Tools for School Nutrition Financial ManagementTools for Financial Management - Rachelle- Final.xlsx...

© COPYRIGHT 2017 SCHOOL NUTRITION ASSOCIATION | #ANC17 | ATLANTA, GA© COPYRIGHT 2017 SCHOOL NUTRITION ASSOCIATION | #ANC17 | ATLANTA, GA

Tools for School Nutrition Financial Management

Rachelle Sherrin, Carrollton-Farmers Branch ISD

Beth Wallace, Jefferson County Public Schools

© COPYRIGHT 2017 SCHOOL NUTRITION ASSOCIATION | #ANC17 | ATLANTA, GA

Session Objectives

• To understand sources for revenues and available funds.

• To become familiar with tools and benchmarks to evaluate

expenses for cost effectiveness.

• To understand how financial reporting can be utilized to promote

transparency, goals for improvement and increase employee

ownership/pride of the program.


Revenue

• It all Starts with Revenue

• Types

– Paid by students for meals served

– Reimbursements

– USDA Foods assistance

• Determine what you really have to spend

– Average by meal categories (Distribution of Revenue)


Distribution of RevenueAvailable Revenue Secondary Schools

Distribution of Revenue for Awesome School District

Breakfast

Meals Served (July 2015-June

2016) DistributionFederal

ReimbursementStudent

PaymentCommodity

Revenue Total RevenueDistributed

Revenue

Revenue Available for

Food Cost Per Meal

Paid 84,318 19% 0.290 2.000 2.290 0.431

Reduced 7,774 2% 1.410 0.300 1.710 0.030

Reduced Severe 62,116 14% 1.740 0.300 2.040 0.283

Free Regular 17,825 4% 1.710 - 1.710 0.068

Free Severe 275,795 62% 2.040 2.040 1.256

Total 447,828 $ 2.068 $ 0.931

Lunch

Paid 858,571 47% 0.360 3.250 0.2825 3.893 1.839

Reduced 192,481 11% 2.820 0.400 0.2825 3.503 0.371

Free 766,470 42% 3.220 - 0.2825 3.503 1.477

Total 1,817,522 $ 3.687 $ 1.659


Using Menus as a Cost Control Tool

• Menu is the heart of any foodservice operation. In theory, the

menu should determine:

– Type of facilities needed

– Number and type of personnel required

– And the merchandise/supplies ordered.

• Often we are not building an operation from the ground up and

must plan a menu that fits the situation.

• The menu planner must achieve the best use of personnel and

equipment.


Using Menus as a Cost Control Tool

• CONTROL – used as a verb means to regulate, verify or hold in

restraint.

• Efficient foodservice operations have effective menus.

• Items to consider for improved efficiency and cost control.

– Available Revenue and Cost Targets for Food Items

– Type of Menu Rotation

– Number of Items Offered

– Methods to evaluate menus for their effectiveness.


Target Cost for Food Items

• We must estimate how much we have to spend: Tools for Financial Management -

Rachelle- Final.xlsx

Revenue Per Meal – El Lunch

Reimbursment Cash TOTAL Revenue Meals to Date Total Revenue

Paid $ 0.38 $ 3.00 $ 3.38 483,933 $ 1,635,693.54

Reduced $ 2.84 $ 0.40 $ 3.24 309,066 $ 1,001,373.84

Free $ 3.24 $ - $ 3.24 1,786,382 $ 5,787,877.68

Grand Totals 2,579,381 $ 8,424,945.06

Average Revenue Per Lunch $ 3.27

Target food cost 46%

Available for food cost $ 1.50

Entrée Target $ 0.64

Veg Target $ 0.19

Veg Target $ 0.19

Assumption - No Offer vs Serve Fruit Target $ 0.25

Milk Target $ 0.23

Tools for Financial Management - Rachelle- Final.xlsx


Using Menu Rotation as a Cost Control Tool

• Static Menus

– Menus that do not change from

day to day – Fast Food

restaurants

• Cycle Menus

– Menus that rotates on a cycle

such as every 8 days, every 4

weeks – School Lunch menus

• Single-Use Menus

– Menus that change everyday or

every event – Catering events

–


Cost Saving Advantages of Cycle Menus

• Reduces planning time, allows time for other task, i.e. marketing.

