Class NameInstructor NameDate, Semester

Foundations of Cost ControlDaniel Traster

Revenue Prediction

chapter 12

Opening Question

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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?

Forecasting Process

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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

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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

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% changeCurrent customer count– prior count

Prior customer count=

Example 12a

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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?

% change347-360

360= = -0.036 (3.6% decrease)

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)

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Example 12b

New Count = 340 X (1 + 0.014) = 344.8 or 345

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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?

Rolling Averages

C = Customer count for that periodN = total number of periods counted

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Rolling Average CountC1 + C2 + C3…+ CN

N=

Use rolling averages when no trend is consistent across weeks.

Example 12c

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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?

Rolling Average418 + 437 + 398 + 414

4= =

417

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

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Evaluating the System

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Constantly compare the forecast to the actual guest count to learn from mistakes and to make more accurate forecasts in the future.

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

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Average Check

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Average CheckRevenue for a Period

Guests for that Period=

Example 12d

Average Check = $12,385 ÷ 1,104

= $11.22

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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?

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

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Example 12e

Forecast revenue = 3,700 X $47.58

= $176,046

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Restaurant with average check of $47.58 forecasts 3,700 guests next month. How much revenue should manager expect next month?

Using Forecast Revenue

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Using forecast revenue and target food cost %, beverage cost %, and labor cost %, manager can determine budget in dollars for a given period of time.

Seat Turnover

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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.

Seat TurnoverCustomers Served in a Period

Total Seats in Dining Room=

Example 12f

Seat Turnover = 280 ÷ 120 = 2.33

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Restaurant has 120 seats in dining room, but serves 280 guests at dinner. What is seat turnover for dinner?

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

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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

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Menu Mix Formula

Note: Number of each item sold and total sold come from POS system or sales receipts

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Menu Mix %Number of that item sold

Total number of items sold=

Example 12g

Menu Mix % = 37 ÷ 140

= 0.264 or 26.4%

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Restaurant typically sells 140 desserts each Monday. Of those, 37 are usually sorbet. What percent of desserts are the sorbets?

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

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% buying categoryGuests buying that category

Total guests=

Example 12h

% buying dessert = 140 ÷ 330

= 0.424 or 42.4%

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Of the 330 guests in a restaurant one night, only 140 buy dessert. What percent bought dessert?

Forecasting Number of Menu Items Sold from Menu Mix Percents

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Guest Forecast

Percent

buying a category

of food

Number of

dishes in that catego

ry forecast to be

sold

Step 1

Forecasting Number of Menu Items Sold from Menu Mix Percents

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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

Step 2

Example 12i

1. No. ordering dessert = 370 X 0.42 = 155.4

2. No. of sorbets = 155.4 X 0.37 = 57.5 or 58 sorbets

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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?

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

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Menu Analysis for Increased Profitability

• 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)

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Menu Analysis is process through which managers compare each menu item’s profitability and popularity

Calculating PopularityWork with only one menu category at a time…

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Calculating Profitability, Part 1

Contribution = Item Sales Price – Item Food (or

Margin (CM) Beverage) Cost

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Menu CM = No. sold (for an item) X CM (for that item)

Calculating Profitability

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Still working with only one menu category at a time…

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

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Menu Analysis Categories

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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)

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.

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Example 12j

Number ordering dessert =130 X 0.42

= 54.6 or 55 guests ordering dessert

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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.

Example 12j Chart

Dessert Menu Mix % Forecast CountStrawberry Cheesecake

14.5%

Chocolate Mousse 18.7%Crème Brulee 23.1%Pecan Pie 19.9%Ice Cream Sundae 23.8%

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Example 12j Answer

Dessert Menu Mix % Forecast CountStrawberry Cheesecake

14.5% 8.0

Chocolate Mousse 18.7% 10.3Crème Brulee 23.1% 12.7Pecan Pie 19.9% 10.9Ice Cream Sundae 23.8% 13.1

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Converting Forecast Menu Mix Count to Kitchen Production Schedule

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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

Kitchen Production Sheet

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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.

Kitchen Production Sheet

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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.

Example 12j converted to Kitchen Production Sheet

Dessert Forecast Count

Adjusted Forecast

Portions on Hand

Buffer Portions to Prepare

Total Avail-able

Left-overs

Cheese-cake

8.0 8 3 5 10 13

Mousse 10.3 12 0 5 17 17Brulee 12.7 14 0 5 19 19Pie 10.9 11 1 5 15 16Sundae 13.1 12 5 5 12 17

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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

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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

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Voids

• 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

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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

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

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Reasons for voids:

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.

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See Table 12.5 in text, which shows sample food and sales reconciliation

form.

Part of Example 12j as Food and Sales Reconciliation Form

Kitchen ProductionFood Portions on

HandPortions Prepared

Add. Prep Total Available

Leftovers Portions Consumed

Cake 3 10 0 13 1 12Mousse 0 17 0 17 2 15Brulee 0 19 0 19 5 14Pie 1 15 0 16 1 15

Sales AccountingFood Portions

SoldVoids Total

OutputPortions Consumed

Difference Notes

Cake 12 0 12 12 0Mousse 14 1 15 15 0Brulee 12 1 13 14 1 See Susie

Sundae 18 0 18 18 0

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

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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.

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