From time to time, my clients ask about the practice of including labor expenses in work in process inventory valuation. I am against this practice due to needless complexity. Those who decide to change their inventory policy always see a one period bump. However, in the long run, the impact of this policy change will be low.
The key issue in the decision is the perishable nature of food (both as purchased and prepped). Most food inventories run about 14 days of cost of sales or less. Within the total inventory value, at least 75% is typically stored as purchased. One fourth (about one half week) may be in the prep box. Adding another 20% to the value of the WIP items to account for labor cost will reduce cost of goods sold about 2.5% in month one (see calculation below).
Once you hit month two, the inventory change will be minimal. Now you have locked yourself into a needless monthly exercise. It is far more conservative to completely expense all labor in the month the hours were spent. Even seasonal operations should see very little benefit with adding labor to WIP.
The key to inventory valuation in our industry is proper tracking yields on the work in process items. A steak should be valued at a greater price per pound than the large cut of meat butchered to produce the steak. Divide the as purchased price per pound by the yield percentage. Go the extra step of adding a separate line item on your inventory sheets. Let the counters weigh the large untouched cuts and keep a separate count of the trimmed portions.
If you carefully track the entire butchering and prep process for yields, you will create enough data to properly determine standards for ideal usage calculations. Many operators fail to evaluate a large enough data set when creating these standards. Comparing week to week variances from solid standard yields will explain most of the differences in your food cost. Theft and spoilage is far more difficult to quantify. Employees rarely document waste and theft each period.
Calculation: (3.5 divided by 28) times 20% equals 2.5%.
Click Here For More Information
Tuesday, August 29, 2006
Wednesday, August 16, 2006
Navigating Through The Recipe Jungle
From time to time, certain issues surface when recipe standards are effected by seasonal shifts. The common high impact issue concerns produce yield and price as seasons change. For example, the Romaine lettuce you purchase in the off season may not only cost more. The yield will be far less than peak season. Often you will see a case price double and the yield decline.
These times of high priced, low yield purchases should trigger a menu shift. In winter, I'd recommend as the special each night a wonderful soup made from seasonal root vegetables. Steer the customers away from the popular Caesar Salad to Minestrone.
At this time, we in the Northeastern USA will see prices plummet on beautiful peppers. Menu items with roasted peppers, stuffed peppers and sauteed peppers will fully utilize the high yield, low price cases. On the other hand, this may be the absolute worst time of year to buy apples. With a few weeks to go until the apple harvest begins, current offerings are often of poor quality and from 50% to 70% above prices you can expect to pay in one month.
If your menu is inflexible and some highly popular items must be produced from ingredients which are out of season, create a completely new recipe calling the
poor yield item at the inflated price. Save your main recipe for the peak season.
Now when your food cost percentage trends upward, you'll be able to quantify the impact of the limitation in your menu.
Click Here For More Information
These times of high priced, low yield purchases should trigger a menu shift. In winter, I'd recommend as the special each night a wonderful soup made from seasonal root vegetables. Steer the customers away from the popular Caesar Salad to Minestrone.
At this time, we in the Northeastern USA will see prices plummet on beautiful peppers. Menu items with roasted peppers, stuffed peppers and sauteed peppers will fully utilize the high yield, low price cases. On the other hand, this may be the absolute worst time of year to buy apples. With a few weeks to go until the apple harvest begins, current offerings are often of poor quality and from 50% to 70% above prices you can expect to pay in one month.
If your menu is inflexible and some highly popular items must be produced from ingredients which are out of season, create a completely new recipe calling the
poor yield item at the inflated price. Save your main recipe for the peak season.
Now when your food cost percentage trends upward, you'll be able to quantify the impact of the limitation in your menu.
Click Here For More Information
Saturday, August 12, 2006
The Recipes Are Wrong!
