UNIT 1

Cost

Definition –

Cost is defined as a reduction in the value of an asset for the purpose of securing benefit or gain. In f&b service
terms it means the price for the goods and services, when goods are consumed and services are rendered.

Costing is defined as the ascertainment of cost relating to a suitable unit of output.

Cost control is defined as the process by means of which managers attempt to direct, regulate and restrain the
activities relating to cost in order to achieve the desired financial goal of the establishment.

Cost Control

Control may be defined as a process by means of which managers attempt to direct, regulate and restrain the
actions of people in order to achieve the desired goals of the establishment: financial success, preservation of
sound environment, etc.

Steps in cost control –

Establishment of standards

Measuring performance

Taking corrective action ( if required )

 Establishment of standards include establishment of procedures, standard purchase specification, standard

recipe, standard yield, etc. which are set as bench mark for performance.

 Measuring performance is done against the set standards; variance is checked to find how closely standards
are being followed.

 Ideal = Actual +/- Variance, Variance should be within set parameters/ tolerable limits. Corrective actions
are taken when the variance is beyond tolerable limits, which may include re-establishment of standards, if
required.

Objectives and Advantages

 To ascertain the profitability of each revenue producing department.

 To reveal the possible sources of economy.
 To facilitate the optimum and better utilization of resources.
 To obtain information for the adaptation of a sound pricing policy.
 To give an opportunity for comparison.
 To increase the efficiency of the employees.
 UNIT 1
 To reduce the wastage and pilferage.
 To allow flexibility in the selling price in case of the banquet functions this in turn results in higher
revenue.
 To prevent fraud by staff.
 To set example for the subordinates by the managers or leaders (i.e. the supervisors).

Methods of controlling food cost

I. Ordering perishable food in quantities for immediate use in preparations and service.
II. Ordering non perishables food in quantities which can be turned over fast to prevent spoilage.
III. Offering incentives to the staff for achieving sales target.
IV. Using standard recipes from which portions can be easily identified.
V. Close supervision and regular checks at strategic points to pin point area of variance and correct
them in food control cycle.
VI. Using modular equipments for storage, preparation and service.
VII. Portioning of dishes in the kitchen, by handing it over to the service staff.

Purchasing

These are the steps involved in purchasing process in order to ensure food cost control and avoid pilferage
so that food costs does not go high.

a) Aims -

The primary aim in purchasing of food is to obtain the best quality of merchandise, based on specifications
established at the most favorable price.

b) Purchasing staff -

Purchasing is a function concerned with the search, selection, purchase, receipt, storage and final use of a
commodity in accordance with the catering policy of the establishment. The person responsible for purchase is
also responsible for receiving, storing and issuing. In large hotels, there is a full time purchase manager/officer
responsible for all purchases – F&B commodities and non-consumable. In small hotels, the storeroom items (food)
are purchased by an assistant manager, and perishables (food) such as meat, poultry, fish, vegetables, etc. are
purchased by the chef.

c) Source of Supply –

A catering establishment depending on its size, type and style and also on the quantity and quality of commodities
required decides on the source of supplies, they may be –

i) direct purchase in cash from market,

ii) through suppliers – on contract & in cash,
iii) direct from wholesalers.

d) Selection of supplier -

In case of selection of a supplier, a great deal of exercise and detailed enquires have to be made –
 UNIT 1
i) details about the firm, to find its reputation,
ii) information from other customers about their product and services,
iii) recent price lists,
iv) trade terms and conditions such as cash discount, trade discount, etc.,
v) sample of products to check quality,
vi) a visit to the supplier’s firm,
vii) minimum order level,
viii) ordering procedures,
ix) delivery procedures,
x) part deliveries or standing orders,

On selection, the suppliers are put on an approved “suppliers’ list” and periodically they are evaluated on –

i) price performance
ii) quality performance
iii) delivery performance

e) Types of food purchased –

There are 2 categories –

i) Perishables – these are those items that have a short useful life after they are received. They are best to
be procured on a daily basis with 1-3 days stock in hand. E.g. – vegetables, dairy products, etc.

ii) Non – Perishables - these are those items that have a longer shelf life. They can be stored for weeks or
even months. E.g. – cereals, pulses, etc.

f) Quality Purchasing –
The quality of an item to be followed would be determined by the
Purchase Manager, Executive Chef and the F & B Manager as per
the catering policy, the menu requirements and its price range, which
should be stated in the Standard Purchase Specification (SPS).
The quality to be purchased should be stated in terms of grade or brand .

E.g. – Tomato Ketchup - Kissan

Prawn – Grade A

Food Quality

Factors for different commodities:

The food quality factor is mainly concerned with the food i.e.:
Texture
Composition
Keeping qualities
Flavor
Smell etc.
 UNIT 1
The food quality factors for certain commodities are as follows:

A) FRUITS&VEGETABLES
1. Count & weight
2. Wastage in terms of peel.
3. Shape and size
4. Color
5. Firmness
6. Smell
7. Taste

B) CANNED FOODS
1. Drained weight.
2. Density(juices etc)
3. Color
4. Taste and appearance

DEFINITION OF YEILD

It is the maximum usable amount that is obtainable from a particular product.

TESTS TO ARRIVE AT A STANDARD YEILD

 Usually yield tests are performed on food bought as purchased and need to be converted to ready to cook.
 Items received already proportioned need not undergo any yield test.(soybean, cashew etc)
 Some foods received ready to cook might need yield tests.

 Yield test tells us:

1. Yield of kg, lts, grams, portions&so on.
2. Cost per kg, lt, gm,&so on.

 Yield tests are pre control technique because we know the cost of the item and we can adjust the menu selling
price before serving the item.

The objective of yield testing is simply to discover the respective yields of whole range of commodities available
for any one purpose and to determine the unit cost concerned.

 Example of test to arrive at standard yield:

a) BUTCHERY TEST
1. Waste
2. Useable meat
3. Bones
4. No. of portions
5. Fat amount and color
6. Color of meat flesh
 UNIT 1
7. Bone structure
8. Color of bones

b) COOKING TEST
1. Cooking time
2. Cooking losses
3. Taste after cooking
4. Appearance after cooking
5. Flavor after cooking
6. Shrinkage

The above mentioned points are observed in these tests. These tests can be used to compare two examples. They
form a basis for standard purchase specification.

g) Definition of SPS

Standard Purchase Specification (SPS) is concise descriptions of quality, size, weight or count factors desired for a
particular item.

An SPS must contain –

i) Definition of each item,

ii) Grade or brand name of the items,
iii) Size, weight or count,
iv) Unit against which prices should be quoted,
v) Special note for the commodity,
vi) Photograph of the ideal / standard item, e.g. – table apple, cherry tomato.

Objectives of SPS –

i) to establish a suitable buying standard for a particular commodity for the catering establishment,

ii) to furnish to the suppliers in writing in specific terms the requirements of the catering establishment,
iii) to help in deciding the price of a commodity,
iv) to obtain a standard product,
v) to measure the performance against the standard product.

Advantages of SPS –

i) establishing a buying standard of a commodity so that a standard product is available for the customer,
ii) inform the supplier in writing, by drawing, or with a photograph or describing precisely what is
required,
iii) provides detailed information to the receiving department and store as to the standard of foods to
accept,
iv) makes everyone aware of the differences that can occur because of
the difference in size, weight, quality and quantity of a product.
v) the specifications act as an aide memoire to all concerned of what
was agreed.
 UNIT 1
h) Purchase Procedure

The purchase procedure will depend upon he nature, size, standard, location of the establishment and the forecast
of future requirements.

