Banquet Beverage Cost Question

Dear Joe,

Very good day to you.
I am writing you this mail, because I am facing a problem with the beverage cost calculation.

I am an F&B cost controller in a hotel of 176 Rooms, with a sports Bar, Lobby lounge Bar, Brasserie restaurant for Breakfast and all day dining, as well as the room service Bar outlet, and Mini Bar. Our hotel also offers Banquet Facilities and Functions.

My main question is how do we calculate the beverage Cost in all departments? Also, how do we calculate the consumption beverage in banquet and functions? Finally, how do we split food and beverage when we charge a flat price (for example 35$ per person for a banquet buffet)? The matter of splitting food and beverage is a real problem.

Is there a formula to solve this issue?

Thanking you in anticipation, kind regards,

Elie, Resort Cost Controller

Thanks for the question Elie!

Cost allocation for banquets is a snap if you avoid percentage analysis. This is best for all buffet and banquet operations. These events generally involve a single price per guest. The use of percentages won't help you in cost control. With every banquet, the goal is to make a specific amount of profit per guest.

Using your $35 example, I would develop a comprehensive profit and loss statement for the event. Let's say we wanted to make a net profit before overhead costs of $5. We would need to construct a simple P&L with all the main categories: Sales, Food Cost, Beverage Cost, Supplies Cost, Decorations, Entertainment, Kitchen Labor, Server Labor, Management Cost, etc. You could setup columns for both budget and actual costs.

Try to carefully isolate all beverage costs for each event. Draw lines on bottles, carefully monitor transfers and take an accurate inventory before and after each event.

In your venues, you need to monitor beginning inventory, transfers (net of in and out), and ending inventory for each major activity. Match your costs with sales. Since banquets are taken care of entirely with the event P&L system, this final control is the standard cost allocation by profit center. You can see how each venue contributes to your overall beverage cost and gross profit.

Follow Up on Slammed! Peak Period Woes

Management at the Peruvian chicken concept in my neighborhood have taken significant action during the month since we paid our first visit. For the most part, the excellent quality meals are still available to their patrons. Let's review the main points of the article and see if there has been a change in the operation.

The production team should be trained to stop fully stocking the oven late in the evening since very few guests will return to have dinner at 9:00 PM in this neighborhood.

The restaurant closes two hours earlier now. When the final batch of birds is removed from the oven, the workers start cleaning up (including turning chairs up on the tables.).

The number one constraint is the rotisserie oven. They purchased a 20 bird model. The entire space is tight with the dining area claiming 50% of the square footage. The oven is sandwiched between the range and the warming bin. Workers have very little space and frequently run into each other.

They still have the one oven and this production constraint will prevent the annual sales volume from reaching it's true potential. The dining area has a new ordering counter in the center of the store. Tables line the perimeter leaving the center floor space to handle the order line. Space freed on the side of the production area is now utilized by the production workers. They no longer run into each other as frequently.

How could they produce the chickens needed for the 7:30 PM shift and avoid cooking the unnecessary birds for the low after 9:00 PM volume?

Oven management has been improved tremendously and the team actually shuts the oven off late during the final batch of the day. They remove the chickens one rod at a time and use the residual heat in the oven as a warmer. With the earlier closing time, there is very little over production.

Someone should have been counting the lost revenue at 8:00 PM. Perhaps a person could be stationed at the door to explain the 100% fresh production policy and to offer a coupon for a future meal.

Lost revenue issues have evaporated along with the revenue potential. A fast casual Mexican concept opened recently and they are slammed. The current chicken crowd is very manageable and much less lucrative. Will they ever be able to recapture the people who left in frustration during the chaotic opening week? Only time will tell.

I would purchase a large digital time piece for the front window. Every time the chickens start their 1 hour journey from their raw marinated state to the fantastic mouth watering perfection, the clock could be reset. Patrons could drive by and check the clock.

No clock but they are communicating in a less direct manner. When the restaurant line gets long, they close the blinds in the front window. Anyone in the know avoids the place when the blinds are closed.