Variance reports frequently identify huge differences between actual item usage and the calculated ideal usage. There are many reasons for these major red flags. To eliminate the obvious, you need to review the fundamental calculation of actual usage. Recheck your counts from the two inventories. Go over the invoices for the period. Check for very small and very large quantities. Make sure you did not miss an entire invoice. Pay strict attention to invoices near a cutoff date. Anything received after the ending inventory should be excluded.
Once you have adjusted your actual usage to reflect changes, take a second look at the variance. You need to switch your focus to the recipe model. If an item is butchered, trimmed, cleaned, processed or if the item increases in volume when cooked (e.g. rice, pasta, etc.), you need to check your standard yields. Make sure you haven't entered the reciprocal figure in a subrecipe yield.
The final check is in plate recipes and portion sizes. These quantities should be exact and at this phase allowances for tiny variation should be avoided. Your plate recipe model should not be soft. You need exact portion sizes to tie to POS counts.
Whenever possible, line cooks should use pre-portioned items in the final production.
If you finish your review and find the inventories were accurate, purchases were all in order and the recipe model is accurate, you have an operational problem. There are certain problems which persist in our industry.
Employee consumption of food and beverage items has a bigger impact in slow periods. During the off-season or slow days of the week, employee meal cost will be higher as a percentage of sales. Adjust your expectations to this reality and move on to much greater concerns.
Collusion with vendor delivery staff is the first possible problem. You need to only pay for food actually received. Make sure receiving controls are rock solid. Limit your testing to invoices with large variance items. Problems may occur on certain shifts or on a specific day of the week. Check each invoice for the delivery person and your receiving person. Look for patterns.
Chronic, unintentional food overuse needs to be identified and halted. Training will correct future overuse. Portions of salads, starches (including french fries), garnishes, soups, sauces and all other discretionary prep items need to be clear. If the operation uses forecasts to prepare for a busy period and perishable items need to be discarded, fill out waste sheets and record the reason as bad forecast.
Your storage areas should be easy to count and high cost items should be difficult to steal. Small portions of tenderloin, shrimp, lobster tails and crab may require additional controls. Pull sheets are helpful. Sheets should be completed with initials and checked by the manager each shift change.
Late night and early morning are the times of greatest probability of theft. Delivery times are just as bad as the close. If you have surveillance systems in place, these periods should be highly scrutinized. We have found brazen thieves taking full cases of food to the dumpsters, trunks of their car, etc. It's best to terminate these people at once.
When I first started my consulting practice, there were two excellent articles on theft. The Wall Street Journal had a survey conducted by F.W. Dodge in which they interviewed food service employees. Of the respondents, 44% admitted to theft. I went to see if there was any other sources on employee theft. I found a general psychology article (source unknown) which stated about 20% of workers are very honest and 20% of workers are very dishonest. The middle 60% tend to follow the herd. If they are working with a completely honest person, theft is minimal. However, when they work with thieves, they will often steal to the same extent as their dishonest co-worker.
Over the years, I have seen major mistakes made by honest workers. One person left spare ribs unattended on a grill to check a delivery and they were inedible. Another person decided to pre-cook a huge number of rotisserie chickens for a special promotion on a low traffic day. In both cases, the employees made mistakes which were one time events. Both of my clients said nothing to the employees. They both realized their mistakes and brought them to management's attention in the first place. Keeping records on simple waste sheets encourages this honest loss activity to be quantified and archived for future period comparisons.
It's difficult for me to leave the theft issue hanging and management often can't see how major theft is possible. However, over the years we have found managers with relatives in the pizza business filling a van with flour, cheese and canned tomatoes. A multi-unit chain in New York tracked a vendor delivery person who visited five of their stores trying to sell cases of shrimp as a "cash only" special. Someone lost the shrimp due to poor receiving controls. My first consulting client ever couldn't believe the long time chef was a thief until the employee admitted he stole two blocks of 16-20 shrimp a week.
