Business Economic Notes - 16

Catering-General

These notes are issued to Inspectors of Taxes to assist them in examining accounts. They are intended to provide a general background to the trade, with some explanation of its most important features. Business Economic Notes are not intended to provide an exhaustive or definitive picture of any particular trade or profession.

Contents

General

Definitions OF Types Of Restaurants

  • Traditional Restaurants
  • Self-Service Restaurants
  • Speciality Restaurants
  • National Restaurants
  • Fast Food Outlets

Location
  • City Location
  • Suburban Location
  • Country Location

The Wine List
  • Licensing Requirements
  • Supply
  • Wines
    • Table Wines
    • Fortified Wines
    • Sparkling Wines
    • Aperitifs
    • Liqueurs
  • Pricing Policy

The Menu

Kitchen Management Structure

Volume & Prices

Trends

Catering Economics
  • Control Systems
  • Profit Levels
  • Costing Principles
  • Standard Costing System
    • Definition - Identification And Measurements Of Variances
    • Application Of Standard Costing System
  • Wastage
    • Processingg And Preparation Losses
    • Food Remaining Unsold
    • Portion Control

Computer Controls

Credit And Charge Cards

Miscellaneous
  • Beverages (Tea And Coffee)
  • Portion Packs
  • Tips, Wages And Staff Meals

1 General

The catering establishments covered in these notes are essentially non-residential establishments, both licensed and unlicensed, where catering is undertaken as the main activity with a view to profit.

The notes do not, therefore, directly include hotels, motels, clubs or the catering activities at schools, hospitals and canteens.

With some exceptions such as fast food outlets and certain speciality restaurants it is difficult to classify the trade as a whole into well defined groups, owing mainly to the overlap in type of food and service offered.

But broadly speaking, catering establishments can be divided into five main groups as follows.

  • Restaurants - traditional or self service
  • Speciality restaurants
  • National restaurants
  • Fast food outlets
  • Other - cafes, snack-bars, sandwich bars.

2.Definitions of types of restaurants

Traditional restaurants

Traditional restaurants are establishments which normally cater for luncheons and dinner service only or where these main services are predominant.

These restaurants generally provide a table service, although a restaurant with, say, a carvery or garden barbecue, will have an element of self service.

Self service restaurants

The concept of self service restaurants evolved out of the need to provide a quick and inexpensive meal or snack for the budget and time conscious business person, traveller or shopper.

The majority of self service restaurants are, by and large, part of chains usually attached to department stores or motorway service points or situated in prominent shopping areas and so on.

The range of main meals is limited although a wider range of sandwiches and snacks is offered. They differ from fast food outlets in that they offer a better choice of main meals and more traditional `restaurant type' seating accommodation.

Speciality restaurants

Speciality restaurants specialise in a particular type of food, such as pasta house, steakhouse, vegetarian, sea foods, and so on.

National restaurants

National restaurants specialise in foods of a particular country or region of a country.

They may, for economic reasons, also include other national dishes or traditional British fare on their menu.

The category is therefore meant to include restaurants who specialise predominantly rather than exclusively in a particular national fare.

Fast food outlets

This category covers take-away and eat-in establishments, but excludes fish and chip bars, and consists predominantly of franchised establishments, such as Wimpy, Kentucky Fried Chicken, McDonald's, and so on.

3. Location

Broadly speaking, for purposes of categorisation, the main locations in which you will find a catering establishment, can be summarised as

  • in the centre of a city
  • in the suburbs
  • in the countryside.

Establishments in each of these areas will be catering to different specific needs and their patter will be directly influenced by the particular location.

City location

The city centre location may cater wholly for the lunch time trade, for evening meals or both if the situation provides the demand, such as, near offices and theatres. Reliance on lunch time trade will normally follow if situated predominantly in a business district or shopping centre.

The normal trading pattern will be Monday to Friday, unless of course it is near a busy weekend shopping centre or entertainment area when weekend trade may also be feasible.

The lunch time establishment can range from a snack or sandwich bar, fast food restaurant, medium priced a la carte restaurant to an elaborate first class restaurant catering for the `expense account' lunch.

Evening trade in city centre locations will be mainly social. Meals will need to be a bit more special and service geared to customers needs, such as, pre-theatre suppers, intimate dinners for couples, family get-togethers, and so on. A restaurateur catering for evening trade will also have a substantially higher call on the wine list.

Suburban location

A restaurant sited in or near a residential suburb could cater for both lunchtime and evening trade. Proximity to a shopping centre or offices or factories may provide the same kind of custom that would be attracted to the city centre restaurant. However there may be a demand for morning coffee, snack and afternoon teas during the day, with evening trade being possibly less elaborate than the city locations. A lot of eating out here may be done for convenience rather than occasion.

Speciality and fast food restaurants can do well in this sort of location, although they will need a large suburban catchment area to reach high turnover targets.

Country location

By and large this is the area of serious catering, where success depends on total commitment, skill and hard work.

