FACULTY OF MANAGEMENT SCIENCES

Department of Hospitality and Tourism

COURSE NOTES: CONTROL FUNCTION

THE CONTROL FUNCTION

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Control is a series of coordinated activities that helps managers assess the
extent to which actual results of operations match the planned results. The
following are the objectives of control in foodservice industry:

 To increase the profit while reducing the cost levels.

 Maintaining and increasing financial strength during changing social
and economic conditions.
 Assessing guest concerns and responding in a positive manner.
 Management and employee interests: control allows management to
measure the performance of employees and assist in identification of
how the employees’ performance can be improved.

The control process

1. Establish standards
 Quality standards
 Quantity standards

2. Establish standard procedures

 Procedures are established and official way of undertaking certain
task in a business environment.

3. Measure actual results

 After quality and quantity standards are established, management
must develop procedures for collecting and assessing actual
operating information.

4. Compare actual results with standards

 The comparison will measure how well actual performance meets

standards expressing planned or desired results. It is important that
comparison are made;
- Frequently
- Routinely
- During different time frames
- As soon as possible after actual cost are known

5. Take corrective action

 The comparison of actual results to standards (expected) results
sometimes reveals a significant variance that requires corrective
action.
 Food and beverage managers often consider corrective action
equivalent to the entire control process.

6. Evaluate corrective action

 After corrective action has been taken, it is important to evaluate
the effects of the changes

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Food and beverage control

Food and beverage control can be defined as the guidance and regulation of
the costs and revenue of operating the catering activity in hotels,
restaurants, hospitals, school, employee restaurants and other
establishments. Control further includes the management of resources
(which are assets of the business) and objectives with a business. Controlling
in foodservice industry involve the management of the following eight basic
types of the business resources:

 Human resources: management of staff needs, motivation and

appraisal to encourage productivity.
 Revenue: managing budgets and financial statements, maximizing
sales
 Inventory: stock control, quality
 Time: productivity, times to be used to advantage
 Procedures: codes of conduct and ethical principles, enforcing the law
 Energy: application of energy saving strategies, monitoring efficiencies
in the usage of energy
 Facilities: socio-economic impact of the organisational facilities, plant-
toilets, kitchen area, dining area
 Equipment: ensure the broken is fixed on time, use effectively to avoid
unnecessary breakdown

The amount of control is related to the size of the catering operation.

o A large group operation obviously requires much precise, detailed, up-

to-date information, and its provision is often aided using computers.
o A small operation such as an owner-operated restaurant cannot afford
nor does it need the same level of sophistication of control, manual
system works well based on owners’ discretion.

Limitation of a computerized control system

1. A computer system will not cure or prevent problems occurring.

2. A control system will require constant management supervision.
3. A control system will need management action to evaluate the
information produced and to act upon it.

The objectives of food and beverage control

1. Analysis of income and expenditure

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  The analysis is solely concerned with the income and expenditure
related to food and beverage operations.
 The revenue analysis is usually by selling outlet, of such aspects such
as the volume of food and beverage sales, sales mix, average
spending power of customers at various times of the day, and the
number of customers served.
 The analysis of costs includes the departmental food and beverage
costs, portion cost and labour costs.
 The performance of each outlet can then be measured in terms of
gross profit and net profit.

2. Establishment and maintenance of standards

 The basis for the operation of any food and beverage outlet is the
establishment of a set of standards which would be particular to an
operation e.g. a chain of steak house restaurants.
 Unless standards are set no employee would know in detail the
standards to be achieved nor could the employee’s performance be
effectively measured.
 Standards can be clearly laid down in manual often know as SOPs
(standard operational procedure) which should be readily available to
all staff for reference.

3. Pricing

 It is important to determine food menu and beverage list prices in the

light of accurate food and beverage costs and other main
establishment costs.
 It is essential that an organisation establish the pricing strategy, match
the demand and supply and then choose a pricing strategy that will be
profitable for the organisation.

4. Prevention of waste

 In order to achieve performance standards for establishment targets

eare set for revenue, cost revenue and profit margins.
 To achieve these levels of performance it is necessary to prevent
wastage of material caused by such things as poor preparation, over-
production, failure to use standard recipe.
 This can only be done with an efficient method of control, which covers
the complete food and beverage cycle.

5. Management information

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  A system of control has an important task to fulfill in providing
accurate up-to-date information for the preparation of periodic reports
for management.
 This information should be sufficient so as to provide a complete
analysis of performance for each outlet of an establishment for
comparison with set standards previously laid down.
 The amount of control necessary is related to the size and complexity
of an establishment.
 The speed by which management information can be produced today
with the assistance of microcomputers enables corrective action to
take place very much quicker than when all the information has to be
collected, collated, analyzed and presented manually.

Problems of food and beverage control

 The perishability of the produce.

 The unpredictability of the volume of business.
 The unpredictability of the menu.
 The short cycle of operations.
 Departmentalization.

THE FUNDAMENTALS OF CONTROL

Planning
phase

Fundamentals
of control

Managemen Operational
t phase phase

THE PLANNING PHASE

Define the basic policies

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Policies are predetermined guidelines, laid down by the senior
management of an organization, which outline such matters as the
market or segment of the market that is being aimed at, how it is to be
catered for and the level of profitability to be achieved.

Financial policy

 Determine the level of profitability, subsidy or cost limits to be

expected from the business.
 Large hotel will set profit targets for the hotel, and departmental
profit targets for the accommodation and catering department.
 Catering department sets overall target for the department
which will further break divided into targets for the various
restaurants, bars and function facilities.
 The industrial contract catering operation will set overall target
for the operation, the level of subsidy and level of management
fee, as well as the cost limits per unit.