• Simplify purchasing and increases quantities for volume

purchases.

• Assist in employee scheduling and training and devising

production standards.

• Improve forecasting due to continuous experience.

• Provide for the systematic use of leftovers.

• Improve labor efficiency due to familiarity.

• Streamlines inventory turnover and issues of theft are more

apparent.


Number of Menu Items as a Cost Control Tool

• “Good Old Days” – students received a pre-plated meal with no

choice.

• Meeting the trends of customization/multiple choices in the food

service industry have increased cost.

• Larger selection = more labor = more cost.

• We have balanced multiple choices with the use of convenience

foods and pre-packaged items to conserve cost.

• The menu planner must always take into account the time

needed to prepare the items and the difficulty of the preparation.


Methods to Evaluate Menus

• Pre-Cost cycle

– Did you meet your targets?

• Post-Cost

– Total food cost / number of meal equivalents served.

– Tools for Financial Management - Rachelle- Final.xlsx

• Evaluating for popularity and profitability of products.

– Menu engineering tool can assist in measuring overall success of a menu.



Menu Engineering Tool

• Analyzes menus items for popularity and profitability.

• Calculates the following indexes:

– Menu Mix (MM) which measures consumer demand/popularity

– Contribution Margin (CM) which measures profit from menu items.

• Categorizes items into four classifications:

– STARS – Items that are both popular and profitable.

– PUZZLES – Items that are profitable but not popular.

– PLOW HORSES – Items that are popular but not profitable.

– DOGS – Items that are neither profitable nor popular.


Menu Engineering Tool

Data needed to evaluate your cycle menu:

List of Entrees

Number of each entrée sold

Food cost of each entrée

District’s Target Entrée cost


Source: Dittmer, P. R., Keefe, J. D. 2011. Principles of Food, Beverage, and

Labor Cost Controls, 9th ed. John Wiley & Sons



Controlling Cost through Labor and Staffing

• As we discussed the menu affects almost every aspect of any

foodservice operations and can be an effective cost control

measure. The other large cost to be monitored and managed is

labor.

• Two major functions of labor analysis

– To determine whether labor costs are excessive

– To identify where inadequacies occur between cafeterias, so corrective

action can be taken.

• Two types of analysis:

– Labor Cost as a Percentage of Sales (Revenue)

– Meal Equivalents and Measuring Productivity


Labor Cost as a Percentage of Sales

• Formula

• National Standard – 40-45% Tools for Financial Management - Rachelle- Final.xlsx

• This benchmark is commonly used, but have limitations:

– A change in prices will change lower the Labor Cost Percentage.

– A increase in wages, with no change in sales volume or prices with

increase Labor Cost Percentage.

– Can be distorted by high absenteeism if substitutes are utilized.

– Labor may be different due to menu, convenience food used, layout &

equipment, or type of service.

Cost of Labor x 100 =Labor-Cost Percentage

Sales



Meal Equivalents

• Meal Equivalent (ME)- we must convert each type of service

provided to an equivalent amount of work.

• Institute of Child Nutrition recommends:

– 1 lunch = 1 ME

– 3 breakfast = 2 ME

– 3 snacks = 1 ME

– Dollar amount of sales of non-reimbursable food divided by Free Lunch

Reimbursement rate + USDA Commodity value = 1 ME

• This is a great starting point, but you should customize to your

operation.


Meal Equivalents

• Must be adjusted for your individual operation. Ask yourself:

– What is being served?

– How much preparation is required?

– How long does it take to serve?

– How much cleaning time is required?

– How does this compare to lunch?

• For example:

– 2 breakfast = 1 lunch




Measuring Productivity

• Number of ME divided by Number of Labor Hours = Productivity

Rate of Meals Per Labor Hour (MPLH)

• Limitations to keep in mind:

– Diversity of foodservice operations may be impractical to compare with

other operations.