These establishments cannot rely on captive clients and rely almost totally on building up a reputation of good service and food in order to attract customers.

In most cases it may be part of the attraction for customers, if the restaurant is situated in an area of natural beauty or local interest.

Where however, the location is the prime attraction, the restaurant is likely to be seasonal, with custom mainly attracted to the area in summer months.

Usually country establishments are expensive to acquire and maintain. The owner will need to establish and maintain a certain level of turnover in order to run the business profitably. This may be achieved either by means of customer volume or high prices or through a mixture of both.

4.The wine list

Licensing requirements

Prior to 1987, the last act governing the sale of intoxicating liquor was the Licensing Act of 1961. Under its provisions, restaurants and residential licences were introduced and permitted drinking hours were generally extended. The Act also provided the statutory `drinking-up' time and for the special provision of late night drinking in premises providing dancing and/or a floor show.

The caterers `on-premises' licence will distinguish which types of alcoholic drink are allowed to be sold. This may be comprehensive, that is, no restrictions, or wine only, or beer, cider and wine, and so on.

Application for a licence is made to the Magistrates or to a Special Licensing Court. In the case of a new licence, certain formalities have to be observed, such as advertising in local newspapers and posting of notices of intention to apply for a licence.

Once granted, the licence may have a number of conditions or restrictions attached and these include limiting sales of liquor to say the evening period only, and so on.

It must be shown that the premises has a substantial trade in meals. It is also not permissible under the terms of a restaurant licence to sell alcoholic drinks by self service methods.

Variations and extensions to permitted hours may be applied for and granted to cover special occasions or functions.

The Licensing (Restaurant Meals) Act 1987 came into effect as from 2 May 1987 and provides for the sale of liquor without the restriction of normal licensing hours. to qualify, the restaurateur needs to show that sale of liquor is ancillary to providing substantial refreshment.

Supply

There are a number of alternative choices in the source and manner of supply of wines.

  • Obtaining stock from an importer/wholesaler on a sale-only basis. This method may limit choice but has the advantage of not tying up capital in stock.
  • Purchasing from cash and carry outlets and taking advantage of special offers
  • Purchasing direct from importers.

Wines

  • Wines can be divided into
  • ordinary table wines (vin ordinaire)
  • fortified wines
  • sparkling wines
  • aperitifs.
  • Table wines

    Table wines come from a variety of sources, mainly

    • French (Bordeaux, Loire, Rhone, Alsace and other regions such as Provence)
    • Germany (Rhine valley notable for Reislings)
    • Spain
    • Portugal
    • Yugoslavia
    • Austria
    • and to a lesser extent from South Africa, Australia, California and Cyprus.

Fine wines are controlled by the French Authorities (appellation controlle) and strict rules apply to the manufacture and bottling.

  • Fortified wines

    These are mainly ports and sherries, of which there are many brands - Oloroso, Amontillado, Amoroso, and so on.

  • Sparkling wines

    The most famous being champagne, which is exclusive to France.

  • Aperitifs

    As their name implies, they are largely drunk as an appetizer before meals. The most popular is sherry, either sweet or dry, and vermouths. There are also other proprietary aperitifs such as Campari, Martini, Dubonnet and so on.

  • Liqueurs

    It is common to follow a good meal with a liqueur and there is a wide range of choice. Most liqueurs are Brand based derivatives, such as Benedictine and Chartreuse. Some are specially distilled from fruits, such as Cointreau (Oranges) and Kirsch (Cherries). Absinthe, a green liqueur is distilled from a combination of wines and herbs together with essence of Wormwood. Another popular liqueur is Drambuie, which is based on Scotch Whisky.

Pricing policy

Traditionally, restaurants have charged premium prices on wines and other alcoholic drinks. There does not seem to be any clear logic in the pricing policies adopted. Generally speaking however it is true to say that there is a correlation between the type of establishment and the prices charged. The same bottle of vin ordinaire will be more expensive in a high class restaurant than in a modest establishment.

Basically it would seem that a very simple pricing structure is adopted, depending on the type of establishment, the cost price is doubled, trebled or quadrupled and the VAT and service charge are added, to arrive at the table price.

With champagne however, there is usually more uniformity in prices charged and this appears to be mainly owing to consumer knowledge of champagne quality and prices of the different categories from non-vintage, rose, prestige and vintage.

There is a common aspect in the pricing policy of all establishments in that wine and spirits sold by the glass carries a premium over and above the listed bottle price. Restaurateurs will claim the additional premium on wines to cover the wastage element.

5.The menu

The standard Bill of Fare or Tariff, the menu, originated from France, itemising the dishes and choice of foods available for any particular meal.

Traditionally French is the language of food and even in an English menu certain words or phrases are retained which convey a better meaning of what is on offer, for example.

  • A la carte - to describe the fact that the menu is a variety and each item individually priced
  • A la Anglaise or Hongraise - denoting food prepared in the style of English or Hungarian and implicitly denoting the use of certain national flavours and spices.
  • Italliene - suggesting a pasta accompaniment and cooked in the Italian style.