The purchase procedure has the following steps –

i) preparing standard purchase specification

ii) contacting new suppliers
iii) taking quotations from both new and approved suppliers
iv) selecting suppliers
v) discussing and deciding delivery needs with the suppliers
vi) placing purchase order form.

 Sources of supply

 A establishment depending upon its size, type and style and also on its quantity and quality of commodities
required decides its sources of supply.
 It may be direct purchase in cash form market or suppliers on contract basis or directly from the whole seller.
 In case of selection of a supplier a great deal of exercises and detailed enquires have to be made on selection,
the supplier are put on an approved suppliers list and periodically they are evaluated on price, quality and
delivery performances.

Purchasing Methods –

i) Contract Purchasing

A contract is entered with a supplier for the commodities to be supplied at regular intervals, usually at an agreed
upon price which is advantageous for both.

a) The specific period contract - it determines the source of supply and the price of goods for a stated period i.e.
for 3 to 6 months suitable for items which has fairly stable price like bread, butter, milk etc.
b) Specific quality contract - it aims to secure continuity of supply of a given quality of an essential item of an
agreed price over a particular trading period- suitable for fruits, vegetables etc.

ii) Periodical Purchasing

The requirements of the establishment are periodically estimated and orders are placed on a weekly /
fortnightly / monthly basis. This is suitable for groceries.

iii) Daily Market List / Daily Market Quotation

This method is used for purchasing perishables on a daily basis. A daily market list is prepared by the executive
chef on the basis of quick stock taking of food. On receipt of the ‘Daily Market List’ the purchase officer contacts
approved suppliers for their prices and then orders for the supplies.
 UNIT 1
iv) Cash & Carry

It is purchasing from the market at a competitive price, and the buyer can personally check the quantity and quality
of each item. The purchaser has to pay in cash and has also to arrange for the goods to be transferred to the
establishment.

v) ‘Paid Reserve’

In this the caterer buys in advance a large quantity of items like beef, jumbo prawns, etc. to cover the needs of
future months and stocks of which is kept with the supplier, and the supplier is paid for this. The caterer
requisitions his requirements from the supplier.

vi) Cost Plus

In this case, the approved supplier is paid exactly the same price that he has paid for the commodities plus an
agreed percentage to include the cost of handling, delivery charges and a margin of profit. Suitable for welfare
catering establishments.

vii) One Stop Shopping / ‘Total Supply’

There are some suppliers who are able to offer a full supply service of all commodities. The advantage of this
system is that the establishment has to negotiate with one supplier, a reduced volume of paper work and fewer
deliveries.

viii) Centralized Purchasing

Suitable in chain operations. In this system the requirements of each individual unit is relayed to a central office.
The central office decides the total requirements of all units and then makes total purchases either, for delivery to
the individual units by he dealer, or, for centralized delivery.

ix) Sealed Bids / Tender Purchase

In this procedure sealed quotations are required from one or more suppliers and orders are placed where the terms
are of best advantage to the buyer, after all elements of price, quality, yield and service are considered. For a Govt.
institute the offer goes to the lowest bidder.

x) Standing Order

The supplies of certain food items (especially of highly perishables like – milk, ice-cream, bread, etc.) can be
asked for a supply without securing price quotation first. However, it is very important that the latest prices of
these items are available to the person when checking the bill for these items.

Additional Methods

Apart from the above mentioned method of food purchase the following methods are also applicable in hotels:

EMERGENCY PURCHASE
To purchase an item on an emergency basis, a risk purchase form has to be filled up& sent to the supplier.
 UNIT 1
TOTAL SUPPLY METHOD
There are some suppliers who are able to offer supply service of all the commodities. The advantage of this system
is that the company has to negotiate with one supplier & there is a reduced volume of paper work.

PURCHASE ORDER FORMS

It is a complete record of all orders made and it helps the receiving department to take necessary action for any
foodstuffs arriving late.
The purchase order is made in 1 + 5 copies…

Original copy--- to the supplier

1st copy ------ to accounts
2nd copy ------ to purchase department
3rd copy ------ receiving department
4th copy ------ indenting department
5th copy ------ master copy.

j) Ordering Cost –

it is the cost incurred in placing an order with a supplier, e.g. – stationery, manpower, time, transportation, etc.

k) Carrying Cost –

It is the cost incurred in making arrangement for the commodities to be delivered to the establishment, e.g. –
manpower, transportation, etc.

l) Economic Order Quantity (EOQ) –

The quantity, which is most economical to order & to stock considering all factors bearing on the situation. the
basis of the EOQ is the usage rate, ordering cost and the time taken. Basically the focus is on maintaining optimum
levels of each units are there in each lot and the speed at which they are used up from the stores.

E.O.Q = (2A x Cp) / Sc.

Where A = Annual Usage, Cp= Cost of Purchase, Sc=Storage Cost (per unit).

The size of the economic order quantity depends upon

 Inventory Carrying Cost.
 Cost of Purchasing.
 Consumption
 Interest on Capital
 Quantity discount.

Sometimes Economic Order Quantity is called Re-Order Quantity.

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XYZ HOTEL LTD
PURCHASE ORDER FORM

No....... For…….. Date ……. Store dept

Reg.no……….

To (suppliers)
QUANTITY DESCRIPTION PRICE TOTAL
(all deliveries accepted
subject to count, wt., and
specifications)

TOTAL=

ALL GOODS DELIVERED The acceptance of this order is

TO……………….. acceptance of all conditions herein.
ON……………….
SIGNATURE
(Purchase Officer)

..................................................THE END..................................................
 UNIT 2

Receiving Control

a) Aims –
To ensure one gets the commodities that one has ordered –
i) in the right quality,
ii) in the right quantity and
iii) receive at the right time.

b) Receiving Staff –

i) In small / medium establishments – it is the same person who does purchasing is responsible for
receiving.
ii) In bigger establishments – there is a receiving personnel / clerk with assistants takes care of all kinds
of receiving.

The Receiving Personnel should –

i) be able to read & understand purchase orders and invoices,

ii) have knowledge of weights and measures,
iii) have good knowledge of quality of food,
iv) be good at performing calculations.

c) Facilities and Equipments –

 There should be a hassle free loading and unloading dock with an inclined plane.
 When the storage area is away or on different floor than receiving then an elevator is desirable.
 Weighing scale
 Trolleys
 Crates

Records maintained at the receiving department:-

a) Goods received book
b) Daily receiving report
c) Meat tags
d) Credit note

Documents given by the supplier in receiving control:-

a) Bills/invoices
b) Delivery notes
 UNIT 2

Receiving Procedure –

i) All goods are received at the centralized receiving department within specified time only, under the
supervision of the receiving clerk.

ii) The receiving clerk checks for quality (against SPS), quantity, price and time (against purchase order) and
matches with the invoice.

iii) When everything is in order he signs on the copy of invoice or delivery note and returns it to the
supplier’s man.

iv) If there is any discrepancy – shortage / goods not up to the set standards – a credit note is made and handed
over to the supplier’s man.

iv) The invoices are posted on the receiving sheet / daily receiving report (DRR) / goods receiving report
(GRR). Then the invoice and the receiving sheet are sent to the F&B Controller’s office for checking.
v) The goods are sent to appropriate sections – stores or departments.