If you believe you have reviewed and corrected all the items mentioned above and your variances still don't make sense. Review the POS setup for all menu items which call for the variance item. Look for specials, the OPEN FOOD key and buffets. You may even find the item is wrong in the system. Some companies allow managers to overwrite the menu item names on the POS. I'm not a fan of this method. The entire history is ruined with one small change.
If the operation has no issues at all, check the recipe. Maybe it really isn't correct. Sometimes the wizards make mistakes.
Once you have adjusted your actual usage to reflect changes, take a second look at the variance. You need to switch your focus to the recipe model. If an item is butchered, trimmed, cleaned, processed or if the item increases in volume when cooked (e.g. rice, pasta, etc.), you need to check your standard yields. Make sure you haven't entered the reciprocal figure in a subrecipe yield.
The final check is in plate recipes and portion sizes. These quantities should be exact and at this phase allowances for tiny variation should be avoided. Your plate recipe model should not be soft. You need exact portion sizes to tie to POS counts.
Whenever possible, line cooks should use pre-portioned items in the final production.
If you finish your review and find the inventories were accurate, purchases were all in order and the recipe model is accurate, you have an operational problem. There are certain problems which persist in our industry.
Employee consumption of food and beverage items has a bigger impact in slow periods. During the off-season or slow days of the week, employee meal cost will be higher as a percentage of sales. Adjust your expectations to this reality and move on to much greater concerns.
Collusion with vendor delivery staff is the first possible problem. You need to only pay for food actually received. Make sure receiving controls are rock solid. Limit your testing to invoices with large variance items. Problems may occur on certain shifts or on a specific day of the week. Check each invoice for the delivery person and your receiving person. Look for patterns.
Chronic, unintentional food overuse needs to be identified and halted. Training will correct future overuse. Portions of salads, starches (including french fries), garnishes, soups, sauces and all other discretionary prep items need to be clear. If the operation uses forecasts to prepare for a busy period and perishable items need to be discarded, fill out waste sheets and record the reason as bad forecast.
Your storage areas should be easy to count and high cost items should be difficult to steal. Small portions of tenderloin, shrimp, lobster tails and crab may require additional controls. Pull sheets are helpful. Sheets should be completed with initials and checked by the manager each shift change.
Late night and early morning are the times of greatest probability of theft. Delivery times are just as bad as the close. If you have surveillance systems in place, these periods should be highly scrutinized. We have found brazen thieves taking full cases of food to the dumpsters, trunks of their car, etc. It's best to terminate these people at once.
When I first started my consulting practice, there were two excellent articles on theft. The Wall Street Journal had a survey conducted by F.W. Dodge in which they interviewed food service employees. Of the respondents, 44% admitted to theft. I went to see if there was any other sources on employee theft. I found a general psychology article (source unknown) which stated about 20% of workers are very honest and 20% of workers are very dishonest. The middle 60% tend to follow the herd. If they are working with a completely honest person, theft is minimal. However, when they work with thieves, they will often steal to the same extent as their dishonest co-worker.
Over the years, I have seen major mistakes made by honest workers. One person left spare ribs unattended on a grill to check a delivery and they were inedible. Another person decided to pre-cook a huge number of rotisserie chickens for a special promotion on a low traffic day. In both cases, the employees made mistakes which were one time events. Both of my clients said nothing to the employees. They both realized their mistakes and brought them to management's attention in the first place. Keeping records on simple waste sheets encourages this honest loss activity to be quantified and archived for future period comparisons.
It's difficult for me to leave the theft issue hanging and management often can't see how major theft is possible. However, over the years we have found managers with relatives in the pizza business filling a van with flour, cheese and canned tomatoes. A multi-unit chain in New York tracked a vendor delivery person who visited five of their stores trying to sell cases of shrimp as a "cash only" special. Someone lost the shrimp due to poor receiving controls. My first consulting client ever couldn't believe the long time chef was a thief until the employee admitted he stole two blocks of 16-20 shrimp a week.