The order of taking dishes for any meal and the courses appropriate to either lunch or dinner, still follows the traditional format, although much abbreviated.

Traditionally, a full course lunch will have the following basic items.

  • Hors d'oeuvres (starter or appetizer)
  • Egg or pasta
  • Fish
  • Entrée (main course)
  • Sweet
  • Cheese

The French regard soup as more appropriate for the evening than the luncheons and in gourmet restaurants this tradition continues.

Dinner follows the same basic patterns as lunches, except soup may displace Hors d'oeuvres and following Entrees or the main dish, you may have Releves, which is usually a selection of prepared, cooked meats. For both lunch and dinner, a choice of vegetables will be provided for entrees.

Menus are either itemised and costed per individual item or offered on a `prix fixe' or net charge basis. The `prix fixe' menu provides a choice of different menus at set prices and usually states the number of persons catered for, such as, set menu for 2 persons - £20 inclusive of VAT and service charge, and so on. A la carte menus do not normally include VAT or service charge and these items are added on separately at the bottom of the bill. The exceptions to the normal concept of starters, main meal and dessert are Chinese and Indian cuisine. There are no such things as courses in Indian or Chinese cuisine with meals consisting of a variety of dishes eaten simultaneously. To some extent menus have been adapted to English tastes and some orderly concept of starters, main dishes and desserts are provided,

6.Kitchen management structure

The French influence is still much in evidence in the style and structure of kitchen management. There have, of course, been some changes in the overall structure and whilst some of the main principles remain, there is a more flexible approach with more duality of roles and less of the traditional hierarchial concept of the kitchen management structure. Traditionally, the chef de cuisine has effective control of the kitchen and organises and manages the kitchen and directs the activities of the kitchen staff. The chef de cuisine is also responsible for all other management functions such as buying, menu planning and costings. This is effectively, a manager or proprietor role, depending on size of establishment.

The maitre chef is directly responsible for the preparation of food and will have one or more Sous chefs (under chefs) as assistants. Under the Sous chef there will be Commis chefs (newly trained chefs) and Aides (usually trainees). The maitre chef may also have chefs assisting in the various cooking principles, for examples.

  • Chef Potager - soup chef
  • Chef Poissonier - fish chef
  • Chef Entrenetier - vegetable chef
  • Chef Rotissier - roast chef
  • Chef Saucier - sauce chef.

Nowadays, it is fairly common to find Commis chefs in charge of the various principles in large kitchen or one or more chefs in charge of a number of specialisms.

7.Volume and prices

Speciality restaurants, fast food outlets and other catering units providing limited unvarying menus, are the biggest group of establishments with the highest average number of covers per day.

A 1987 Gallup restaurant business survey commissioned by the Caterer and hotelkeeper magazine showed the average covers for weekdays and weekends and percentage change from 1985 as follows.

 

Weekday

average

Percentage

change

from 1985

Weekend

average

Percentage

change

from 1985

Pub counter

53

+11

78

+23

Steak/Pub restaurant

89

+1

170

+15

Fish and chip

restaurant

164

-1

274

-12

Pizza restaurant

201

+27

363

-37

Chicken/Burger

556

+180

678

+80

Café/Instore

164

+8

35

-10

English

77

-31

116

-70

Continental

57

+1

98

+7

Hotel restaurant

121

+19

137

+21

Chinese/Indian

66

-6

129

-3

Theme/US style

182

+32

335

+55

Wine bar

92

-58

46

-12

The most significant points arising from this survey are

  • the traditional English restaurants continued loss of popularity
  • the dramatic increase in the popularity of fast food establishments
  • the substantial increase in popularity of trendy theme restaurants.

The fast food and speciality group is of necessity geared up to higher volumes at lower margins, the need for volume being essential in view of the lower average spend per customer.

At the other end of the scale, the national restaurants have low volume and a higher than average spend per customer.

Average bill per head by type of restaurant

8.Trends

The economic recession of the early 1980's markedly slowed the growth rate of the catering industry, dropping from an average growth rate of 14% in 1980 to around 5.5% in 1984. This trend has however altered in the last 5 years and the industry as a whole is entering a more buoyant period.

Within this market however fast food and take-away outlets have captured a bigger slice of the available market and their growth rate has been substantially higher than the traditional restaurant.

Whilst the overall trend is a growing popularity for eating out, there is substantial evidence to indicate a change in eating habits and preferences. Surveys appear to indicate a marked change from the traditional English restaurants, wine bars and up-market national restaurants.

9.Catering economics

Control systems

Some form of control is required in order to reconcile and record sales and for the customer to be presented with a total bill/ this is, or course, more important in a large restaurant where there may be more than one department involved, such as kitchen, bar, dining room, coffee lounge and so on. There are a number of manual systems using duplicate or triplicate order pads in which either the cashier finally collect the money or the waiting staff responsible for their own sections ensures correct settlement of the bill.