 When receiving directs / perishables a chef of the concerned kitchen must be present at the receiving area.

Blind Receiving –

When there is no document (invoice / delivery note) from the supplier, instead it is directly send to the accounts
and a list of articles is send along with goods. the receiving clerk has to do his job more carefully preparing a
Blind Receiving Report, and weighing and counting all good as per the purchase order and checking their
qualities as per SPS with the help of list given by supplier. The receiving clerk then sends the complete list to the
accounts department.

Assessing the performance and efficiency of receiving department:-

a) By strict supervision of the receiving department’s recordkeeping and paperwork.

b) To ensure that receiving schedule are strictly followed.
c) To evaluate the receiving clerk’s performance by blind receiving.

Frauds in receiving department.

a) Receiving department accepting lower quality commodities which is not acceptable as per standard purchase
specification.

b) Receiving department receiving less quantity of a commodity. Thus not following the purchase order.

c) Receiving department not following the delivery time schedule.

 UNIT 2

Brief description of the documents –

a) Invoice/delivery note – a document containing detailed information about the food deliveries, it is always in
duplicate, the duplicate copy is signed and returned by the receiving clerk to the supplier’s man and the original
is sent to accounts for billing.

b) Credit memo/ Credit memorandum / Credit Note - When there is a shortage or goods not as per SPS, the
receiving clerk writes a credit memo/ credit memorandum / credit Note mentioning details and requesting the
supplier to remove the goods mentioned in this from the bill giving the reason for returning along with the
quantity.

c) Meat Tag – These are the tags put on the butchery items mentioning all details of cuts, weights, price etc.
when the item is issued then the issuing date is put on it and copy is sent to two places one to f&b control and the
other to the stores.

It is required because –

i) To have control over expensive food, like prawns, mutton, etc.

ii) Assists in controlling the stock levels of the items,
iii) Helps in yield testing,
iv) It helps in efficient rotation of stock.
d) Goods received book/daily receiving report:-

Whatever goods come are registered here and then sent to the stores.

XYZ SUPPLIERS LTD

INVOICE
No. ----------- Date –

To, ABC HOTELS LTD

Sl Description Quantity Unit Price Amount
No.

Less Discount
TOTAL

----------------------------------
SIGNATURE
 UNIT 2
BLIND RECEIVING REPORT
XYZ Hotel Date
No.
Stock no. Quantity Description Unit Remarks

Receiving Clerk
Signature

DELIVERY NOTE
To A B C Supplier
XYZ Hotel Date
No.
Order No. Quantity Description Unit Value Remarks

Delivered by Receiving by
 UNIT 2

CREDIT NOTE

To XYZ Hotel Date

No
A B C Supplier

Please issue credit note for items listed below

Quantity Unit Item Cost (unit) Cost (total)

Delivered by Receiving by

Copy to - F&B Controller

Accounts

A-MEAT
B-FISH
C-POULTRY
D-VEGETABLES
E-FRUITS
F-DAIRY PRODUCTS
G-BREADS
H-BEEF

GOODS RECEIVING SHEET – FOOD

Supplier Delivery Dry Wet stock Subtotal Tax Total

note/invoice stores wet stock
no.
A B C D E F G H

Grand
Total

Receiving clerk
 UNIT 2

MEAT TAG

XYZ Hotel

ITEM NO.
CUT
TOTAL WEIGHT
TOTAL VALUE
COST/KG
SUPPLIERS
DATE RECEIVED
DATE ISSUED

F&B CONTROL COPY STORE KEEPER

…………………………………Tear Here…………………………………………….

MEAT TAG

XYZ Hotel

ITEM NO.
CUT
TOTAL WEIGHT
TOTAL VALUE
COST/KG
SUPPLIERS
DATE RECEIVED
DATE ISSUED

F&B CONTROL COPY STORE KEEPER

 UNIT 2

Storing & Issuing Control

 Aims of Store Control

i) To ensure that an adequate supply of food materials for the immediate need of the operation are available
at all times,
ii) To prevent losses through spoilage or pilferage,
iii) To have minimum working capital.

Storing Procedure / Control

After Receiving

--------------------------------------------------------------

Directs / Perishables Dry Stores / Non- Perishables

Kitchen Stores

Utilized under the able supervision of Quantities entered into

Executive Chef Storeroom register

Goods are stored in the

appropriate places &
bin cards are updated

Issued to various departments on receiving requisition

 Layout and Facilities in a Storeroom -

The layout of the store should be such that it minimizes the distance walked by the storekeeper and the
inventory list be printed in the same order in which items are placed in the store. This will facilitate the quick
and efficient stock taking. Items, which are issued daily, must be located near door and remainder being
arranged in a logical sequence. Commodities should be grouped together and each of them arranged into
sections.
 UNIT 2

Facilities in storeroom –

i) Appropriate storing space

ii) Appropriate temperature & adequate lighting
iii) Proper storing equipments, like shelves, containers, refrigerators, cold room, etc. must be available,
iv) Proper issuing equipments, like weighing scales, measuring containers, trolleys, etc. must be
available,
v) Proper security,
vi) Proper pest control,
vii) Proper sanitation.

 Arrangements of food –

i) Items, which are issued daily, must be located near door and remainder being arranged in a logical
sequence.
ii) Groceries and canned goods are stored on shelves by groups like –

1. Tea, Coffee, etc

2. Spices
3. Condiments
4. Cereals
5. Nuts
6. Syrups, etc.

iii) Canned goods must be checked for spoilage – one must watch out for swells, leaks, tampering or
improper count – matter must be reported to the F&B Controller.
iv) Pricing of groceries – all groceries are priced and marked before putting on shelves. Receiving dates must
be mentioned (for FIFO) and some put a special label or a sticker to stop pilferage.
v) Expensive groceries - like caviar, saffron, truffles, etc. are placed under lock and key. The keys are with
the storekeeper and only a few can access it.

Job description of store room clerk:-

Job title:-store room clerk

Department:-store
Reports to:-storekeeper
Responsible for:-subordinates equipments
Scope (of promotion):-Asst. storekeeper/Storekeeper

Responsibilities:-

1. To upkeep and maintain the store room register.

 UNIT 2

2. Assist store-keeper in all his responsibility.

3. Upkeep bin cards to know stock in hand.
4. Assist the store-keeper in proper storing and issuing of goods.
5. Assist the store-keeper in finding the cost of commodities.
6. To ensure hygiene and cleanliness in store.

Location of storage facilities

 It should be located near to both receiving and usage area.

 The store should be at same level as the receiving area.
 Generally the store room is located at the back of building which would enable the good to come right in.

Security

i) Adequate security arrangements are of utmost importance.

ii) Unauthorized personnel are not allowed.
iii) Keys of the storeroom are issued to individuals designated by the chief accountant after entering into a
Key Log Book.
iv) Proper strong locks to be used to lock the storeroom once it is closed.

Stock Control

 Goods are stored in a manner so that FIFO can be followed.

 Each item stored is entered in the storeroom register, and subsequently the bin card is updated.
 Each item issued is entered in the storeroom register and issued to authorized person only, on receiving a
requisition, and subsequently the bin card is updated.

