved employees and explained why changes are necessary.

• Also, change is easier if situations have historically been better after changes than before.

• A continuous quality improvement (CQI) initiative can drive the culture in which change is implemented.

• Employees will know that regardless of how small a change might be, the operation can better meet its mission and goals.

• Several basic procedures can be used to implement rollouts of new or revised policies, procedures, and menu items.

Chapter 10 Food and Beverage Management: Analysisand Decision Making - Summary

4. Describe basic procedures for implementing change continued…

• This process involves identifying rollout changes, planning rollout details, considering staff training if necessary, and implementing the rollout.

• Then, rollout data must be collected and evaluated, and the rollout may need adjustments depending on how well its objectives were attained.

• A final step is recording the rollout results.

Chapter 10 Food and Beverage Management: Analysisand Decision Making

Key Terms:Bottom line A planned profit or another financial goal such as to break even.

Calendar year A year that begins on January 1 and ends on December 31.

Continuous quality improvement (CQI) A system of ongoing efforts to better meet or exceed customers’ expectations, and to define ways to perform work with better, less costly, and faster methods.Fiscal year Any 365-day accounting period that does not begin on January 1.

Fixed cost A cost, such as rent, that does not change as revenue changes.

Food cost percentage The percentage of all food revenue that was spent to purchase the food products required to generate that revenue.

Chapter 10 Food and Beverage Management: Analysisand Decision Making

Key Terms continued:

Mixed cost A cost that contains both fixed and variable components, such as labor.

Net income The profit made in a business.

Profit percentage The profit or loss expressed as a percentage of total revenue.

Quality system A system that outlines how quality processes and procedures should be implemented, controlled, and maintained.

Revenue, incremental

Income statement The percentage of all food revenue that was spent to purchase the food products required to generate that revenue.

Chapter 10 Food and Beverage Management: Analysisand Decision Making

Key Terms continued:

Spot checking A regular review of standardized recipes and food products as a way to maintain product quality.

Supply and demand, law of Economic beliefs about the supply of an item and its price relative to its demand. Generally, as the price of an item increases, the demand for the item decreases (although the reverse can also occur).

Variable cost A cost that changes in proportion to revenues.

Rollout The process of introducing something new in an operation.

Chapter 10 Food and Beverage Management: Analysisand Decision Making

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