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Wednesday, July 25, 2012

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.


Unknown said...

can u help me with these topics like banquet forecasting, cost controlling and banquet sales please????

Joe Dunbar said...

Thanks for the question, Ausmita. I will be posting articles on food cost control in banquets during June 2015.


Susan S said...

Good Morning.
This month at the banquet facility I work at. We did 3 functions we don't make money on. The pay for only the product ( food ) they use.
Not what was ordered. Only what is used.
Does this hurt our food cost ?

Joe Dunbar said...

Thanks for the question, Susan.

You will definitely see your food cost rise when you don't charge enough to make a profit. If the guests reimbursed you for all your costs with no extra profit, the food cost component is 100%.

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