Marketing policy

 Identify the broad market it intends to serve

 Identify immediate and future consumer requirements
 Large operation broken down into segments
 The interpretation of the marketing policy for a national
commercial catering organization into marketing plan for the
next year may include :-
 National identity – to achieve a better national identity for
all units by corporate design and by meeting consumer
expectations of what a popular restaurant concept should
be.
 Customer – customer profile
 Market share – maintain or increase percentage of market
 Turnover – sales volume to be increased by x per cent
 Profitability – profit to be increased by y per cent on
previous year.
 Average spending power – to be increased by z per cent to
achieve anew average spending power.
 Product – the product to be maintained at high standards
 Customer satisfaction – net result satisfied customers

Catering policy

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  Define the main objectives of operating the food and beverage
facilities
 Describe the methods by which such objectives are to be
achieved
 Type of customer
 Type of menu
 Beverage provision
 Food quality standards
 Methods of buying
 Type and quality of service
 Degree of comfort and décor
 Hours of operation

Given that we have discussed three types of policies that are essential
during the planning phase, what is your understanding of the term: ‘policy’?

THE OPERATIONAL PHASE

Stages of the control cycle

a. Purchasing
 Product testing
 Yield test
 Purchase specification
 Method of buying
 Clerical procedure

b. Receiving
 Quantity inspection
 Quality inspection
 Clerical procedures

c. Storing and issuing

 Stock records
 Pricing of issues
 Stocktaking
 Clerical procedures

d. Preparing
 Volume forecasting
 Pre-costing
 Clerical procedures

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 e. Selling
 Checking system
 Control of cash
 Clerical procedures

THE MANAGEMENT (CONTROL AFTER EVENT) PHASE

1. Food and beverage cost reporting

2. Assessment
3. Correction

This phase provides management with valuable information on how effective

their plans were and how an organisation can capitalize on its strengths
while addressing the shortcomings to achieve competitive advantage.

FOOD AND BEVERAGE PRODUCTION CONTROL

Food and beverage production control may be regarded as consisting of four
basic stages of pre-control which together should reduce wastage and
therefore reduce higher costs than necessary from over production, loss of
business opportunity from a shortage of items being available, and loss of
revenue from giving excess portion size

The four basic stages are:

1. Production planning
2. Standard yields
3. Standard recipe
4. Standard portion sizes

Food production planning

1. Production planning

 Volume forecasting of sales for an establishment

 The aims of volume forecasting:-
o To facilitate food cost control
o To facilitate the purchasing of foodstuffs
o To reduce the problem of leftovers
o To gear production to demand by forecasting the number of
meals to be served
o To enable comparison to be made and corrective action to be
taken

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There are numbers of management tools that may be employed by
establishment to assists in the forecasting and planning of production; such
as:

1. Cyclic menus
o Repetition of menus items aids in the preparation of standard recipes.
o Staff scheduling and roster may be accurately calculated.
o Customer preference will soon be known.
o Popular dishes may be identified- MENU ENGINEERING???

The main disadvantages:-

o The range of menu items offered may be too repetitious and hence
become monotonous for the customer if the cycle is too short for the
type of the establishment.
o It can also become monotonous for staff resulting in staff boredom and
lack of motivation and flair.
o Food cost could increase substantially if it is not reviewed.

2. Sales histories
o Sales history shows the actual sales of the menu items. Items to be
recorded alongside the forecast sales for comparative and future
forecasting.

2. Standard yields

The standard yield of a particular product is the usable part of that product
after initial preparation, or edible part of the product after preparation and
cooking.

3. Standard recipes

A standard recipe is a written schedule for producing particular menu item,

specifying the name and quantity of the item to be produced, the constitute
ingredients necessary for its production and the method of preparation.

4. Standard portion size

A standard portion size is the quantity of a particular item that will be served
to the customer.

For example, a 300g of Rump Steak served with seasonal Vegetables.

Beverage production control

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1. Production planning

A standard par stocks is a predetermined number of bottles of each item and

brand used in particular bar, and the size of the par stock is calculated to be
sufficient to meet the demand for a busy day plus a safety factor. Aim of par
stock is help determine the average daily consumption of a bar. Sales
histories can also be used to determine the forecast.

3. Standard yields

..as per food standard yield.

4. Standard drink recipes

..As per food recipe, but beverage recipes is lighter than food recipes and
normally take less time to prepare compared to food.

5. Standard portion sizes

Standard portion size is quite easy to determine since most beverages

comes in standard size, e.g. 250ml Red bull, 330ml Coke Zero, 440ml Castle
Lite, etc. For dispense bar beverages, the standard portion size is
determined using a glass. For example, 350ml cocktail glass for Milkshake.

AUTOMATIC BEVERAGE DISPENSING MACHINES

Advantages

o Drink size pre set

o Yield is higher
o It prevents bar staff from handling bottles
o Machines connected to computer to measure, dispense, display prices
and print bill as well as maintain inventory and analyse drink sales

FOOD CONTROLLING

Essential of control system

1. It should be comprehensive and cover all the outlets of an

establishment and all stages of food control system
2. The cost of maintaining the system should be in ratio to the saving to
be made
3. It should be easy to operate and to be understood by all levels of staff
4. It should be seen by staff as working
5. To be effective the information produced must be accurate

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Methods of food control

1. Weekly/ monthly food cost report

A reconciliation report on an activity that is tightly controlled daily by

management

Advantages

 It is simple and quick to produce

 It can give an indication of the general performance of the unit

Disadvantages

 This information is only produced after seven or twenty- eighty days of

operation
 It provide no intermediate information so that any undesirable trends
may be corrected early
 It does not provide the daily information on purchases, requisitions and
sales

2. A daily food cost report

Advantages

 It is simple and easy to follow

 It gives a reasonably detailed account of the general performance on a
day to day basis
 It records daily stock level, daily purchases, daily food requisitioned
and daily food sales and enables the daily food cost percentages to be
calculated.

Disadvantages

 Relies heavily on the accuracy of the basic information to be collected

 It is not totally accurate as it ignores such things as cost of staff meals.