If you believe you have reviewed and corrected all the items mentioned above and your variances still don't make sense. Review the POS setup for all menu items which call for the variance item. Look for specials, the OPEN FOOD key and buffets. You may even find the item is wrong in the system. Some companies allow managers to overwrite the menu item names on the POS. I'm not a fan of this method. The entire history is ruined with one small change.
If the operation has no issues at all, check the recipe. Maybe it really isn't correct. Sometimes the wizards make mistakes.
Friday, August 04, 2006
100% Cost Percentage?
As I entered the professionally designed coffee shop on Madison and 49th Street, my first observation was the herd of Wall Street types sipping espresso. The grand opening was in full swing. The press had done a fantastic job of getting the word out. Sales were brisk and it was difficult for my clients to hide their emotions.
As the jubilation of the busy opening faded, the reports began to show a huge cost problem in the premium bottled drinks category. These refrigerated products were available on a help yourself basis. The general manager and the vice president asked me: "Is it possible to run a 100% cost of sales?" My answer was a simple yes. They looked at me incredulously and demanded to know how items priced to yield a 30% cost of sales could possibly have a 100% figure. My answer was "Massive theft!" They agreed there might be a bottle or two taken every day by "customers" but there's no way theft could explain this level of variance.
We continued to debate the theft issue and I explained the true yield was 100% which would rule out portion issues. The items were all shelf stable which would rule out spoilage. Breakage was possible but they explained the new store had yet to suffer a broken bottle incident. So where do we find the 70% variance? I held my ground with the massive theft theory.
The offices were upstairs and we took the elevator to continue our meeting away from the operation. During our meeting I asked for the complete path a bottle would take from delivery to sale. The deliveries were approved by the morning manager and full cases were stored in a first floor storeroom near the sandwich production area. Bottles were restocked three times a day by general helpers (morning, pre-lunch and post-lunch). As our meeting broke up, I asked to visit the first floor storage area to check for locks and other security features.
As we entered the sandwich area, I noticed the four prep workers were all drinking premium bottled beverages. I asked them how they account for employee beverage consumption. The general manager told me they were allowed unlimited coffee and fountain drinks. I asked for clarification on the premium bottled beverages. The answer was the employees would have to pay for these drinks.
Indeed we found the extra 70% cost. The specialty iced teas in assorted flavors were the most popular drinks for the workers in the hot production areas. The opening was in July and the weather was sweltering and the prep area had no air conditioning unit. These workers were drinking these bottles by the case while the paying customers out front barely noticed the premium drinks cooler. Everyone was drinking barista specialties.
For those who want to know how the cost percentage could be 100%: Take a $0.45 bottle and sell 3 at $1.50 each. That's $4.50 in sales. Now subtract 7 bottles due to employee thirst. That's 10 bottles (3 sold plus 7 unsold) at $0.45 or the very same $4.50.
As the jubilation of the busy opening faded, the reports began to show a huge cost problem in the premium bottled drinks category. These refrigerated products were available on a help yourself basis. The general manager and the vice president asked me: "Is it possible to run a 100% cost of sales?" My answer was a simple yes. They looked at me incredulously and demanded to know how items priced to yield a 30% cost of sales could possibly have a 100% figure. My answer was "Massive theft!" They agreed there might be a bottle or two taken every day by "customers" but there's no way theft could explain this level of variance.
We continued to debate the theft issue and I explained the true yield was 100% which would rule out portion issues. The items were all shelf stable which would rule out spoilage. Breakage was possible but they explained the new store had yet to suffer a broken bottle incident. So where do we find the 70% variance? I held my ground with the massive theft theory.
The offices were upstairs and we took the elevator to continue our meeting away from the operation. During our meeting I asked for the complete path a bottle would take from delivery to sale. The deliveries were approved by the morning manager and full cases were stored in a first floor storeroom near the sandwich production area. Bottles were restocked three times a day by general helpers (morning, pre-lunch and post-lunch). As our meeting broke up, I asked to visit the first floor storage area to check for locks and other security features.
