Strategic Questions in Food and Beverage Management - Coursework Example

CASE STUDY by Student’s Name Code + Name of Course Institution City/State Professor Date Case Study The strategy of all you can eat during the week will affect the food average spend statistics during the week in different ways. The average amount of money spent on food will reduce from the initial amount of $34.15 to an amount of $20.10. This amount is very little compared to the initial amount spent on food in the restaurant by the customers. The reduction in the amount spent on food has positive advantages to the customers of the restaurant. This is because they will be motivated to spend at the restaurant as they receive value for their money. The statistics for the week will therefore indicate a very high turn up of customers during the weekdays. The food cost for the days of Monday, Tuesday and Wednesday will be measured according to the criteria shown below. The first step involves taking a physical count of the food in store. To do this effectively, I will begin with detailing and recording the opening inventory for the period, which is similar to the closing inventory of the previous period. The current period in this case is the day that begins on Monday whereas the previous period is represented by the last day of the al carte menu that is Wednesday. The second step involves adding all the purchases that had been made in the three days. Purchases include the amount of products of food bought during the week (Barrows, Powers & Reynolds 2012, p. 145). After adding up all the purchases, they are then added to the opening inventory of the period being calculated. The third step involves subtracting the closing amount of inventory from the total purchases and opening inventory that had been made in the period. The amount of sales that have been made during the period should also be recorded down. To calculate the food cost for the period, the amount that was calculated from the opening inventory plus purchases and less closing inventory is then divided by the amount that is recorded from the sales made. This value is the food cost that has been spent on food for the three days (Barrows, Powers, & Reynolds 2012, p. 149). After the food cost has been calculated, it should be compared with the original food cost before the all you can eat menu was introduced to determine if the menu is effective for improving the sales and as a result the profit of the restaurant or not. An example of this is represented as Beginning inventory 9,000 Purchases 2,000 Ending inventory 8,500 Cost of food sold 2,500 Food sales 8,930 Actual food cost 28% The potential food cost is calculated by multiplying the cost of item by the total number of items that are sold during the three days. This is done by calculating the cost of food that is offered on the all you can eat menu, then calculate it with the number of purchases that are made. The figure that is realized from this calculation is known as the total cost. The number of items that are sold then multiplies the selling price and this gives the value of the total sales made for the period. The total cost is then multiplied by 100 and then divided by the total sales to obtain the value of the potential food cost (Cousins, Foskett & Gillespie 2002, p.223). The potential food cost figure is then compared to the actual figure for food cost that had been calculated in the first example. An example of the potential food budget is shown below Adults Children Cost per item $7.812 $3.15 Number of items sold 100 120 Total cost $781.2 $378 Sales price $32.90 $16.50 Number of items sold 100 120 Total sales $3290 $1980 Potential food cost 45% 34% The effects of the all you can eat menu can be discussed based on the different area that will be affected as a result. These areas include the effect on the labor cost. The demand for labor is always showed to be negatively sloping because the increase in wage rate increases the cost of production by firms. As such, the selling prices of commodities are increased to be able to deal with the increased cost of production. In this case, however, the selling price of commodities has reduced and this has resulted into increasing the number of customers that visit the restaurant. Because of the increased customers, the amount of labor that is needed in the restaurant is high. The restaurant will be forced to substitute capital for labor to be able to get the amount of labor that is enough for managing the increased number of customers that visit the restaurant. The all you can eat menu therefore affects the labor cost directly by ensuring that the restaurants’ management employs more capital to the laborers. Furthermore, the cost of labor is increased since the management will be required to employ more staff to deal with the increased number of customers during the week. The increased labor cost should therefore be monitored closely to avoid a situation where the profits that are realized by the restaurant are all spent on taking care of the labor costs. The contribution margin is the difference between the revenue that is collected from the sales made and the variable costs that are incurred in the process. The variable costs are subtracted from the revenue and the amount left covers the fixed expenses that relate to the organization as well as adding to the profits made in the restaurant. The contribution margin is used to determine the products that should be added or even remove products to make informed pricing decisions (Ojugo & Rymer 1999, p.124). The contribution margin of the buffet menu can be calculated as shown below; the sales revenue less the variable costs incurred and then divides the whole figure by the sales revenue. The food cost has increased with the introduction of the all you can eat menu and thus an overall increase in the profitability of the restaurant. The profitability is seen to increase because of the number of customers that are attracted during the weekdays because of the all you can eat menu. The customers who are attracted in large numbers help to ensure that the food prepared by the restaurant does not go to wastage due to spoilage. Furthermore, these customers also visit the restaurant on the weekend due to the attractive food packages that are offered by the restaurant. Because of the high number of customers during the weekend, the losses that could have been incurred during the week are overturned by the sales that are made during the weekends. On the other hand, the food cost is high for the a la carte menu as compared to the all you can eat menu. This is because, for the buffet menu a lot of money is spent on the purchase of food whereas most of it goes to waste due to spoilage and throwing away. It is therefore more effective for the management of the restaurant to adopt an all you can eat menu as it shows a lesser food cost as compared to the a la carte menu as well as higher profitability. The amount of food prepared daily for the buffet menu is a very large amount. This is because the hotel’s management anticipates the number of customers who will visit the restaurant to be many. Because of this, the amount of food that is prepared is usually in large amounts to ensure that the demand of the food by the customers is effectively met by the supply that is present. However at times, the amount of food prepared might be a lot more than the demand that is present. Because of this therefore, there are instances when the restaurant has to deal with leftovers and wastes. These wastes and leftovers can be dealt with in a number of ways. In order to ensure that the profitability is maintained even with the wastes and leftovers, the management of the restaurant an sell the wastes to persons with pigs and dogs who may need the foods. The management will ensure that the food that is left as waste is well refrigerated so that it can be sold to the institutions that deal with keeping of animals that include pigs and others that eat left over foods. The money that is generated from this sale will be added to the profits of the restaurant (Wood 2000, p. 156). The leftover foods could also be well kept and refrigerated so that they can be given to the workers of the restaurant as take away in the evening when they leave work. This will motivate them to work since they will be assured of take away at the end of their shifts so they do not have to cook at their homes. Furthermore, the leftover food can be given as a form of charity to institutions, such as orphanages and the homeless people without money to buy food or even cook the food on their own. This gesture will prove to the society that the restaurant considers the needs of the community. These moves will ensure that the waste and leftover foods do not just go to waste. Reference Barrows, C. W, Powers, T. F & Reynolds, D. E 2012, Introduction to Management in the Hospitality Industry, Wiley, Hoboken, New Jersey Cousins, J, Foskett, D & Gillespie, C 2002, Food and beverage management, Prentice Hall, Harlow Ojugo, C & Rymer, T 1999, Practical food & beverage cost control, Delmar Publishers, Albany, NY Wood, R. C 2000, Strategic questions in food and beverage management, Butterworth-Heinemann, Oxford Read More