3. A detailed daily food cost report

It is a development of the previous report and refines the accuracy of the

report by taking into account the cost of other items sent other departments

Advantages

 It is more accurate
 It separates purchases that go directly to the kitchen and that goes
into the storerooms

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Disadvantages

 Relies heavily on the accuracy of the basic information to be collected

Food control checklist

Menu
1. Suitable for present market segment.
2. Takes into account current trends in customer eating habit.
3. Menu is interesting, imaginative, changes during the year, takes into
account major food seasons, and assists greatly in selling.
4. Accurately priced, competitive, takes into account labour content in
the production and service of dishes
Purchasing, receiving, storing and issuing procedures
1. Purchase specifications used for all main items
2. Purchase orders made for every purchase
3. All purchases made from nominated or approved suppliers
4. Deliveries timetabled
5. All deliveries to be recorded in the foods received book and credit
notes obtained
6. All deliveries of food to be entered into the cards/ ledgers daily
7. Issues of all food from the stores to be against authorized, signed
requisitions only
8. Entry to food stores to be restricted to authorized personnel
Food production
1. Yield and product testing
2. Production to be related to volume forecasts
3. Maximum use to be made of standard recipes
4. Efficient scheduling of production to be made
5. All equipment to be regularly maintained at set periods complete a
full stock take of all food stores and food held in the kitchen and
compare ledger.
6. Prepare a stocktaking report
7. Maintain up-to-date food control report

Beverage controlling

Objectives of beverage control

Determine and report on the actual and the potential sales and costs for
each beverage e outlet and to take corrective action where necessary

It is simpler than food control:-

 There are fewer number of beverage items to handle than food

 Beverages are purchased in standard unit sizes of known standard
qualities
 Beverages are not as highly perishable as food.

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Strict controls are required for the following reasons:-

1. The danger of bar staff appointing themselves as “unofficial partners”

2. It is easier for bar staff to steal money that it is for food
3. Beverages are tempting than food
4. Beverages are more expensive and contribute more profit than food
items

Methods of beverage control

1. Bar cost system

Similar to food cost report. It may be produced for each bar separately or for
all the beverages operation. It is time consuming.

2. Par stock or bottle control system

 The level of par stock is established

 For each bar, i.e. to establish the number of bottles required for a busy
day
 The number and type of empty bottles are noted
 The potential sales are based on the quantities issued at selling price
and are compared to actual revenue received
 It is simple and easy to operate

3. Potential sales value system

This system is designed to control beverages sales and therefore beverage

costs by setting a sales value on each bottle item carried in stock. The
revenue of the bottle is based on the standard size, content of drink and
selling price for each drink.

STOCK CONTROL
Stock control involve a cyclical control of items by stocktaking, ordering,
purchasing, receiving, storage and issuing.

ORDERING

- How much to order: consider admin cost involved when ordering,

discount on large quantities, cash tied on large quantities and
risk of stock being outdated.
- When to place an order: consider the lead time and maintain
safety stock levels.
- In controlling complexities:
 Apply a degree of control to each item

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  Invest in an information processing system
[Class A stock account 20% of items but 80% value]
[Class B stock account 30% of items but 10% value]
[Class C stock account 50% of items but 10% value]
- Ordering procedure:
 Obtaining requisition
 Selecting the supplier
 Negotiating with the supplier
 Supplier must be evaluated using price, quality and
delivery

PURCHASING

Purchasing includes the following methods:

(a) Daily market list

- Purchasing of perishable items on a daily basis
(b)Cash and carry
- A member of the organisation goes directly to the warehouse
and purchase products of desired quality and quantity, anytime it
is needed.
- However, organisation have to pay cash and provide its own
transport for such products.
(c) Contract
- Can draw up a legal fixed contract with suppliers.
- Price can be fixed but quality might vary with seasonal items.
(d)Paid reserves
- Organisation buy in advance, normally in large amounts.

Purchase specification

- It is a concise description of the size, quality and quantity

required of the item.
- It establish a buying standard and gives clarity to the suppliers.
- It provides for definition of an item, weight, size, count, grade,
brand name, units and special requirements.

RECEIVING

Receiving is the activity of checking incoming goods being delivered by the

supplier, that they were those ordered.

- Request for credit memo is created when an item is rejected due

to quality, quantity and price mismatch.

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Receiving process:

Step 1: inspect incoming goods against a purchase order and purchase

record
Step 2: inspect incoming goods against a purchase specification
Step 3: inspect incoming goods against delivery invoice
Step 4: accept incoming goods by signing delivery invoice
Step 5: move goods to storage for quality and safety reasons
Step 6: complete the daily receiving report

Other receiving tasks

1. Marking
- Marking involve marking the date of delivery and price of the
item. This help in stock rotation and inventory evaluation.
2. Rejection
- Receiving personnel have a right to reject a product due to
incorrect price, inadequate quality, late deliveries, etc.
3. Stock rotation
- The FIFO principle should be applied. It is even more effective
provided it constitutes or is used hand-in-hand with marking.

Receiving area

It should be sited in a way that allows it to be located near storeroom,

delivery door, refrigerators and freezers. It must be to clean and must have
sufficient drainage.

Equipment in receiving area

- Scales
- Unlocking platform
- Ramp
- Table for inspection
- Thermometer
- Blade knife
- Crowbar
- Calculator
- Clip board, tagging clips, pens

STORAGE

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Storage can be defined as a space or place allocated to keep particular
goods for a set time, which normally include dry, refrigerator and freezer in a
food and beverage service context.