As we entered the sandwich area, I noticed the four prep workers were all drinking premium bottled beverages. I asked them how they account for employee beverage consumption. The general manager told me they were allowed unlimited coffee and fountain drinks. I asked for clarification on the premium bottled beverages. The answer was the employees would have to pay for these drinks.
Indeed we found the extra 70% cost. The specialty iced teas in assorted flavors were the most popular drinks for the workers in the hot production areas. The opening was in July and the weather was sweltering and the prep area had no air conditioning unit. These workers were drinking these bottles by the case while the paying customers out front barely noticed the premium drinks cooler. Everyone was drinking barista specialties.
For those who want to know how the cost percentage could be 100%: Take a $0.45 bottle and sell 3 at $1.50 each. That's $4.50 in sales. Now subtract 7 bottles due to employee thirst. That's 10 bottles (3 sold plus 7 unsold) at $0.45 or the very same $4.50.
Thursday, July 20, 2006
Market Segmentation - Strategic Focus
In a previous post, Market Segmentation - Best Practices , I reviewed the best practices from seven segments. Each of these segments has a different strategic focus and the differences impact their long range plans.
Hotels
Hotels plan for occupancy levels, REVPAR, banquet event orders and conventions. These operators forecast sales and expenses by departments. In a smaller property, there may be a single kitchen with one or two bars and several banquet rooms. Larger properties have multiple kitchens and many concepts. These huge hotels and resorts often book very large events. They typically have a flexible floor plan for the affairs and book many events simultaneously.
The food and beverage team takes a critical view at each meal period, event, buffet and room service. Plans include departmental level figures for food and beverage revenue, production labor, service labor, banquet labor, bar labor, etc. In addition, all other operating expenses are budgeted by department. Monthly reports compare the actual results to these budget numbers for each operation.
Restaurants
The restaurant wizards take a look at previous year's statistics and focus on covers per meal period, check averages, turns, menu price increases, raw ingredient fluctuations and waitstaff productivity. They use this data to forecast the year ahead. Plans consider old competitors as well as fresh concepts in the market. Pricing strategy depends on profit targets and competitive pressures.
From the comparison of menu prices before and after a factor may be applied to the check averages. Covers per period, turns and any change in the number of seats provide the volume data. For each meal period, a sales forecast is put together using the estimated check averages and the forecast of covers. These figures are summarized by week, month and quarter and become the focus of the budget.
Clubs
Clubs analyze a la carte menus much like a restaurant with a large percentage of sales from regulars. They analyze similar meal period and check average data. Often, banquets and buffets represent a higher percentage of sales than a restaurant. The banquets and buffets are forecasted from a study of previous year's data (often more than one year is examined). Operators forecast start dates and end dates for seasonal clubs and weather may help or hurt them in attaining budget goals.
Provision for staffing is required for the main season and the off-season. Food and beverage revenue and expenses is put in perspective with the members goals. Some clubs seek a break even result from F&B and others expect a small loss. The best F&B operations at major clubs make a positive contribution.
Institutional Caterers
Onsite feeders run a decaying operation along side a growing operation. Since most contracts have a definite termination date, management takes a looks at contract due to expire in the year ahead. Some contracts end when a construction project is completed. If the contract will be renewed in a competitive bid, a probability of success is assigned to the project. Knowledge of the competititor's contract expirations is also critical. Similarly, an estimated probability of taking over each account from the competition is calculated.
The marketing department provides details on new business targets and their estimated probability of success. Each project is defined as hard dollar (profit or loss depends on actual results) or cost plus (all expenses paid plus a fee for management). Total volume affects the amount of overhead required. Cost plus jobs are less risky at the operational level but the documentation of job costs is higher than a hard dollar account.
