Hospitality Business and Cost Control
Hospitality Business and Cost Control tests costing, pricing, stock control and the break-even arithmetic behind a menu, a restaurant or a department.
Core formulas
Cost of food used = opening inventory + purchases - closing inventory. Food cost % = cost of food used / food sales x 100. Beverage and labour cost percentages follow the same pattern. Gross profit = sales - cost of sales. Contribution per cover = selling price - variable cost per cover. Break-even covers = fixed costs / contribution per cover.
Stock control
Purchasing cycle: requisition, order, receiving and checking against the delivery note, storing under FIFO, issuing, then stocktake. Par stock is the minimum held to cover normal trade between deliveries. Inventory turnover = cost of food used / average stock value.
Worked example
Opening inventory 620 JOD, purchases 3,480 JOD, closing inventory 510 JOD. Cost of food used = 620 + 3,480 - 510 = 3,590 JOD. Food sales are 11,220 JOD, so food cost % = 3,590 / 11,220 x 100 = 32.0%. If the target is 30%, the two-point gap is worth about 224 JOD and must be traced to portioning, wastage, staff meals, supplier prices or theft. Separately, if fixed costs are 6,000 JOD a month and each cover contributes 4.50 JOD, break-even = 6,000 / 4.50 = 1,334 covers a month.
Menu engineering
Stars are high profit and popular, so keep them. Plowhorses are popular but low margin, so re-engineer price or cost. Puzzles are profitable but unpopular, so promote them. Dogs are low on both, so remove them.
Traps
Forgetting closing inventory; dividing cost by the number of customers instead of by sales; comparing cost percentages across different sales volumes; ignoring wastage and staff meals; pricing only by cost plus and ignoring competitors and demand.