Storage procedure must address three basic issues:

(a) Security
- Storage security measures include lockable storage areas which
features previous storage, limited access, effective inventory
control to theft-prone items, central inventory control, security
design and monitoring.
- Theft can be controlled by:
 Scheduled receiving hours
 Adequate facility
 Restriction
 Separate purchaser and receiver
 Immediate transfer of deliveries to storage
(b)Quality
- Product quality should be safeguarded during the storage.
- Basic safeguarding procedures constitutes the following:
 Proper stock rotation
 Proper and correct temperatures
 Cleanliness of storage
 Proper ventilation and air circulation
(c) Record keeping
- Physical inventory: periodic physical counting of stock
- Perpetual inventory: continuous count so that balance is
available
- Bin card: individual bin card for each menu item
- Stock sheet
- Stores ledger
- Order book
- Computerised system

Essential storage practices

- Cleaning material in a separate store

- Hazardous substance always locked up
- Strong smelling away from smell absorbing
- Frequent store inspection

Dry storage:

 For dry goods, e.g. flour, sugar, canned products

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  Humidity levels be maintained
 Ventilation must be good, thermometer to control temperature

Cold storage:

 Cold room temperature must range between 0ºC - 4ºC

 Freezer : -18ºC
 Cooked food above raw
 Meat separate from poultry and fish
 Fruit and vegetables away from dairy products
 No warm products as temperature will drop

ISSUING

- Issuing of stock should be done at set times everyday

- In case of large orders, requisition should be handed in few hours
in advance
- No requisition, no issues
- Perishables may directly go to production area- direct issue
- Requisition to be signed by a person in charge
- Store man to file all requisition
- Requisition in duplicate or triplicate (computerized system may
be used to adhere to environmental protocols)

REVENUE CONTROL
Revenue control is a control system covering the sale of food and beverage
in a food service operation to maximize returns. To control the revenue of a
unit, particular attention must be paid to the major factors which can have
an influence on the profitability.

It is essential to control the main factors which can affect the revenue of a
business such as menu-beverage list, the total volume of food and beverage
sales, the sales mix, the average spend of customers in each selling outlet at
different times of the day, the number of covers served and the gross profit
margins.

The payment of food and beverage may be made in many forms such as
cash, foreign currency, credit cards, cheques, travelers’ cheques, luncheon
type vouchers and signed bills.

All staff handling cash should be adequately trained in the respective

company’s methods.

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A manual/ handbook should be given which would contain information on the
standard procedure to be followed for such things as:

 Opening procedure
 Working procedure
 Closing procedure
 Procedure for accepting foreign currency
 Procedure for accepting credit cards
 Procedure for accepting vouchers such as luncheon vouchers
 Procedures for accepting cheques
 Procedure for accepting travelers’ cheques
 Procedure for complimentary or signed bill

The purpose of revenue control

- To effectively control all items issued from various supply points

- To minimise pilfering and wastage
- To acquire accurate financial information
- To subtract human error in relation to bill costing
- To automatically receive the breakdown of sales

In revenue control, the main control method used are:

 Method of taking food and beverage orders

 Method of billing
 Sales summary sheet
 Operational statistics

Revenue control through controlling the METHOD OF TAKING FOOD

AND BEVERAGE ORDERS

A method of order taking (also known as a checking system) is an essential

component of revenue control in the organisation. Selection of the most
efficient and economical checking system in an organisation is a crucial
aspect of yield management for food and beverage management team. As
indicated in page 2 of this course note, the control system should be
determined by the size of the operation. It is vital that management review,
select and/or adopt the system that is most suitable for the type and size of
a food service operation.

Methods of taking food and beverage orders

(e) Triplicate

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 Oder is taken, top copy goes to supply point, second copy to the cashier
for billing and third copy is retained as by the service personnel as a
means of reference during service.

(f) Duplicate
Order is taken, top copy goes to the supply point and second copy is
retained for billing purposes.

(g)Service with order

Order is taken, customer is served and payment is received according
to that order.

(h)Pre-ordered
Order has been pre-ordered individually, e.g. room-service breakfast

Revenue control through controlling the METHOD OF BILLING

Billing is a statement of the amount owing to the business, which the guest
should pay/compensate in an exchange for service rendered and/or products
served.

Basic billing methods

(a) Bill as check

Orders are entered into a duplicate copy of the bill, the second copy is
presented to the guest as a bill.

(b)Separate bill
Runs in conjunction with triplicate checking system, however; orders
are entered into a duplicate copy which is given to the cashier who
opens a bill according to serial numbers. Top copy is presented to the
guest as the bill and the duplicate copy of the bill is filed.

(c) Bill with order

Service to order and billing at the same time, e.g. bar service. The
advantage of this system is that it speeds up the billing process and
ensure prompt service to customers. Electronic keyboard may be
programmed with GIN & TONIC to accelerate the speed of service at
the bar.

(d)Pre-paid
Customer purchase a ticket in advance, either for a specific meal or
specific value.

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 (e) Voucher
Customer has a credit issued by third party for either a specific meal or
specific value, e.g. travel agent voucher.

(f) No charge
Drinks and meals are free. It is a compliment for a particular reason.
Management must ensure that a bill is posted to the correct internal
account using a certain folio number and a person responsible for that
no charge bill should sign according and provide a compelling reason
behind ‘comping’.

(g)Deferred billing
Bill is automatically posted to the company’s account or organizer’s
account in case of a function or conference.

Revenue control through controlling SALES SUMMARY SHEETS

Sales summary sheets are sometimes called restaurant analysis sheets or

bills summary.

These sheets provide for:

- Reconciliation of items with different gross profit.

- Sales mix information- records for stock control, i.e. which items
makes profits to aid predicting future demands.
- Records for popular and unpopular items [menu engineering].
- May also provide for various performance measures such as:
 Seat turnover
 Average check
 Revenue per member
 Productivity index
 Ratios of sale of food and beverage
 Stock turnover

Revenue control through manipulation of OPERATIONAL STATISTICS.

Operational statistics include a variety of performance measures (as

mentioned above). For example, a restaurateur may calculate the sales per
seat available to determine the spending habits of patrons and to ultimately
determine the techniques to influence customers to spend more within the
restaurant.

SYSTEMS FOR REVENUE CONTROL

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1. Manual system
1.1 Sales checks

The items ordered are recorded in the waiter’s check pad as well as
prices.

Objectives

 To remind the waiting staff of the order they have taken.