The triplicate checking system is used in establishments where the menu is varied and it is likely that customers will also want to retain a copy of the bill.

Each member of the serving staff has a pad of serialised sheets in triplicate and with his own number or reference incorporated, on taking an order, one copy is given to the servery or kitchen, one copy to the cashier, who start to prepare the bill and third copy is retained by the waiter. A separate triplicate page will be made out for other sections of the meal such as supplementary courses, sweets, wines and spirits and coffee and the same process is followed. There are various procedures that can be adopted for recording extras, mistakes, amendments and so on.

At the end of the meal, the kitchen, waiter and bar will each have their own set of slips. The cashier meanwhile has been making out the bill as the meal progressed and when all items have been accounted for will be passed to the customer for payment. The bill will be in duplicate, with the top copy receipted.

When the dinner or luncheon session ends, the cashier will make out a cash summary sheets, on which are recorded a breakdown of the items served. All duplicate customers bills and waiters checks are clipped together and retained for checking by the accounts section.

The duplicate system is less elaborate and comes in a number of variations. The more complex duplicate system is the perforated slip system. The top copy consists of a number of perforated sections, each one serial numbered. As courses are ordered, starting at the bottom of the top copy, the relevant slip is torn off and handed to the kitchen or appropriate department. When a further course is ordered, another slip is torn off and so on, as the meal progresses. Prices are written in by the waiting staff as the orders are taken and the complete duplicate then becomes the customer's bill.

A simpler system is the single sheet composite order and billing form, on which food items are either printed or coded. The waiting staff merely tick in the appropriate boxes and pass to the kitchen. When the order is completed the kitchen staff return the slip to the waiting staff with the food, and the bill is passed to the customer. On completion of the meal the customer takes the bill to the cashier who rings up the bill from the information on the slip. This type of system is used in conjunction with the new simplified display tills, where items on the menu correspond with keys on the till. Items are rung up on the till which automatically identifies and rings up the price.

In restaurants, the fixed price menu provides the simplest control system. The cashier only needs to know which set dinner the customer has had in order to calculate payment. One slip is made to note the order, this is passed to the kitchen and then passed back to cashier or waiter.

Profit levels

From the point of view of the proprietor it is essential that some method of establishing the return on food is employed. The level of return on sales necessary to cover costs and leave a balance as profit will need to be gauged.

The first step will be to evaluate costs and calculate an achievable level of gross profit and this principle can be expressed as

Net Profit + overheads + labour costs = gross profit.

Having determined the required level of gross profit, the desired mark up on food costs can be calculated in order to achieve the necessary level of sales.

In doing so, the proprietor needs to make certain assumptions and bear in mind certain considerations.

  • An accurate forecast of the average level of covers will have to be made. Few restaurants will be in the fortunate position to say that at all times they will be at full capacity. Using judgement based on past experience, the proprietor will need to arrive at a realistic level of percentage cover
  • Seasonal factors will also have to be considered and their effect on the estimate of percentage coverage. Depending on the size of the establishment, the proprietor may have the option of downward cost adjustment. In other words, only a small core of full time staff are employed, backed up by additional seasonal labour. Then in times of low demand, the proprietor reduces labour costs by shedding seasonal labour, with no adjustment required to profit margins.

A smaller establishment or one without any downward flexibility will normally be unable to maintain the same gross profit level throughout the year. In order to counteract the seasonal effects on gross profit, he will gear up profit margins in high season, providing a higher than required level of gross profit and using the surplus profit to offset the effect of lower returns in off-season periods.

This type of adjustment will also take into account some scope for price reductions in low season periods in order to attract custom. The practice can be described as operating above and below a median gross profit margin. Above during high season and below during low season, but overall achieving a fixed median gross profit margin. The level of any price increases may be moderated by taking into account the probable increased level of profit as a result of increased turnover in high season or the increased turnover could be substantial enough to avoid any upward adjustment to prices and still achieve the desired result.

  • Whatever the proprietor may feel the desirable mark-up on food costs should be, consideration will have to be given as to whether the prices charged are compatible with the service and quality of food offered and the type of clientele.

At the end of the day, the proprietor must bear in mind that prices can only be sustained at a level at which the market will bear. Except, of course, if the restaurateur is in the happy position of knowing that custom will be retained irrespective of pricing levels.

It must be said that a unique aspect of catering which sets it aside from any other service industry is that at a certain level of repute, high prices are part of its allure and anything less than exorbitant prices would not command the same level or type of clientele.

Costing principles

In order to achieve the desired rate of gross profit, the cost of preparing each particular dish needs to be ascertained and priced appropriately.

In theory, the basic principle is straightforward and involves costing all the ingredients for a dish or set meal and then adding up the cost. To this figure is applied the appropriate rate of mark-up, which is added to the cost, gives the sale price necessary to achieve the required gross profit margin.