– Menu, Number of items, Production methods, layout, equipment, service

type, and type of patrons will affect productivity.

• Tools for Financial Management - Rachelle- Final.xlsx



Measuring Productivity and Labor Cost

• Meals Per Labor Hour is an effective method to compare similar

operations with identical menus, facilities, and grade levels and

develop staffing schedules.

• Food service operators must know whether their labor costs are

excessive, insufficient or appropriate.

• While labor cost percentages and production measures may

mean little by themselves, they become helpful when they are

compared with budgeted or historical figures.


Monthly Reporting

• Financial accountability is the responsibility of all members of the

food serves operation.

• Best Practices for Reporting include:

– Monthly profit and loss by site (including the Central Office)

– Shared with all team members

– All team members thoroughly understanding the profit and loss report

– Annual and historical trends

– Ability of individual sites to control revenue (i.e. a la carte sales,

participation) and expenses (i.e. overtime, substitutes, food cost/inventory)


Report Tools

• Monthly Profit & Loss by Site and District

• Annual Profit & Loss by Site and District

• Monthly and Annual Trends

– Participation

– A La Carte revenue

– Food and Non-Food expenses

– Labor and Benefit expenses

– Equipment and Repair expenses

• Pre and Post Meal Costs

• KPIs


Report Tools Review

• Monthly Profit and Loss (P&L) Statement

• Central Office (CO) Summary of Expenses

– Prorated share of CO Expenses

• P & L Yearly Summary

• Summary of Monthly Post Cost


Key Performance Indicators (KPIs)

• A performance measurement that exposes the gaps between

current and desired performance, and provides evidence if

progress has been made toward closing the gaps.

• These measurement provide a data driven numbers approach to

performance.

• Use of KPIs help identify where resources need to be invested.

Resource: Essential KPIs for School Nutrition Success, Institute of Child Nutrition, Applied Research Division


KPI’s Continued

• Types of KPI’s to Consider

– Meal Equivalents

– Average Daily Participation

– Meals Per Labor Hour

– Revenue per Meal Equivalent

– Cost per Meal Equivalent

– Cost as a Percentage of Revenue.



Average Daily Participation

• Average daily participation is a key factor in determining your

food and labor needs

– ADP Breakfast

Number of Breakfasts Served (Month, Year)

Number of Operating Days (Month, Year)

5699 ÷ 19 = 299.95 or 300

– ADP Lunch

Number of Lunches Served (Month, Year)

Number of Operating Days (Month, Year)

17,852 ÷ 19 = 939.59 or 940



Cost as a Percentage of Revenue

• Cost as a Percentage of Revenue is an important tool for budget

development and monthly operation monitoring:

– Food and Non-Food Costs

Total Revenue

$520,000 ÷ 1,325,000 = 0.3924 or 39%

– Labor and Benefit Costs

Total Revenue

$537,000 ÷ 1,325,000 = 0.4052 or 41%



Communication

• Communicate a consistent message in multiple setting and in

different ways.

• Be concise with your information, but allow for questions.

• Present data in easy-to read spreadsheets, charts or graphs.

• SN administration should demonstrate accountability and

transparency to all stakeholders.



AFFILIATION OR FINANCIAL DISCLOSURE

Rachelle Sherrin, MS, MBA, SNS, RD

• Employee: Carrollton-Farmers Branch Independent School

District

• No Disclosures

Beth Wallace, MBA, SNS

• Employee: Jefferson County Public School

• No Disclosures

© COPYRIGHT 2017 SCHOOL NUTRITION ASSOCIATION | #ANC17 | ATLANTA, GA© COPYRIGHT 2017 SCHOOL NUTRITION ASSOCIATION | #ANC17 | ATLANTA, GA

PROFESSIONAL STANDARDS CODE

• This session provides one (1) CEU

– Key Area: Administration – 1000

– Key Topic: Financial Management

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