 To give record of sales so that portion sales and sales mixes and
sales histories can be compiled.
 To assist the cashier and facilitate easy checking of prices.
 To show the customer detailed list of charges made.

1.2 The cashier’s role

to issue check pads to the waiting staff prior to the meal period, to
record the number of the checks issued in each pad, and to obtain
the waiting staff’s signature for them: and on the completion of the
meal period to receive from the waiting staff their respective
unused check pads, record the numbers, and sign for the receipts of
those returned. This information to be recorded on the check
number issue control sheet.
To check pricing, extensions and subtotals of all checks and to add
any government tax charges and to enter the total amount due.
To receive and check money, credit or when applicable, an
approved signature in payment for the total amount due for the
check
To complete a missing check list for each meal period. When a
missing check is identified, investigation to be carried out to find
the reasons for this
To complete restaurant sales control sheet for each meal period;
revenue received should be recorder under specific headings such
as cash, cheques, credit cards transactions, etc.

Problems of the manual system

 The time span between purchasing, receiving, storing, processing,

selling the product and obtaining the cash or credit for the product
is sometimes only a few hours.
 The number of items held in stock at any time is high.

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  A large number of finished items are produced from a combination
of the large number of stock items held in stock.
 The number of transactions taking place on an hourly basis in some
operations can be very high.
 To be able to control the operation efficiently management ideally
requires control in formation of many types to be available quickly
and to be available quickly and to be presented in a meaningful
way.

The full manual control of a food and beverage operation would be

costly, time consuming and data produced would frequently be far too
late for meaningful management action to take place.

The day-to-day operational problems of a manual system are many

and include such common problems such as:-

 Poor handwriting by waiting staff resulting in:

(a) Incorrect order given to the kitchen or dispense bar.
(b)Wrong food being charged to the customer.
(c) Incorrect prices being charged to the customer.
(d)Poorly presented bill for the customer, etc.

 Human error can produce such mistakes as:

(a) Incorrect prices charged to items on a bill.
(b)Incorrect additions to a customers’’ bill.
(c) Incorrect service charge made.
(d)Incorrect government tax charge made.

 The communication between departments such as the restaurant,

dispense bar, kitchen and cashiers has to be done physically by the
waiting staff going to the various department.

 Manual systems do not provide any quick management information

data, any data produced at best being normally 24 – 48 hours old,
as well as being costly to produce.

 Manual systems have to be restricted to the bare essentials

because of the high cost of labour that would be involved in
providing detailed up- to date information.

2. Machine system
2.1 Pre-checking systems

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Pre-check machines are similar to a cash register

 A waiter has his/ her own machine key.

 A check is inserted into the printing table and particular keys,
depending on the order taken are pressed giving an item a price
record as well as recording the table numbers, the number of covers
and the waiter’s reference number.
 A duplicate is printed and issued by the machine which is then
issued as the duplicate check obtains food and/ or beverages.
 For each transaction a reference number is given on the sales check
and the duplicate.
 All data is recorded on a continuous audit tape that can be removed
only by authorized at the end of the day when the machine is
cleared and total sales taken and compared to actual cash received.

Advantages of the system are:

o The sales check is made out and a record of it made on the
tape before the specific items can be obtained from the
kitchen or bar
o Analysis of total sales per waiter is made on the audit tape
at the end of each shift.
o No cashier is required as each waiter acts as his/ her
cashier, keeping the cash collected from the customers
until the end of the shift and then paying it.
o As each waiter has his/ her own security key to operate the
machine, there is restricted access to the machines and no
other way by which pre-checks can be provided and used
in exchange for items from the kitchen or bar.

2.1.1 Pre-set pre-checking system

This is an up-date on the basic pre-check machine. The keyboard is
much larger than the previous machines, and has descriptive keys
corresponding to all items on the menu which are pre-set to the
current price of each item.

2.2 Electronic Cash register ( ECRs)

High speed machines, used in high volume catering

Advantages of the system ARE:

o Price customers’ checks through pre-set or by price look-ups.

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 o Prints checks, including the printing of previously entered items.
o Have an additional special key so that the pre-set price can be
changed during promotional.
o Provide an analysis of sales made by type of product and if
required by hour
o Provide an analysis of sales by waiter per hour per shift period.
o Analyse sales by method of payment e.g. cash, cheque, type of
credit card, etc.
o Complete automatic tax calculations and cover and service
charges.
o Provide some limited stock control.
o Provide waiter checking-in and checking –out facilities
o Provide facilities for operator training to take place on the
machine without disrupting any information already in the ECRs
o Restrict access to the ECR and till drawer by the key or code for
each operator.
o Eliminate the need for a cashier, by requiring each waiter to be
responsible for taking payment from the customers and paying in
the exact amount as recorder by the ECR at the end of the shift

Points to consider before ECR is purchased

 Is it suitable for the type and size of operation it is to be used in?

 Cost – how does it compare with other models of similar capacity?
 Is it an up-to-date model or is it about to be superseded?
 What on-site training will be offered if this model is purchased?
 Can this ECR be linked to similar ECRs as part of a network or directly
to micro-computer?
 Maintenance. How foolproof is this machine? What level of
maintenance is expected? Can simple maintenance be done by staff
e.g. changing of the printing ribbon, etc?
 What safeguards are standard or optional to the model when power
failures occur?
 What built-in security features are included?

2.3 Electronic point of sales control systems

It is similar to ECR with the additional feature of one or several printers at

such locations as the kitchen or dispense bar

Objectives of having printers are:

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 1. To provide an instant and separate clear and printed order to the
kitchen or bar
2. To speed up process of giving the order to kitchen and bar.
3. To aid control, in that items can only be ordered when they have
been entered into the ECR or terminal by an identifiable member
the waiting staff and printed.
4. To reduce the time taken by the waiter in walking to the kitchen or
bar to place an order and, as frequently happens, to check if an
order is ready for collection.
5. To afford more time, if required, for customer contact.