Issuing Control

g. Aims Issuing Control -

i) To ensure the proper authorization for the release of merchandise,

ii) To account properly for daily food issues.

h. Issuing Procedure / Control

i) All items are issued against requisitions prepared and signed by authorized person,
ii) The requisitions are pre-numbered and are in triplicate, the copies are distributed as follows – original –
store, duplicate – department, triplicate – book copy,
iii) The storekeeper is intimated about persons who can sign and authenticate requisitions.
iv) The storeroom register is updated after issuing of goods.
 UNIT 2

Requisition:-

1. All items are issued against requisition prepared by authorized person.

2. The requisitions are in triplicate.
3. The original and carbon copy are in different colors.
4. The top copy goes to store, 2nd copy to the department concern.
5. The third copy is the book copy.

Transfer note:-

 For inter or intra departmental transfers.

E.g.:- 1. Lemon from kitchen to bar.
2. Fish from main kitchen to coffee shop kitchen.
For this transfer note is generated.
 Transfer note is generated in duplicate copy.
 Fist copy goes to supplying department.
 Second copy remains with receiving department.

i. Stock Taking -

There are two types of stock taking-

i) Perpetual Stock Taking – it is the stock registered in the storeroom register or

the book stock.

ii) Physical Stock Taking – it is stock taking by physically counting all goods
in the storeroom and noting them on a physical inventory sheet.

Perpetual stock taking/perpetual inventory procedure-

It is also known as continuous stock taking. The essential features of this type of stock taking is that the number
of items of ingredients and materials which are used over the past period of few days or fortnight are counted
and checked at frequent intervals and physical balance of stock is compared with the balance shown by bin cards
and stock books. Thus, a perpetual inventory is an up to date record of all purchases and store room issues along
with their balance for each commodities.
 UNIT 2

Physical Stock Taking / Physical Inventory Procedure –

It is generally done on the last day of the trading period (a trading period is of 28 days – thus there are 13 trading
periods in a year) or it can be done once a month. It is generally done by two persons – one from the accounts
department and the other from F&B Controls or Purchase, one of them count the goods and other note it on the
physical inventory sheet. This is done to ascertain the actual value of goods and compare with its book value. A
report is generated and sent to GM, F&B Manager, Accounts, Purchase, Executive Chef and Storekeeper.

Stock levels:-

There are three basic Stock levels.

A) Maximum stock level:- this is the upper level beyond which items must not be stocked. this level is decided
after considering consumption frequency ,durability of items, availability.

B) Minimum stock level:- it is the level of stock to be maintained at all times so that production and sales do not
get obstructed due to want of material and ingredients.

C) Recorded level of stock:- between the maximum and minimum level a, point is set as the recorded level, at
this point the orders for fresh supplies must be placed with suppliers .to ensure that the stock of ingredients arrive
before the existing stock level fall below the minimum level.

Comparison of actual physical inventory and book value:-

Sometimes there is a difference between the actual physical inventory and book stock of a particular item. the
causes of difference are as under:

1. Change in volume due to evaporation or absorption of moisture.

2. Impossibility of breaking up or cutting bulk without loss.
3. Shortage in actual inventory due to pilferage and careless handling.
4. Careless measurement at the time of receiving.

Records Maintained -

i) Bin Card – kept with the goods on their shelves and updated on receiving & issuing goods.

ii) Stock Record Card – same as bin card

iii) Food Storeroom Requisition – it is for requisition of goods from store.

iv) Kitchen Transfer – it is for intra or interdepartmental transfer of goods, like from main kitchen to coffee
shop kitchen, from coffee shop kitchen to bar, etc.
 UNIT 2

v) Physical Inventory Sheet – it is for noting quantity of goods during physical stock taking.

Bin card

ABC Hotel Ltd

Commodity: Re-order point: Supplier:
Max stock:
Min stock: Bin no. : Code no. :

Date Ref In Out Bal Date Ref In Out Bal

STOCK RECORD CARD

ABC HOTELS LTD.

BIN NO-
SUPPLIER-
COMMODITY-
REORDER QUANTITY-

REORDER LEVEL-

DATE REF UNIT COST RECEIVED ISSUED BALANCE

NO. RS. NO. RS. NO. RS.
 UNIT 2

PERPETUAL INVENTORY CARD

ABC HOTELS LTD.

ITEM- COST-
SIZE- PAR STOCK-
SUPPLIER- RE-ORDER POINT-

DATE ORDER NO. IN OUT BALANCE

FOOD STORE ROOM REQUISITION

DELIVERY DATE- INDENT NO-

DEPARTMENT-

SL NO. STOCK ITEM SIZE QNTY QNTY UNIT TOTAL

NO. REQUIRED ISSUED COST COST

REQUESTED BY- INDENT MADE BY- (CONTROLLER)

DELIVERED BY - RECEIVED BY-

 UNIT 2

KITCHEN TRANSFER NOTE

NO-

DATE-

FROM-
SL NO. ITEM SIZE QNTY COST
TRANSFER
UNIT TOTAL

REQUESTED BY- INDENT MADE BY-

DELIVERED BY- RECEIVED BY-

(COST CONTROLLER)
 UNIT 2

INVENTORY SHEET-
ABC HOTELS LTD.

PHYSICAL
INVENTORY PAGE NO-
AS ON-
VALUE
VARIANCE ISSUE
STOCK UNIT OF
PHYSICAL VARIANCE INVENTORY VALUE OF
SL NO. ITEM UNITS IN PRICE MONTH REMARKS
STOCK + - RS. P. + - MONTH
HAND RS. P. ISSUES
RS P. QNTY
RS. P.

..................................................THE END..................................................
 UNIT 3
INVENTORY CONTROL

The main objective of inventory control is operational as well as financial.

The operational objectives mean that food materials should be available in sufficient quantity so that work is not
disrupted for want of inventory.

The financial objective means that investment in inventory should not remain idle for a long period of time &
minimum working capital should be locked in it.

STOCK LEVEL DETERMINATION

Stock levels are determined keeping in mind the following:

 Usage
 Lead time
 Economic order quantity (EOQ)

Various Stock Levels

Re order level (ROL): Is a point lying between maximum and minimum levels. This is a point will usually
be slightly higher than minimum stock to cover abnormal usage & delivery delays.

Minimum stock level:

The minimum stock level is that level of any food item below which it should not be allowed to fall.

MIN STOCK= (ROL - AVG CONSUMPTION) X AVG RE ORDER PERIOD

Maximum Stock level: The maximum stock level above which stock of any item should not allowed exceeding.

MAX STOCK = (ROL - MIN CONSUMPTION) X MIN REORDER PERIOD

Considerations are:
 Rate of consumption
 Reorder level
 Delivery time
 Capital
 Storage life
 EOQ
 Storage space.
 UNIT 3
DANGER LEVEL: Is a level below minimum level. When stock reaches danger level urgent action is
necessary.

DANGER LEVEL = AVG CONSUMPTION X MAX REORDER PERIOD.

ECONOMIC ORDER QUANTITY: The quantity which is most economical to order & to stock considering all
factors bearing on the situation

This can be calculated by the following formula:

Q = √2AS/I

where Q stands for quantity per order ;

A stands for annual requirements of an item in terms of rupees;
S stands for cost of placement of an order in rupees; and
I stand for inventory carrying the cost per unit per year in rupees.