In practice, it may not always be possible to achieve the desired gross profit and there are a number of reasons why this may be so.

In order to bridge the gap between theory and practice the restaurateur needs to ensure that

  • sale prices are altered and costings brought up to date following every change of ingredient cost
  • the amount of portions served or obtained from a particular dish never varies
  • the estimate of wastage of prepared food never varies
  • the estimate of own and staff consumption never varies
  • there is no direct or indirect pilferage.

Whether or not a restaurateur comes close to achieving the appropriate results is a matter of control. All factors which may have an affect on profit margins need to be monitored carefully and remedial action taken.

Both in exercising control and taking effective action, the restaurateur is faced with a number of practical problems. Most restaurateurs would find it impossible to monitor changes in ingredient costs on a day to day basis. Suppliers price increases may only show up on a receipt of the invoice and this could be a week or more following delivery. Even if prices were available on day of delivery, the restaurateur may simply not have the time to check for price changes on all supplies.

Even if this were possible, it may not be felt prudent to make frequent changes to menu prices, bearing in mind the adverse effect it could have on custom. Ideally, the restaurateur will be endeavouring to keep menu prices constant, with as few changes as possible during the year.

Seasonal factors will need to be considered and their affect on ingredient costs taken into account. It may only be felt necessary to make any variations if

  • the change in price was to be permanent
  • there was no possibility that any temporary seasonal increase would be offset by lower costs later in the year.

Alternatively, the restaurateur may simply make changes to the dishes on the menu, for example, replace roast beef with roast pork and generally put up dishes on which the profit rate would not be adversely affected.

However, this option would not be available or available only to a limited extent, to specialised restaurateurs, as they would be expected to provide the dishes of their specialisms on the menu. Similar difficulties will also face the proprietors of a National restaurant in that they are obliged to sell the particular National dishes at all times, irrespective of cost or difficulties in obtaining the raw materials.

Standard costing system

In order to provide the essential stability and to effectively monitor profit ratios, a system adopted by some restaurateurs is the standard costing system.

The restaurateur prepares a standard set of costing for the menu items and these are revised quarterly or bi-annually.

Each factor which may effect the achievable profit ratio is termed a `variance'. The precise measurement of these variances then enables the restaurateur to accurately monitor the drift between actual and standard costing results and to `fine tune' future costings.

These differences or variances are identified as favourable or adverse, depending on whether the actual result is more profit or less profit than expected and the identification process is referred to as variance analysis.

  • Definition, identification and measurement of variances

    In dealing with food, there are two main variances.

    • Sales price variance, which is a change in selling price and which allows for changes in average selling prices for all the meals actually sold at the different price.
    • Sales volume variance, which is a change in the number of meals sold and which automatically creates an additional cost for the extra meals. The variance takes into account the different number of meals and the gross expected from every meal.

    There are then variances due to changes in cost of units and these may be due to

    • changes in the buying price of food
    • changes in portion size

The first is an ingredient price variance and the second an ingredient usage variance.

  • Application of standard costing system

    Having defined the various aspects of standard costing, the application of the system is demonstrated in the following examples.

    a. Change in selling price

    If the selling price has changed from the standard costing and there are no other changes, then the gross profit will be different by the amount of the sales price variance.

Standard costing
£
Sales - 500 meals at £4 =
 2,000.00
Food cost - 100 kgs at £6 per kg =
 600.00
Gross profit =
 1,400.00

Actual costing
£
Sales - 500 meals at £3.50 =
 1,750.00
Food cost - 100 kgs at £6 per kg =
 600.00
Gross profit =
 1,150.00
Sales price variance =
 difference in price per meal x actual number of meals
=
 50p x 500
Therefore change in profi t=
 £250 (adverse variance)

b. Change in volume

If say an additional 100 meals had been sold, the difference in sales will be 100 x sales price per meal. However the profit would not increase by this amount, for the simple reason that more meals means extra food cost.

The variance in the profit will be 100 x standard gross profit per meal, which allows for extra food used to produce the extra meals, assuming that the standard quantity of food is used in each meal.

Any further difference in the cost of food actually used will be due to a change in the price paid for food or a change in the quantity of ingredients or portion size, for example.

Standard costing
£
Sales - 500 meals at £4 =
 2,000.00
Food cost - 100 kgs at £6 per kg =
 600.00
Gross profit =
(or £2.80 per meal)
1,400.00
Actual costing
£
Sales - 600 meals at £4 =
 2,400.00
Food cost - 120 kgs at £6 per kg =
 720.00
Gross profit =
(or £2.80 per meal)
1,680.00

Here the total cost of food has been increased reflecting the increase in umber of meals, but cost per meal remains the same. The only variation in gross profit is due to the volume of sales.

Sales volume variance =
 difference in number of meals x standard gross profit per meal
=
 100 meals X £2.80
Change in profit =
 £280 (favourable variance)

c. Change in buying price

With changes in the cost of food, the variation in gross profit may be due to a change in ingredient price or to a change in the quantity used per meal.