Printers are sometimes replaced by VDU screens

Before the invention of the microprocessor only a few large organization

were able to justify the high cost of a computer system. In the hotel and
catering industry these systems were mainly applied to areas such as
front office, and reservations in particular, as well as for many aspects of
the accounting function. The very complex area of food and beverage
management including purchasing, storing, stock control, standard
recipes, menu planning, pricing, sales analysis, etc.

Equipment required:

1. Hardware
2. Software
2.1 Packages – software that is bought in from a computer firm and
is already pre-programmed to perform specific function
2.2 User-developed programs – software which is designed by the
food and beverage management staff or by company staff with
or without the assistance of computer programming expertise

The cost of computerized system would include:

1. The system hardware

2. The system software
3. The cost of additional or special programming
4. The cost of training staff and payroll costs
5. The cost running the dual system whilst the new system is run-in
and initial problems ironed out.
6. The cost of maintenance which should be by contract whenever
possible.
7. The cost of supplies, e.g. computer paper

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The following steps should be taken to ensure that the most suitable system
is purchased.

 Analyse the present system for its strengths and weaknesses.

 Summarise the equipment specifications by reference to information
requirements.
 Select a list of potential suppliers and request literature.
 Obtain shortlist of potential suppliers’ full details of companies using
their equipment and packages.
 Check if programs are simple to understand in that the operator is
continually guided through the system.
 Check if the supplier takes overall responsibility for both the hardware
and software performance and maintenance.
 Check if the supplier can modify the software packages to the
particular requirements of the organization.
 Conduct a financial analysis of alternative short-listed suppliers’
equipment and select a supplier.
 Have a system put into full operation with the suppliers’ training and
technical staff standing by to assist with initial problems as they occur.

Additional reading

CHARACTERISTICS OF A GOOD RESTAURANT OPERATIONAL CONTROL

A review by KBKB Public Accountants and Consultants

1. POINT OF SALE SYSTEM

A good point of sale system will minimize bad communication between the
kitchen and the front of the house, deter employee theft, keep employees
from punching in early or late, identify which menu items are selling & who is
selling them, allow for daily price changes, accumulate valuable tip reporting
information, help establish employee incentive programs, be an important
factor in menu engineering, and much more. A good point of sale system
used to its fullest can add 1-2% to the bottom line.

Control of food leaving the kitchen

Proper control of food coming out of the kitchen will help ensure that all
ordered items are being accounted or charged for, which is the main function
and importance of a point of sale system.

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Summary breakdown by entrees/appetizers/desserts & a detailed
breakdown by menu item, server, & time period

The importance of detailed sales information is to understand what, when,

who, and why sales are what they are. The more information you have in this
area the better decisions you can make when it comes to menu designing,
menu pricing & engineering, hours of operation, staff hour allocations, etc…

Time & attendance, including tip reporting, labor budgeting, & labor
scheduling

A quality time & attendance component of a point of sale system is critical

for a number of reasons including, forecasting sales and scheduling labor
hours and payments accordingly, tracking employees punching in too early
or late, make it easier to prepare employee schedules once set up, and keep
tip information required by the IRS.

2. PURCHASING

Purchasing, inventories, and food costing are all inter-related in the typical
restaurant operation, with purchasing being the most important part of food
costs – food & beverage (“a prime cost”) on average represents 30-40% of
the costs in a restaurant and therefore is one of the most important areas to
be controlled. An operator has to develop procedures for whom will do the
purchasing, selecting purveyors, determining the quantity and quality of the
product needed, receiving the product, and more. Using an outside
consultant to analyze your purchasing can often be very beneficial. These
consultants can negotiate and audit vendor contracts and often work on a
percentage of savings to you.

Are par levels established?

Par levels are determined from fairly consistent levels of sales and
considering how often items can be purchased, minimum purchase
requirements from purveyors, and allowing for a 30% cushion. Par levels are
established to allow inventory levels to be at a minimum, which will curtail
waste, spoilage, theft, and require less storage space.

Do you control pricing by receiving bids from multiple vendors, ask

for specials, consider freight costs, and have advance knowledge of
price increases?
Purveyors should be selected based on a competitive price basis per pre-
determined specifications and considering consistent quality, minimal price
fluctuations, and good service. Competitive bids should be received on a

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weekly basis for high cost items and every 3 to 6 months on all other items
put out to bid. Many operators list the purveyors for each item and let them
submit bids. Then they remove the highest bidder from the list and a new
purveyor is added.

Are deliveries checked for weight, quality, and pricing?

Receiving procedures are critical to ensure that the product you worked so
hard to purchase at the right price is what you received. At a minimum the
operator should weigh and/or count the product, visually inspect the product,
check the pricing and make sure the invoice is correct.

3. FOOD COSTING

Food costing is an area many restaurant operators are not good at or they
don’t spend much time with. Maybe it’s because the process can be difficult,
tedious and continuous due to the fluctuations in food prices. Having said
that, costing out a menu (along with knowing the sales mix) is the only way
you will ever know what their ideal food cost percentages are and be able to
compare them with actual food costs. This information is a must for any
operator that wants to reach maximum profitability.

Are there pictures or standards utilized & recipes followed for each
menu item?
The starting point of food costing is always having a recipe file. Without it the
operator will not be able to accurately cost out the menu. A recipe file needs
to be established for each menu item listing all the ingredients and portions
for each item. All items have to be converted from the way it is purchased to
the way it is served (taking into account waste, shrinkage, etc…). Standards
need to be maintained for consistency of food presentation and costs.

Does the menu get costed regularly?

If the menu is not costed out regularly then the information will probably be
out-dated and inaccurate. It is critical to continually and regularly cost out
the menu to keep up with the ever-changing environment. How do you raise
prices without properly costing out the menu? How do you uncover non-
profitable items on the menu without costing it out? How do you maximize
the return on your investment without costing out the menu – you don’t.

Do you utilize procedures & other tools to control portions?