Institutional caterers break down costs into many categories since the projected margins are slim in relation to revenue. The return on equity is typically much higher than a hotel or restaurant since these operators invest very little in the bricks and mortar.
Markets
The markets I have worked with treat the prepared food section like a restaurant although the top managers use market terminology (for example shrinkage includes normal trim in many markets). Projections are made for each menu category with salad bar, roasters, sandwiches, pizza, prepared entrees, sushi, hot buffets, and bakery fairly typical of a large market. Some markets now allow guests to sit down and consume the meal on the premise and alcoholic beverages may be possible. Service is typically self-serve with trays.
The long term plans reflect the size and scope of the operation. Larger markets prepare figures similar to a food court with a single owner. Projections are calculated for each category but the entire operation usually has only one kitchen with a production staff capable of preparing any food item.
Event Caterers
Banquet event order systems house data banks for the previous year and the events already booked for the future year. Event caterers look at each month or season and visualize the year ahead. If the system has too few events in a normally busy month, they will put more sales and promotion assets to work. Letting a night go dark in a busy period is something they want to avoid.
Focusing on each event as a separate job allows a complex budgeted income statement for all events. These estimates are placed side-by side with the actual figures as the year proceeds. Many event caterers segregate purchases by event. Careful control is exercised over each detail.
Alcohol may be served in a cash bar or open bar format. This is determined for each event and estimates for the bar charge need to be made if the agreement is for a fixed beverage cost per patron.
Race Tracks
Race tracks are large complexes with lots of space for guests to roam and many ways to offer food and beverage. Most tracks offer one or more formal dining areas with wait service. Buffets are offered in many tracks since customers are in a hurry to return to the action. Throughout the entire complex, numerous bars and food outlets serve a variety of menu items in a QSR type environment.
Each kiosk is tracked separately and forecasts are required for these stands. The person in charge of the stand prepares a sheet and accounts for the beginning inventory minus ending inventory with a cash projection and reasons for shortages.
Long range plans account for the projected losses due to theft and poor forecasts. Operators try to limit these losses.
Overview
The long range plans must account for marketing costs, leasehold improvements amortization, rents, mortgage expenses, equipment rentals, depreciation, fleet maintenance, etc. At the heart of each operation, the food and beverage team need to accurately forecast demand. This demand may take the form of special events, rooms occupied, nightly covers, hot dogs per stand times the stand count, REVPAR F&B component, contracts retained, etc. The secret to success in each highly specialized segment is knowing the marketplace. Customer knowledge, competitor intelligence, major events and the weather may have a major impact on the operation from year to year.
Hotels
Hotels plan for occupancy levels, REVPAR, banquet event orders and conventions. These operators forecast sales and expenses by departments. In a smaller property, there may be a single kitchen with one or two bars and several banquet rooms. Larger properties have multiple kitchens and many concepts. These huge hotels and resorts often book very large events. They typically have a flexible floor plan for the affairs and book many events simultaneously.
The food and beverage team takes a critical view at each meal period, event, buffet and room service. Plans include departmental level figures for food and beverage revenue, production labor, service labor, banquet labor, bar labor, etc. In addition, all other operating expenses are budgeted by department. Monthly reports compare the actual results to these budget numbers for each operation.
Restaurants
The restaurant wizards take a look at previous year's statistics and focus on covers per meal period, check averages, turns, menu price increases, raw ingredient fluctuations and waitstaff productivity. They use this data to forecast the year ahead. Plans consider old competitors as well as fresh concepts in the market. Pricing strategy depends on profit targets and competitive pressures.
From the comparison of menu prices before and after a factor may be applied to the check averages. Covers per period, turns and any change in the number of seats provide the volume data. For each meal period, a sales forecast is put together using the estimated check averages and the forecast of covers. These figures are summarized by week, month and quarter and become the focus of the budget.