Standard costing
£
Sales - 500 meals at £4 =
 2,000.00
Food cost - 100 kgs at £6 per kg =
 600.00
Gross profi t=
 1,400.00

Actual costing
£
Sales - 500 meals at £4 =
 2,000.00
Food cost - 125 kgs at £6.50 per kg =
 812.00
Gross profit =
 1,187.50

Here the gross profit has fallen for two reasons.

  • An increase in ingredient costs
  • An increase in ingredient usage.
Ingredient price variance -
Difference in price x actual usage
=
 50p x 125 kgs
=
£62.50 (adverse variance)
Ingredient usage variance -
 Difference in quantity used per meal x actual number of meals x standard price per kg
=
 £50g more per meal x 500 x £6
=
 £150 (adverse variance)
Therefore reduction in gross profit =
 £62.50 + £150.00
=
 £212.50

d. Composite example

This example shows change in profit caused by all four variances.

Standard costing
£
Sales - 500 meals at £4 =
 2,000.00
Food cost - 100 kgs at £6 per kg =
 600.00
Gross profit =
(or £2.80 per meal)
1,400.00
Actual costing
£
Sales - 500 meals at £3.75 =
 2,250.00
Food cost - 140 kgs at £6.50 =
 910.00
Gross profit =
 1,340.00

In this example the extra usage of ingredients (40 kgs) is partly due to increased volume of sales and partly due to increase in usage per meal (larger portions).

Extra ingredients allowed for in

i.Sales volume variance = 100 meals x 200g =
 20 kg
ii.Ingredient usage variance meals x 33.33g =
 20 kg
Total additional usage =
40 kg

Therefore, overall change in gross profit is made up of

i.Sales volume variance = 100 x £2.80 =
 £280 (Favourable)
ii.Sales price variance = 600 x £0.25 =
 £150 (adverse)
iii.Ingredient usage = 20 k g x £600 per =
 £120 (adverse)
iv.Ingredient price = 140g x £0.50 =
 £70 (adverse)
Net reduction in Profit =
 £60 (adverse)

Apart from the benefits of using standard costings in every day control the system provides the basis for measuring the effect of any changes of final results by variations in sale prices, volume, portion size and ingredient costs.

The system can also be used as an effective audit tool for validating and quantifying differences between target and actual results.

Wastage

Wastage in a catering establishment may take the form of either

  • processing and preparation losses
  • food prepared and remaining unsold
  • lack of or poor portion control.

    processing and preparation losses

    Normally the caterer will know in advance, the extent of loss arising from processing and preparation of raw materials and will allow appropriate margins in his costings calculation.

    During the normal course of business there will, of course, be additional unforeseen losses, such as

    • overcooking or spoilage
    • poor quality of vegetables or meats, resulting in more than normal loss in preparation and trimming
    • provisions becoming unfit for use, owing to overlong or bad storage.

    There will also be occasions when provisions may be sub-standard or unfit for use at time of delivery. Normally the caterer will be able to return these items to the supplier and claim a refund.

    Food remaining unsold

    The extent of the wastage arising from food remaining unsold is very much the responsibility of the individual caterer.

    Normally, one would expect the caterer to be able to judge demand accurately and minimise wastage. With careful menu planning, the restaurateur will be able to make use of most of the edible left-overs from prepared food remaining unsold.

    There will probably be a higher degree of wastage with outlets such as fast food or snack bar units, selling either pre-cooked or packaged foods.

    If demand is not gauged correctly, heated food left standing for an undue length of time, will deteriorate in quality and have to be thrown away.

    Portion control

    The caterer, when costing the menu, will calculate the anticipated number of portions per prepared dish and so on. Wastage can occur if staff do not follow rigid portion standards and are slap-dash with their serving.

    Again, this is a matter of control on the proprietor's part, and proper supervision will be needed to make timeous corrections.

    On occasions, waiting staff may also be deliberately generous with servings to favourite customers, whom they know will tip well, if good service including generous portions are provided. Most gourmet restaurants these days have adopted or use some form of the `nouvelle cuisine' type of service, where food is served on plates in the kitchen by the chef. In addition to improving presentation, it does, of course, ensure a uniform standard of portion control and reduces the possibility of any extravagances, deliberate or otherwise, on the part of waiting staff.

10.Computer controls

In popular catering, such as fast foods and self-service, the most commonly used systems are electronic cash registers (ECRs) and electronic point of sale (EPOS) terminals.

The primary use of both systems is as cash registers, but additionally they are capable of collecting information about what is being sold. EPOS terminals have greater intelligence and can record sales item by item for up to 100 individuals items. This facility allows the caterer to control stock, monitor sale of menu items and work out exactly what is or is not popular with his customers.

There are now ECRs available with the facility to link into micro-computers and which can deliver as much information as EPOS terminals.