Portion control is an integral part of controlling food costs. A good operator
trains the employees regarding the importance of controls and often will use

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procedures including weighing items on a test basis, use appropriate sized
serving utensils, buy pre-portioned items, observe items as served, and use
pictures of each menu item.

4. MENU PRICING

Menu pricing seems simple at first. You should price items based upon what
the market will bear right? That is true in large part, however, there are
many decisions leading up to that – the operator has to decide do they want
to be about service and therefore charge a little more or do they want to be
about value and charge a little less or provide larger portions for the same
price. Do they price menu simply based upon desired profits? Many times in
order to accomplish the profit goals, items from the menu need to be
dropped or added, or the operator has to create a niche in the marketplace
to get around pricing constraints by competitors. No matter what the
operator has to price the menu based upon making a profit.

Do you know how your competitions’ pricing compares?

Before a menu can be priced there are many factors that need to be
addressed including pricing by competitors. A good operator will research
the competitors’ products and pricing before pricing their own menu. This
will give them a better understanding of how to create a demand for their
product – price being one element.

Are menu items changed for seasonal increases?

Where some operators lose profits is by not making price adjustments or
changing their menu for seasonal fluctuations in costs. If the profit goals
already take into account seasonal cost increases that might be okay,
otherwise something would need to be done to maintain profitability – again
pricing is one option.
Are menus priced to accomplish profit goals?
Pricing a menu for profits means that the operator has to have enough
information to know that at certain prices and sales mix the profits will be X.
That information includes food and beverage cost for each item on the
menu, potential price increases of major ingredients, labor intensity to
produce each menu item, the sales mix over a representative period, and
total projected labor and general expenses based upon projected sales.

Are menu design & engineering techniques utilized?

Menu design and engineering is a critical technique to use in developing a
menu that is both popular and profitable. The engineering part involves

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creating a worksheet that includes 1) The number of each menu item sold for
the period, 2) the cost of each menu item sold for the period, 3) the food cost
percentage of each item, 4) the margin contribution of each item, and 5) the
overall food cost percent. The menu then is broken into four groups – (A)
popular & profitable, (B) popular & profitable sometimes, (C) unpopular, but
profitable when sold, and (D) unpopular & unprofitable. Based upon this
analysis you can eliminate items, add new items, change prices, change how
items are prepared, or refocus the menu placement and/or design. Menu
engineering and design should be done before the reprint of the menu or if
“ideal costs” materially differ from actual costs over a period of a few weeks
or more.

5. BAR CONTROLS

As with food costs, bar costs are controlled with the use of procedures and
financial information. However, with a bar there is many more ways for
employees to steal and therefore in most cases is much more difficult to
control. Operators that have a substantial bar business typically develop a
recipe file, train the bartenders and cocktail services, cost out drinks, control
sales based on inventory and statistics, implement a good point of sale
system, and visually check the Bar Service.

Is a weekly & perpetual (on some items) bar inventory utilized?

Inventory controls is a huge part of controlling bar costs. At the end of each
week or even on a given day – compare the perpetual inventories against the
weekly physical inventory taken, looking for differences. The manager based
upon empty bottles from the bar should issue liquor.

Are spotting services used periodically?

The use of spotting services is a must for any restaurant with a bar. These
services are trained to identify problems and even catch bartenders not
ringing up drinks, “feathering” or short pouring drinks, over-pouring or giving
away drinks, collaborating with servers, not ringing up drinks, and much
more. In addition, the service with identify customer service or product
issues that can be valuable feedback.

Does the Point of Sale system give a detailed bar breakdown?

As with food costs, a good point of sale system will give the operator
incredible information with which to run the restaurant. The more detailed
the reporting the more valuable the information for use in costing out the bar
menu, knowing what is selling and what isn’t (especially wine),

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understanding what the “ideal costs” are and how close they are to actual
costs, etc…

Do you have a recipe file?

Again as with food costs, a recipe file for the bar is a must. Without a recipe
file, there is no way to know what the “ideal costs” are so how will the
operator ever know if there is a problem.

6. LABOR SCHEDULING

There are several factors that affect labor costs including sales volume,
restaurant design, type of restaurant, cross-training employees, availability
of employees, and ability of employees to name a few. Labor scheduling the
most important tool management has to control labor costs. Labor (“a prime
cost”) on average represents 30-40% of the costs in a restaurant and
therefore is one of the most important areas to be controlled.

Is labor scheduled considering sales trends by day and hour?

If at all possible you should schedule labor hours based on historical
numbers, projected sales, and review the labor cost before final staffing. If
actual sales are materially lower, management has to react and send people
home early. By direct contrast if actual sales are materially higher
management will need to call staff in to work or authorize overtime and/or
split shifts to service the customers.

Are blind staffing techniques used?

Blind staffing is when the operator fills out the schedule based upon the
hours needed within each department without using names. The purpose of
this is to meet the staffing (hours) needs of the restaurant without playing
favorites, catering just to the employees’ needs, or preparing a schedule
based upon what was done in the past.

Do you budget and monitor weekly overtime & split shifts?

Controlling overtime and even split shifts is a large part of controlling labor
costs. If a restaurant operator is paying premium time to employees, the
effective hourly rate becomes higher and profitability generally suffers.
Keeping a pool of employees available is easier said than accomplished;
however it does keep overtime to a minimum and is a good goal.

Have you considered cutting 1/4 hour a day from the hourly staff?
Cutting a ¼ hour a day from all hourly employees might sound simplistic and
not very meaningful in terms of profit to the bottom line. Let’s illustrate by

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taking an example of a restaurant with the equivalent of 50 full-time hourly
employees. These employees make an average of R8 per hour. If the staff
each worked 260 days (full-time) the savings would be (50 employees x
R2.00 1/4 hr x 260 days) R100 each day and R26, 000 annually.

7. INCENTIVE PROGRAMS

Incentive programs are a key element in making a restaurant profitable.