The size of the economic order quantity depends on:

 Inventory Carrying Cost.
 Cost of Purchasing.
 Consumption
 Interest on Capital
 Quantity discount. Sometimes economic order quantity is called Re-order quantity

TECHNIQUES OF THE INVENTORY CONTROL

Some of the most important techniques of the inventory control system are
1. Setting up of various stock levels.
2. Preparations of inventory budgets.
3. Maintaining perpetual inventory system.
4. Establishing proper purchase procedures.
5. Inventory turnover ratios.
6. ABC analysis.

1. Setting up of various stock levels:

To avoid over-stocking and under-stocking of materials, the management has to decide about the maximum
level, minimum level, re-order level, danger level and average level of materials to be kept in the store.
These terms are explained below:
(a) Re-ordering level:
It is also known as ‘ordering level’ or ‘ordering point’ or ‘ordering limit’. It is a point at which order for supply
of material should be made.
This level is fixed somewhere between the maximum level and the minimum level in such a way that the
quantity of materials represented by the difference between the re-ordering level and the minimum level will be
sufficient to meet the demands of production till such time as the materials are replenished. Reorder level
 UNIT 3
depends mainly on the maximum rate of consumption and order lead time. When this level is reached, the
storekeeper will initiate the purchase requisition.
Reordering level is calculated with the following formula:
Re-order level =Maximum Rate of consumption x maximum lead time
(b) Maximum Level:
Maximum level is the level above which stock should never reach. It is also known as ‘maximum limit’ or
‘maximum stock’. The function of maximum level is essential to avoid unnecessary blocking up of capital in
inventories, losses on account of deterioration and obsolescence of materials, extra overheads and the temptation
to thefts etc. This level can be determined with the following formula. Maximum Stock level = Reordering level
+ Reordering quantity —(Minimum Consumption x Minimum re-ordering period)
(c) Minimum Level:
It represents the lowest quantity of a particular material below which stock should not be allowed to fall. This
level must be maintained at every time so that production is not held up due to the shortage of any material.
It is that level of inventories of which a fresh order must be placed to replenish the stock. This level is usually
determined by the following formula:
Minimum Level = Re-ordering level — (Normal rate of consumption x Normal delivery period)
(d) Average Stock Level:
Average stock level is determined by averaging the minimum and maximum level of stock.
The formula for determination of the level is as follows:
Average level =1/2 (Minimum stock level + Maximum stock level)
This may also be expressed by minimum level + 1/2 of Re-ordering Quantity.
(e) Danger Level:
Danger level is that level below which the stock should under no circumstances be allowed to fall. Danger level
is slightly below the minimum level and therefore the purchases manager should make special efforts to acquire
required materials and stores.
This level can be calculated with the help of following formula:
Danger Level =Average rate of consumption x Emergency supply time.
(f) Economic Order Quantity (E.O.Q.):
One of the most important problems faced by the purchasing department is how much to order at a time.
Purchasing in large quantities involve lesser purchasing cost. But the cost of carrying them tends to be higher.
Likewise, if purchases are made in smaller quantities, holding costs are lower while purchasing costs tend to be
higher.
Hence, the most economic buying quantity or the optimum quantity should be determined by the purchase
department by considering the factors such as the cost of ordering, holding or carrying.

2. Preparation of Inventory Budgets:

Organisations having huge material requirement normally prepare purchase budgets. The purchase budget should
be prepared well in advance. The budget for production and consumable material and for capital and
maintenance material should be separately prepared.
Sales budget generally provide the basis for preparation of production plans. Therefore, the first step in the
preparation of a purchase budget is the establishment of sales budget.
 UNIT 3
As per the production plan, the material schedule is prepared depending upon the amount and return contained in
the plan. To determine the net quantities to be procured, necessary adjustments for the stock already held is to be
made.
They are valued at the standard rate or current market. In this way, material procurement budget is prepared. The
budget so prepared should be communicated to all departments concerned so that the actual purchase
commitments can be regulated as per budgets.
At periodical intervals, actuals are compared with the budgeted figures and reported to management which
provides a suitable basis for controlling the purchase of materials,

3. Maintaining Perpetual Inventory System:

This is another technique to exercise control over inventory. It is also known as an automatic inventory system.
The basic objective of this system is to make available details about the quantity and value of stock of each item
at all times. Thus, this system provides a rigid control over stock of materials as physical stock can be regularly
verified with the stock records kept in the stores and the cost office.

4. Establishing Proper Purchase Procedures:

A proper purchase procedure has to be established and adopted to ensure necessary inventory control. The
following steps are involved.
(a) Purchase Requisition: It is the requisition made by the various departmental heads or storekeeper for their
various material requirements. The initiation of purchase begins with the receipts of a purchase requisition by the
purchase department.
(b) Inviting Quotations: The purchase department will invite quotations for supply of goods on the receipt of the
purchase requisition.
(c) Schedule of Quotations: The schedule of quotations will be prepared by the purchase department on the basis
of quotations received.
(d) Approving the supplier: The schedule of quotations is put before the purchase committee who selects the
supplier by considering factors like price, quality of materials, terms of payment, delivery schedule etc.
(e) Purchase Order: It is the last step and the purchase order is prepared by the purchase department. It is a
written authorisation to the supplier to supply a specified quality and quantity of material at the specified time
and place mentioned at the stipulated terms.

5. Inventory Turnover Ratio:

These are calculated to minimise the inventory by the use of the following formula:
Inventory Turnover Ratio = Cost of goods consumed/sold during the period/Average inventory held
during the period
The ratio indicates how quickly the inventory is used for production. Higher the ratio, shorter will be the duration
of inventory at the factory. It is the index of the efficiency of material management.
The comparison of various inventory turnover ratios at different items with those of previous years may reveal
the following four types of inventories:
(a) Slow moving Inventories: These inventories have a very low turnover ratio. Management should take all
possible steps to keep such inventories at the lowest levels.
(b) Dormant Inventories: These inventories have no demand. The finance manager has to take a decision
whether such inventories should be retained or scrapped based upon the current market price, conditions etc.
 UNIT 3
(c) Obsolete Inventories: These inventories are no longer in demand due to their becoming out of demand. Such
inventories should be immediately scrapped.
(d) Fast moving inventories: These inventories are in hot demand. Proper and special care should be taken in
respect of these inventories so that the manufacturing process does not suffer due to the shortage of such
inventories.
Perpetual inventory control system:
In a large b essential to have information about the continuous availability of different types of materials and
stores purchased, issued and their balance in hand. The perpetual inventory control system enables the
manufacturer to know about the availability of these materials and stores without undergoing the cumbersome
process of physical stock taking.
Under this method, proper information relating to receipt, issue and materials in hand is kept. The main objective
of this system is to have accurate information about the stock level of every item at any time.
Perpetual inventory control system cannot-be successful unless and until it is accompanied by a system of
continuous stock taking i.e., checking the total stock of the concern 3/4 times a year by picking 10/15 items daily
(as against physical stocktaking which takes place once a year).
The items are taken in rotation. In order to have more effective control, the process of continuous stock taking is
usually undertaken by a person other than the storekeeper. This will check the functioning of storekeeper also.
The items may be selected at random to have a surprise check. The success of the system of perpetual inventory
control depends upon the proper implementation of the system of continuous stock taking.