A further innovation is the introduction of soft programmable keyboards. This facility allows the user to individually program each key on the ECR terminal. Each key can be associated with an item on the menu, ringing up the appropriate price automatically, thus cutting down on user mistakes and increasing speed of customer throughput. In catering generally there are a number of computer systems on the market and these are basically designed to assist the caterer in four main areas of activity as follows.

  • Cash control (revenue and income)
  • inventory and stock control
  • Labour costs
  • Statistical and marketing information.

The last item can of course, be an invaluable aid to the caterer enabling accurate long term planning forecasts to be made. Peaks and troughs can be analysed on a day to day basis and the pattern of sales can be accurately projected.

Total control systems provide for full control of all the crucial points in a restaurant - serving, kitchen, bar and cashier. Each point in the system has a terminal and printer and each order fully controlled from time of taking order to payment of account. All transmitted information is stored at a central point and can be viewed by the restaurant manager on a VDU screen.

A recent innovation is the hand-held computerised order taker, capable of relaying customers orders without the server leaving the table.

The order taker is about the size of a small calculator, with keys which denote menu categories and numbers. A small screen displays the order as it is keyed-in.

Once keyed-in, the order is automatically printed up in the kitchen or bar receiving unit, messages being relayed by radio or infra-red transmission.

Customers individual preference, such as rare steak or any additions or corrections can also be transmitted by this machine.

The system is capable of two-way transmission and the kitchen or bar can relay messages back to the server relating to the order.

11.Credit and charge cards

The catering trade is fairly unique in that despite the substantial growth in credit and charge card usage, a substantial proportion of establishments still do not accept cards. The main reason is their unwillingness to pay what they feel is an inordinately high commission to the various card companies. The small operator also has a strong feeling of resentment towards the card companies who appear to offer better discounts on commission to larger establishments and chains.

On average commission charges range from 2.5% to 6% with charge cards such as American Express and Diners Club being at the top end of the scale.

The table that follows shows the rough spread of credit card acceptance.

Restaurant type

Cards not accepted

Scale of card use

 

Pub

26% Access 61%

Restaurant

  Amex 39%
    Visa 50%

Steak House

  Diners Club 42%

*Fast Foods/Speciality

50% Access 17%
    Amex 9%
    Visa 20%
    Diners Club 8%

English restaurant

47% Access 28%
    Amex 24%
    Visa 33%
    Diners Club 46%

French/Italian

24% Access 59%
    Amex 46%
    Visa 68%
    Diners Club 46%

Chinese/Indian

34% Access 56%
    Amex 24%
    Visa 54%
    Diners Club 26%

* Denotes mainly Speciality restaurants, as the vast majority of fast food units do not accept cards

Whilst for some the cost of accepting cards can be too high, it is probably true to say that the majority of restaurateurs accept that credit cards can boost income by attracting more customers and also to a lesser extent increasing spending per head. A survey in 1986 gave the following information on average spends by various methods of payment.

  • Cash - £8.32
  • Cheque - £20.38
  • Access - £25.21
  • Visa - £27.39
  • Amex - £42.89

Major changes are now being proposed, following the recent enquiry by the Monopolies and Mergers Commission, which has provisionally declared that the current United Kingdom credit card system is regarded as a monopoly.

The first major change proposed is that High Street banks will gradually take over the major retail trade processing role from the credit card companies, effectively meaning that retailers will be able to negotiate commission charges with their bank and shop around for the best quote.

Other major changes proposed are

  • single sales voucher for all Visa and MasterCard transactions
  • all sales vouchers to be paid into a single bank
  • uniform authorisation limits
  • single statements
  • speedy conversion of vouchers to cash, usually on the same working day.

12.Miscellaneous

Beverages (tea and coffee)

Team and coffee are still the nation's most popular drinks, with tea competing closely with coffee as the favourite complement to a meal.

Tea has pulled away from the `tea-urn' image and nowadays caterers almost universally prefer to use tea bags, either the individual tea bags with tags or the mini-pot sized one or two cup tea bag.

On average a cup of tea with milk and sugar costs around 3p to produce represents tremendous value to the caterer.

Unlike coffee, tea is a simple beverage to prepare and with the use of tea bags, uniform taste and strength can be ensured. Coffee, on the other hand, has always been a highly controversial drink and is the subject of more complaints by customers about restaurants that any other aspect of the business. Lack of attention in preparation and allowing coffee to stand for too long, are usually the main reasons for poor coffee. This is why many caterers opt for instant coffee or invest in equipment which can provide good quality instant or ground coffee at a uniform level of quality.

The caterer in search of an efficient coffee machine is faced with a vast and bewildering array of equipment and can spend thousands of pounds in the quest for the perfect cup. The simplest answer to the caterer's problems, apart from using instant coffee, is what is known as pour-over coffee. Ground coffee is supplied in 3oz sachets, enough for 10 cups of individual one cup containers which sit either on top of a jug or cup. Hot water is poured over the sachet and fresh coffee filters into the cup or jug.