While helping to make the restaurant more profitable, incentive programs
can also make employees feel like they are part owners, like they are getting
rewarded for increased efforts, and are appreciated for work well done. Well
thought out programs can make the workplace more interesting and fun as
well.

Do you have a Front of the House incentive program?

Front of the house incentives is typically put into place to motivate
employees to sell more and their reward is primarily an increase in tips.
However, you can have a contest for just about anything including increasing
check averages, helping other staff, volunteer to go home early – you name
it. And the rewards management gives to the staff are typically gift
certificates or money, but can be just about anything as well as long as the
employee receives recognition as the winner or being the best.
Do you have a Back of the House incentive program?
Back of the house incentives are geared to motivate staff to perform and
then get recognized for that performance. There are hundreds of incentives
that can be used; the operator just has to find what fits for their restaurant in
their situation. Some examples of typical incentive programs are the
following:
1) Food costs are lower than the goal set; then the kitchen staff receives a
reward.
2) Reward staff for giving good suggestions (use a suggestion box) to
improve operations and saving money.
3) If there are no workers compensation claims for a period of time, then all
the staff might receive gift certificates or other rewards.

Do you have a manager incentive program based upon controllable

results?
Good management incentive programs are almost always based upon
controllable results. That means whatever numbers management has some
control over should be included in the calculation for incentive bonuses.
Controllable profits always include the “prime costs” (product and labor

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costs) and overhead items that are not fixed costs, such as utilities, repair &
maintenance, credit card discounts, laundry & linen, replacements, supplies,
and others. The operator typically comes up with benchmark numbers as a
starting point, decides how to weight the importance of each area, and
shares increases in profits with management as a bonus.

8. CONTROLLABLE OVERHEAD EXPENSES

Even though the majority of cost reduction dollars happen in the prime cost
area, overhead expenses can, and often do, play a huge part in a restaurant
being profitable or not. Almost every line item in overhead can be
“controlled” at some point or at some level. The potential savings from a
line-by-line overhead analysis can be material, ongoing and done at different
stages of the restaurant (i.e. – negotiating rent for the restaurant space is
done before any operational analysis on actual numbers is done, however
both are extremely important to the future success of the restaurant).

Have you developed an overhead expense budget?

An overhead expense budget will help you quickly identify potential
problems as they occur, reviewing reacting quickly to large deviations.

Did you negotiate a good lease?

Negotiating a lease is something that once it’s done you might not be able to
change for a significant period of time; and it’s a material line item that can
easily stunt future growth of the company if not done properly. Restaurant
leases can be complex and typically include tenant improvement provisions,
minimum rent (per sq. ft.) versus a percentage of sales, CAM charges, CPI
increases, sales definitions (what to exclude), free rent, security deposits,
phase-out provisions, personal guarantees, and more.

Are “replacements” or small wares bills analyzed?

The cost of silverware, glasses, plates, utensils, and small appliances can be
extremely high. Many employees don’t understand that a lost knife or broken
glass costs money and therefore is no different than pouring a heavy drink,
or giving larger food portions than the recipe calls for, or losing cash. Some
ideas to control costs might be to buy durable plates and glasses, educate
the employees regarding the cost and handling of items, develop an
incentive program in this area, and “rake” the garbage to find out what is
really happening.

Are linen & laundry bills analyzed?

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Laundry & linen contracts are difficult to understand & monitor. Because this
is the case you need to spend time in this area if it is a material line item for
the restaurant. Significant savings can be found by tracking deliveries &
inventories, auditing bills, and having another company review your
contract. Other cost saving ideas might be using paper napkins and paper or
glass for the tabletops.

Are credit card rates reviewed & bid out?

There are numerous credit card companies and several programs in the
marketplace depending on how much volume your operation does, the ticket
size, how much commission the broker is willing to accept, etc…Visa and
MasterCard is where material differences in rates mostly occur and they are
typically used much more frequent than American Express.

Do you bid out your insurance rates & have your coverage
reviewed?
All the insurances required in a restaurant business such as, workers
compensation, liability, property, and unemployment insurance, add up to a
very important overhead line item(s) for all restaurants. Make sure you have
the right coverage, the right carrier (with restaurant clientele), and keep
bidding out the contract each year if nothing else to keep your broker
looking out for your best interest.

Are utility bills reviewed & trends analyzed?

Another area not usually addressed in-depth is the cost of Utilities. If your
utility costs are increasing analyze the bills to understand why. You can
always get a free energy audit to understand where the potential cost
savings are the largest. Many operators end up utilizing better, more
efficient, light bulbs, monitoring the use of equipment or purchase more
efficient equipment, tracking the air conditioning usage, and developing
incentive programs for employees helping to control these costs.

9. DAILY/WEEKLY FINANCIAL INFORMATION

A restaurant is a very difficult business to own and operate unless you are
proactive about constantly making changes to enhance your operations.
Being proactive and making changes requires you to have knowledge of
what is happening in your restaurant. That knowledge is acquired in large
part by having timely and meaningful information by week, day, shift, hour,
and minute.

Do you have weekly financial statements (by day)?

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Detailed “flash reports” or weekly P&L’s can add 1-2% to your bottom line if
properly implemented. A weekly P&L is the most important tool you can use
to understand what is happening in your restaurant.

Are key financial data reviewed daily & in weekly meetings?

If systems and procedures are set up and no one analyzes the information
then setting a daily/weekly reporting system up is a waste of time.

Are findings / trends acted upon?

Once you have reviewed your daily/weekly “flash reports” and found
inconsistencies or perceived problem areas, are you following through to find
out why? Are you checking the reporting system against monthly financials
and internal source documents (i.e. payroll records, etc…) for accuracy?
Without follow through the reporting system will not be beneficial.

Are perpetual inventories used for key items?

Inventory is no different than cash. If you leave it unattended, don’t count it
often, and don’t keep tight controls, it will disappear. Just the fact that your
employees know you are tracking food and bar items will deter theft and
diminish other problems in the kitchen. Many operators use perpetual
inventories for high-priced items and alternate items from week to week

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