6. ABC analysis:
In order to exercise effective control over materials, A.B.C. (Always Better Control) method is of immense use.
Under this method, materials are classified into three categories in accordance with their respective values.
Group ‘A’ constitutes costly items which may be only 10 to 20% of the total items but account for about 50% of
the total value of the stores.
A greater degree of control is exercised to preserve these items. Group ‘B’ consists of items which constitute 20
to 30% of the store items and represent about 30% of the total value of stores.
A reasonable degree of care may be taken in order to control these items. In the last category i.e. group ‘Q’ about
70 to 80% of the items is covered costing about 20% of the total value. This can be referred to as a residuary
category. A routine type of care may be taken in the case of the third category.
This method is also known as ‘stock control according to value method’, ‘selective value approach’ and
‘proportional parts value approach’.
If this method is applied with care, it ensures a considerable reduction in the storage expenses and it is also
greatly helpful in preserving costly items.

Pricing Of Commodities:

In a department, there must be a system established so that the department can be fairly charged for what it has
requisitioned for its use. The method of pricing the food issued depends mainly on the type of commodities in
question.
Perishables:
In the case of perishable commodities as already stated they frequently go directly to the kitchen as direct issues
and priced against the actual purchase price of the commodities. When however a perishable store system is
 UNIT 3
operated the daily issues can be more effectively controlled and a much more accurate gross profit calculated for
each day some discrepancy do occur under this method at times, e.g. the butchery department will draw food
items from the stores, manufacture them into a processed item and returned it to the stores to be issued at a later
date. The method of costing here must be clearly worked out, as often – central butchery departments are
required to be self-supporting and also the purchasing officer and food and beverage manager having previously
decided it was cheaper and more efficient to have a butchery department in the establishment, require to measure
than previous make or buy decision at periodic intervals. Perishables food may be priced out of in any methods
by which non-perishables and be priced in some instants the method used would be restricted to the large
establishment because of the high degree of skill necessary to install and control.
Non-perishables:
In this case, one of several different methods may be adopted.
1. Actual Purchase Price: This may be applied to items, which are infrequent purchase, and of which only a
small stock is held and also for slow-moving items e.g. items costing Rs. 5/- each are issued at Rs. 5/- each.
2. Simple Average Price: This may be applied to items, which have a fluctuating market price. When a new
purchase is made a new average price should be calculated e.g. 10 times are purchased in a week at Rs. 5/- each
and a similar 12 items are purchased in week 2 at Rs. 4/- each. If any of the 22 items in stock were to issue they
would be at Rs. 4.5/- each.
3. Weighted Average Price: This is a more accurate method which is sometimes used, the quantities are taken
into account as well as the price, thus giving a more accurate average price.
E.g.
10kg at Rs. 15/- = Rs. 150/-
20kg at Rs. 20/- = Rs. 400/-
Total 30kg = Rs. 550/-
WAP 550kg/30 = Rs. 18.3/-

4. Inflated Price: Here the goods are issued at cost plus, say 10 or 15 % to recover the cost of handling and
storage charged.
5. Standard Price: A Standard Price is to decide on for a given period, usually 3-6 months and the positive and
negative variances recorded when purchases vary in price from the standard. This method of pricing will assist
measuring the performance of the kitchen accurately by means of the kitchen gross profit, as the typical excuse
for a poor kitchen performance, a loss gross profit because of high prices for commodities is no.1.
6. Last In First Out (LIFO): This may be applied to items which have a fluctuating market price. This assumes
that issues will be made with the normal rotation of stock, but priced out at the latest purchase price for the items.
7. First In First Out (FIFO): This may also apply to items which do not have a fluctuating price. This assumes
that issues will be from the earliest purchases and priced accordingly.

COMPARISON OF ACTUAL PHYSICAL INVENTORY AND BOOK VALUE

Sometimes there is a difference between the actual physical inventory and book stock of a particular item. the
causes of difference are as under:
1. Change in volume due to evaporation or absorption of moisture.
2. Impossibility of breaking up or cutting bulk without loss.
3. Shortage in actual inventory due to pilferage and careless handling.
4. Careless measurement at the time of receiving.
 UNIT 3
Records Maintained

i) Bin Card – kept with the goods on their shelves and updated on receiving & issuing goods.
ii) Stock Record Card – same as bin card
iii) Food Storeroom Requisition – it is for requisition of goods from the store.
iv) Kitchen Transfer – it is for intra or interdepartmental transfer of goods, like from main kitchen to coffee
shop kitchen, from coffee shop kitchen to bar, etc.
v) Physical Inventory Sheet – it is for noting quantity of goods during physical stock taking.

SALES CONTROL

Introduction

To control the revenue of a unit, particular attention must be paid to the major factors which can have an
influence on the profitability. Therefore it is essential to control the main factors which can affect the revenue of
a business, such as the menu-beverage list, the total volume of food and beverage sales, the sales mix, the
average spend of customers in each selling out-let at different times of the day, the number of covers served and
the gross profit margins.

It is important to note, particularly in commercial operations that somewhere in the total con trol system there is
a need for the accountability of what has been served to the customer and the payment for what has been issued
from the kitchen or the bar.
The payment for food and beverage may be made in many forms such as cash, foreign currency, credit cards,
cheques, travellers’ cheques, luncheon type vouchers and signed bills.

All staff handling cash should be adequately trained in the respective company’s methods. It is a common
practice for a cashier’s or waiter’s handbook/manual to be produced so that an established procedure may be
followed with the specific aim of ensuring that cash security is efficiently carried out at all times.

There are two basic approaches to recording and controlling food and beverage sales.

1. A manual system: Which is commonly used in small and in exclusive type catering units.
2. An automated system: Which is commonly used in units with several outlets, in units with a very high volume
of business and in up-to-date companies with many units.

Manual System

Sales Checks

One of the simplest steps to take when attempting to establish sales control-procedures is to require that each
item ordered and its selling price are recorded on a waiter’s sales check. Using some form of a check system
serves the following functions:
1. To remind the waiting staff of the order they have taken.
 UNIT 3
2. To give a record of sales so that portion sales and sales mixes and sales histories can be compiled.
3. To assist the cashier and facilitate easy checking of prices charged.
4. To show the customer a detailed list charges made.

An additional aid is to use numbered checks and control these tightly, recording all cancelled and missing
checks.
It is more common to find duplicate or triplicate checks being used as an aid to control for the following reasons:

They provide the kitchen, buffet, or bar with a written record of what has been ordered and issued.
1. They authorize the kitchen, buffer, or bar to issue the food and /or beverage.
2. They provide the opportunity to compare the top copy of the check with the duplicate to ensure that all the
goods had been issued has been charged and paid for.

Problems of the manual system

In brief, the basic problems of controlling any food and beverage operation are:
1. 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.
2. The number of items (food and beverage) held in stock at any time is high.
3. A large number of finished items are produced from a combination of the large number of items held in stock.
4. The number of transactions taking place on an hourly basis in some operations can be very high.
5. To be able to control the operation efficiently, management ideally requires control in formation of many types
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-today operational problems of a manual system are many and include such common problems as:

1. Poor handwriting by the waiting staff resulting in:

A. Incorrect order given to the kitchen or dispense bar

B. Wrong food being offered to the customer.
C. Incorrect prices being charged to the customer.
D. Poorly presented bill for the customer, etc.