Clubs
Clubs analyze a la carte menus much like a restaurant with a large percentage of sales from regulars. They analyze similar meal period and check average data. Often, banquets and buffets represent a higher percentage of sales than a restaurant. The banquets and buffets are forecasted from a study of previous year's data (often more than one year is examined). Operators forecast start dates and end dates for seasonal clubs and weather may help or hurt them in attaining budget goals.
Provision for staffing is required for the main season and the off-season. Food and beverage revenue and expenses is put in perspective with the members goals. Some clubs seek a break even result from F&B and others expect a small loss. The best F&B operations at major clubs make a positive contribution.
Institutional Caterers
Onsite feeders run a decaying operation along side a growing operation. Since most contracts have a definite termination date, management takes a looks at contract due to expire in the year ahead. Some contracts end when a construction project is completed. If the contract will be renewed in a competitive bid, a probability of success is assigned to the project. Knowledge of the competititor's contract expirations is also critical. Similarly, an estimated probability of taking over each account from the competition is calculated.
The marketing department provides details on new business targets and their estimated probability of success. Each project is defined as hard dollar (profit or loss depends on actual results) or cost plus (all expenses paid plus a fee for management). Total volume affects the amount of overhead required. Cost plus jobs are less risky at the operational level but the documentation of job costs is higher than a hard dollar account.
Institutional caterers break down costs into many categories since the projected margins are slim in relation to revenue. The return on equity is typically much higher than a hotel or restaurant since these operators invest very little in the bricks and mortar.
Markets
The markets I have worked with treat the prepared food section like a restaurant although the top managers use market terminology (for example shrinkage includes normal trim in many markets). Projections are made for each menu category with salad bar, roasters, sandwiches, pizza, prepared entrees, sushi, hot buffets, and bakery fairly typical of a large market. Some markets now allow guests to sit down and consume the meal on the premise and alcoholic beverages may be possible. Service is typically self-serve with trays.
The long term plans reflect the size and scope of the operation. Larger markets prepare figures similar to a food court with a single owner. Projections are calculated for each category but the entire operation usually has only one kitchen with a production staff capable of preparing any food item.
Event Caterers
Banquet event order systems house data banks for the previous year and the events already booked for the future year. Event caterers look at each month or season and visualize the year ahead. If the system has too few events in a normally busy month, they will put more sales and promotion assets to work. Letting a night go dark in a busy period is something they want to avoid.
Focusing on each event as a separate job allows a complex budgeted income statement for all events. These estimates are placed side-by side with the actual figures as the year proceeds. Many event caterers segregate purchases by event. Careful control is exercised over each detail.
Alcohol may be served in a cash bar or open bar format. This is determined for each event and estimates for the bar charge need to be made if the agreement is for a fixed beverage cost per patron.
Race Tracks
Race tracks are large complexes with lots of space for guests to roam and many ways to offer food and beverage. Most tracks offer one or more formal dining areas with wait service. Buffets are offered in many tracks since customers are in a hurry to return to the action. Throughout the entire complex, numerous bars and food outlets serve a variety of menu items in a QSR type environment.
Each kiosk is tracked separately and forecasts are required for these stands. The person in charge of the stand prepares a sheet and accounts for the beginning inventory minus ending inventory with a cash projection and reasons for shortages.
Long range plans account for the projected losses due to theft and poor forecasts. Operators try to limit these losses.
Overview
The long range plans must account for marketing costs, leasehold improvements amortization, rents, mortgage expenses, equipment rentals, depreciation, fleet maintenance, etc. At the heart of each operation, the food and beverage team need to accurately forecast demand. This demand may take the form of special events, rooms occupied, nightly covers, hot dogs per stand times the stand count, REVPAR F&B component, contracts retained, etc. The secret to success in each highly specialized segment is knowing the marketplace. Customer knowledge, competitor intelligence, major events and the weather may have a major impact on the operation from year to year.
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