The most generally used coffee machine is the Espresso coffee machine. Espresso coffee is made by forcing hot water under pressure through finely ground coffee in a filter tray. Espresso equipment costs are high but because of the way the coffee is made it uses less coffee than other machines and an average cup cost around 2.5p to 3p.

the latest and most impressive newcomer in the coffee making arena is a Swiss machine, which at the push of a button grinds coffee beans and makes filter coffee in any pre-set measured quantity, either by the cup or jug. The machine can produce up to 180 cups of coffee an hour at a cost of about 3p a cup.

Portion packs

Individual portion packs can at first seem uneconomical when, weight for weight, their contents usually cost twice as much as bulk products.

There are however other advantages that outweigh this cost imbalance, mainly in the area of waste, stock control and hygiene.

The major users of portion packs are the middle and economy market encompassing High-Street restaurants, cafes, snack bars, fast food units, take-aways and self-service restaurants.

Portion control is usually the prime consideration, essential in order to cut down on expensive wastage. Other factors such as saving in staff time, presentation and hygiene are also important considerations.

Tips, wages and staff meals

The giving of individual tips to waiting staff is a longstanding tradition in the catering trade. I recent years more and more establishments are following the trend of including a standard service charge in bills, either a set amount or calculated as a percentage of the food and wine bill.

The service charge is an American concept, evolving from the cashless society and extensive use of credit cards. Inclusion of a service charge offers the customer the opportunity to pay an inclusive bill with a card or indeed, a cheque. It is also, apart from avoiding the embarrassment of, say, not having cash for a tip, a boon to the business customer who pays the bill with a business credit card, thereby not having to fund a tip from personal funds.

A service charge is intended to ensure a uniform level of tipping, but there is of course no legal obligation for a customer to pay the service charge. It is an optional extra, but generally accepted without question and indeed some customers may give a personal tip to waiting staff in additional to paying a bill with service charge added.

The customer may assume the service charge to be a payment for service and that it will exclusively benefit the staff. But, it is true to say, that quite often the charge is not paid over to the staff in full and they may only receive a fixed percentage of the charge, the balance being retained by the proprietor. The catering trade has never been noted for good wages and tips are usually seen as a necessary supplement to low wages.

Wages vary widely between regions, with the best wages earned in London and the lowest in Scotland and Wales. However, there are indications to suggest that since 1987 employees in the lower paid areas have been able to obtain larger than average percentage increases.

The following are the results of an independent survey of wages in the catering sector for 1988.

Live out pay scales - Total

Job

Mean

£

Median

£

Low

£

Range

High

£

Head chef

214.95

201.00

85.80

 

548.00

Sous chef

155.76

150.00

80.00

 

298.00

Chef de partie

127.27

122.00

100.00

 

200.00

Chef

107.27

100.00

55.55

 

215.00

Commis

85.43

85.00

40.00

 

143.95

           
Restaurant Manager

176.89

170.00

96.38

 

500.00

Head waiter

128.83

125.00

59.58

 

250.00

Head wine waiter

126.29

119.00

76.38

 

250.00

Station head waiter

106.87

100.00

59.58

 

180.00

Waiter

87.83

85.00

37.50

 

118.80

Wine waiter

95.35

90.00

60.02

 

165.00

Supervisor

107.01

105.00

65.00

 

158.00

Commis

82.95

80.00

40.00

 

159.00

           
Head receptionist

125.18

120.00

38.00

 

350.00

Shift leader

107.86

103.36

72.00

 

175.00

Receptionist

94.06

90.00

38.00

 

154.00

           
Head housekeeper

124.83

113.00

39.00

 

387.25

Assistant housekeeper

105.37

95.50

54.00

 

230.00

Floor housekeeper

96.06

92.00

40.00

 

162.00

Room attendant

74.32

79.00

30.00

 

145.00

           
Head porter

126.54

120.00

80.00

 

257.00

Deputy head porter

115.32

120.00

68.00

 

167.00

Doorman

106.65

107.00

82.00

 

159.00

Porter

87.68

85.50

45.00

 

120.00

Night porter

108.92

105.00

45.00

 

288.00

           
Floor waiter

98.48

98.00

50.00

 

130.00

           
Bar manager

142.17

132.81

72.00

 

360.00

Head barman

119.96

115.00

80.00

 

290.00

Cocktail barman

102.45

100.00

77.00

 

163.00

Barman

90.03

87.00

37.50

 

135.00

Most establishments also give their staff free meals, which may be part of the menu choice, left overs or food cooked especially for staff consumption.

The qualify of staff meals vary enormously, but as general rule the small and medium sized restaurant with an inexpensive menu will allow their staff fairly decent meals, usually menu items. The large restaurants with expensive menus will normally cook separately for staff and quality can vary enormously.

Usually the waiting staff fare better for staff meals in better class restaurants, where staff need to be familiar with food on the menu. Waiting staff are in the front line of selling the food to the customer and they need to have knowledge of the menu items in order to describe contents and taste to the customer.

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