2. Human error can produce such mistakes as:

A. Incorrect prices charged to items on a bill

B. Incorrect additions to a customer’s bill
C. Incorrect service charge made
D. Incorrect government tax (for example GST) charge made.

3. 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 departments. This is not only time consuming but
inefficient.
 UNIT 3
4. Manual systems do not provide any quick management information data, any data produced at best being
normally 24-28 hours old, as well as being costly to produce.

5. 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.

Machine systems

Pre-Checking Systems

Pre-check machines are somewhat similar in appearance to a standard cash register and are designed to operate
only when a sales check is inserted into the printing table to the side of the machine.

The machine is operated in the following way.

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

The advantages of the system are:

1. The sales check is made out and a record of it made on the audit tape before the specific items can be obtained
from the kitchen or bar.
2. Analysis of total sales per waiter is made on the audit tape at the end of each shift.
3. No cashier is required as each waiter act as his/her own cashier, each keeping the cash collected from customers
until the end of the shift and then paying it in.
4. 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.

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. A
waiter pressing the key for, say one cheeseburger would not only have the item printed out but also the price. A
control panel, kept under lock and key, would enable management to change the price of any item if required,
very quickly. It is also possible to have a running count kept of each item recorded and at the end of a meal
period by depressing each key in turn to get a print out giving a basic analysis of sales made.
 UNIT 3
CASH REGISTER

A cash register (US English) or till (British English) is a mechanical or electronic device for calculating and
recording sales transactions, and an attached cash drawer for storing cash. The cash register also usually prints a
receipt for the customer.

Electronic Cash Registers (ECR's)

These are very high speed machines which were developed mainly for operations such as super- markets and
were further adapted for use in high volume catering operations. The particular advantages of these machines are
that they will:
1. Price customers’ checks through preset or by price look-ups.
2. Print checks, including the printing of previously entered items.
3. Have an additional special key-so that the pre-set price can be changed during promotional periods such as a
‘happy hour’ in a bar.
4. Provide an analysis of sales made by type of product and if required by hour (or other similar period) of trading
5. Provide an analysis of sales by waiter per hour or per shift period.
6. Analyze sales by method of payment for example, cash, cheque, type of credit card, etc.
7. Complete automatic tax calculations and cover and service changes.
8. Provide some limited stock control.
9. Provide waiter check-in and checking out facilities.
10. Provide facilities for operator training to take place on the machine without disrupting any information already
in the ECR.
11. Restrict access to the ECR and the till drawer by the key or code for each operator.
12. Have rotating turret displays of price charged to individual customer transactions. This is of particular value in
self-service and counter operations.
13. 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 recorded by the ECR at the end of each shift.

National Cash Register(NCR)

The first cash register was invented by James Ritty following the American Civil War. He was the owner of a
saloon in Dayton, Ohio, USA, and wanted to stop employees from pilfering his profits. He invented the Ritty
Model I in 1879 after seeing a tool that counted the revolutions of the propeller on a steamship. With the help of
John Ritty, his brother, he patented it in 1883.

The first registers were entirely mechanical, without receipts. The employee was required to ring up every
transaction on the register, and when the total key was pushed, the drawer opened and a bell would ring, alerting
the manager to a sale taking place. Those original machines were nothing but simple adding machines.
National Cash Register expressly built for a merchant in Nov M sto nad Metu , Austro-Hungary, 1904. Shortly
after his patent, Ritty became overwhelmed with the responsibilities of running two businesses, so he sold all of
his interests in the cash register business to Jacob H. Eckert of Cincinnati, a china and glassware salesman, who
formed the National Manufacturing Company. In 1884 Eckert sold the company to John H. Patterson, who
renamed the company the National Cash Register Company and improved the cash register by adding a paper
roll to record sales transactions, thereby creating the receipt. The original purpose of the receipt was enhanced
 UNIT 3
fraud protection. The business owner could read the receipts to ensure that cashiers charged customers the correct
amount for each transaction and did not pilfer the cash drawer.

Point-of-Sale Control Systems

At a basic level a point-of-sale control system is no more than a modern ECR with the additional feature of one
or several printers at such locations as the kitchen (or sections of the kitchen) or dispense bar. Some systems
replace the ECR with a ‘server terminal’ (also called ’waiter communication’ systems), which may be placed at
several locations within a restaurant, and is a modification of an ECR in that the cash features are eliminated
making the terminal relatively small and inconspicuous.

The objectives for having printers are:

1. To provide an instant and separate clear and printed order to kitchen or bar, of what is required and by and for
whom.
2. To speed up the process of giving the order to the kitchen or 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 of the waiting staff and printed.
4. To reduced 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 times, if required, for customer contact.

Printers are at times replaced by VDU screens. Server terminals are part of a computer-based point-of-sale
system. These special terminals are linked to other server terminals in the restaurants and bars within one system
and, if required to, also interface with other systems so that, for example, the transfer of restaurant and bar
charges may be made via the front office computer system. The advantage of a computerized point-of-sale
system is that it is capable of processing data as activities occur, which makes it possible to obtain up-to-the
minute reports for management who can be better informed and able to take immediate and accurate corrective
action if necessary.

This type of point-of-sale control system has been taken one step further with the introduction of hand-held
terminals. Remanco’s electronic server pas (ESP), for example, is a palm-size unit which uses radio frequencies
to communicate from the guest’s table direct to the kitchen and bar preparation areas. The use of such a terminal
offers a number of advantages: food and beverage orders are delivered faster and more efficiently to preparation
sites; waiters in turn can attend more tables; with a two-way communication service staff can be notified if an
item is out of stock; all food and beverage items ordered are immediately charged to the guest’s bill, which is
accurate and easy to read; finally, operations can reassess their labour utilization and efficiency, certain members
of the service staff, for example, can take the simple order, while others can spend more time with customers to
increase food and beverage sales.

The ESP is a completely noiseless terminal with orders being entered alphabetically, numerically or by using pre-
set codes. When not being used and the unit is closed, its design resembles a conventional order pad, compact
and light in weight that can easily be carried around by service staff. It is currently being utilized in a variety of
situations, including restaurants.
 UNIT 3

PROCEDURE OF CASH CONTROL

First, all transactions related to cash must be documented and recorded immediately. With cash control, there is
no use of the accrual method of accounting. Each cash receipt is recorded upon reception, while each
disbursement is entered at the time that the payment is released. The mode of documentation requires only some
basic template that will record the necessary data. For the home, a checking account can be used to track all cash
deposited into a common account for the good of the home, with the chequebook register can serve as the basic
document that keeps track of the inbound and outbound transactions.

Cash control procedures require that there be only certain individuals who have access to the cash. This type of
security serves two purposes. First, accountability is established in the way that the cash is managed. Second, the
empowerment of two people to oversee cash control helps to ensure that important transactions can take place at
any given time, even if one individual is unavailable for some reason.

Last, cash control demands that the documents related to the task are kept separated from the physical location of
the cash. In other words, the accounting book that is used to record the cash transactions should not be kept in the
safe with the currency, money orders, and checks. This simple precaution helps to ensure that the task of altering
the physical evidence related to cash in hand is more difficult and thus minimizes the chances for theft to occur.

THEFTS/FRAUDS: SALES CONTROL

Major types of frauds

1. Failure to make kot

2. Failure to make check
3. Failure to record sales in sales summary sheet
4. Under-recording of sale.
5. Pickup of food without proper check
6. Charging incorrect room rent
7. Selling room without registration
8. Payment of bill twice
9. Collecting payment from guests without bill
10.Receiving bills twice for one supply
11.Ghost payrolls
12.Receiving a bill without goods
13.Full payment made for standard goods received
 UNIT 3
REPORTS

SALES SUMMARY SHEET

The sales summary sheet is an analysis of all the transactions/cash taken during the particular period of service. It
is prepared to know the revenue generated through the sales of food, beverages, the modes of bill settlement-
cash, cheque, credit card, amount charged to room accounts, tax amount, discounts given etc. the basic
information required in a sales summary sheet includes the following:
 Date
 Bill number
 Table number
 Number of cover per table
 Bill amount
 Modes of payment- cash, credit card, cheque, posted to room
 Analysis of food, beverages, and other sales items.

DAILY SALES REPORT

Sound financial tracking begins with the accurate recording of sales. The Daily Sales Report (DSR) is the core
tracking element for controlling cash, measuring cost vs. sales performance, and forecasting future sales.

PAYROLL COSTS

Payroll costs are usually expressed as a percentage of sales and are normally higher, the higher the level of
service offered. It is vital that they are tightly controlled as they contribute a high percentage of the total costs of
running operation.
Payroll costs can be controlled by establishing a head count of employees per department, or establishing, the
total number of employee hours allowed per department in relation to a known average volume of business. In
addition, all overtime must be strictly controlled and should only be permitted when absolutely necessary.

..................................................THE END..................................................
 UNIT 4
BEVERAGE CONTROL

PURCHASING

The purchasing of alcoholic and non-alcoholic beverages, like that of foodstuffs, has the aim to purchase the very
best quality of items, at the lowest price for a specific purpose. The purchasing of beverages should be
undertaken by the purchasing manager together with such experts as the food and beverage manager, the head
cellar-man and the head wine waiter. As beverages will frequently contribute more to profits than foods, and as
they require considerably fewer staff to process them into a finished product for the customer, it is essential that
adequate attention is given to this area. What is important to bear in mind always when purchasing beverages is
that expensive products or products with pretty labels do not necessarily indicate or guarantee superior quality.

With beverage purchasing the following points are generally noticeable:

1. There are fewer and often restricted sources of supply.
2. The high value of beverage purchases.
3. The free advice and assistance with purchasing are given by the wine and spirit trade.
4. The quality factors are difficult to evaluate and require special training to identify them.
5. There are fewer standard purchasing units than for food.
6. There is an established standard of product. Many items like minerals, spirits, etc. will have standard that will not
vary over the years and items such as a well-known wine from an established shipper will be of a standard for a
specific year, whereas with food items there may be several grades and a wide range of ungraded items available.
In addition, food items may be purchased in different forms such as fresh, chilled frozen, canned, etc.
7. The prices of alcoholic beverages do not fluctuate to the extent that food prices do.

Duties and responsibilities of Purchase manager

 The Purchase Manager is responsible for the administration of the purchase department.
 Responsible to maintain and upkeep of all purchase documents.
 For all purchases obtain proper requisition from with specification for the item and Budget Code duly authorized
and inky then place written purchase orders.
 Locate surveyors/vendors, find out there they are situated and extent of their resources.
 Maintain a choice of vendor and suppliers.
 Establish ‘Lead Time’ of delivery of various vendors.
 Be familiar with Governmental procedures of import.
 Maintain cordial relation with food production, control, accounts Government agencies and vendors and
marketing.
 UNIT 4

Qualities to be adhered by a Purchase Manager

(a) Have knowledge of commodities.

(b) Know the basis cuts of meats and the differences between various goods.
(c) Be familiar with the method of processing, grading, packing of the fresh/canned frozen and dehydrated fruits,
vegetables groceries and staple.
(d) Have a general knowledge of crop condition in the market.
(e) Carry outlines to establish a quality of Purchase.
(f) Advise and guide the Food and Beverages Manager/Chief in planning their menus,
(g) Visit the local fruits and vegetable markets to find out prices and seasonal items and advise Management
accordingly.
Knowledge of commodities to be purchased

To implement effective purchase arrangement the Purchase Manager shall be required to have thorough
knowledge of various merchandise to be bought with a view to acquiring knowledge of the following:-
1. Description of the items.
2. Sources of supply and availability in the year.
3. Quality characteristic of various products.
4. Right markets price- both wholesale and retail.

Purchasing control
Purchasing control consists of developing ‘Standards and Standard procedures’ for purchasing and outlines the
following:

1. Purchasing policy
 Corporate
 Centralized or decentralized

2. Purchasing research
 Markets and Materials
 Marketing channels
 Price trends

3. Product evaluation and assessment
 Product testing
 Yield testing
 UNIT 4

4. Purchase specifications
 Food
 Beverage

5. Purchasing methods
 By contract
 By quotation
 By cash & carry etc.

6. Clerical procedures
 Documentation
 Information processing

Purchasing Procedure

 Check authorization: Ex. Chef, F&B Manager,

1. Initiation of Purchase requisition Storekeeper
 Check purchase specification: Food or Beverage

 Select and approve suppliers

2. Determination of Source of supply  Negotiate price & delivery requirements
 Invite quotations

 Evaluate quotations
3. Evaluation of proposals and Placement of  Select most favourable quotation
purchase order  Place purchase order
 Follow up purchase order

 Verification of invoice/delivery note against

4. Receiving supplies purchase order
 Transfer of commodities to user departments

 Forwarding details of purchase transaction to

5. Closure of purchase transaction purchase office
 Payment for materials
UNIT 4
 UNIT 4
Format Of Purchase Order
 UNIT 4

Purchase Specification For Beverages

The purpose of a purchasing specification is to set down in writing the standard of a product for a specific use by
an establishment. This is then used by the purchasing manager to inform suppliers exactly what is required and is
vital information when negotiation prices. It is also invaluable to the receiving and cellar department staff to
know what to accept when deliveries are being made. Unlike purchasing specifications for food, specifications
for beverages are much simpler and to understand. The reason is that beverages are sold and purchased by the
brand name label of the product, each having a consistent quality and quantity standard of content for each
selling unit, e.g. barrels, kegs, bottles, splits.

Methods Of Purchasing Beverages

1. Cash And Carry

This method is followed for the purchase of non-alcoholic beverages. Cash n carry businesses offer either whole
range of non-alcoholic brands or limited brands. However, this method is followed in case of emergency
2. Wine Shippers
These are the firms that purchase buying from the country of origin and shipped to the destination. Usually wine
shippers are concerned with sale of wine in a particular region only which means the range of purchases is
limited.in certain cases wine shippers only deal with high profile hotels.
3.Wholesalers
These are generally subsiding companies of wine and spirits, large breweries etc. in which they sell their own
labelled products and first preference. Wholesalers offer sometimes a wide range of all beverages and at times
they assist the hotel people with promotional literature for bar and restaurant sales.
4.Auctions
Alcoholic Beverages also purchased from auctions which are carried out by an auction house however generally
auctions does not authorize the sale of alcohol in the alcohol beverage business. Beverages purchased by auction
are meant for celebration purpose only.
5.Wine And Beer Fairs
Alcoholic beverages are also purchased at an annually held wine and beer fares sponsored by manufacturing
companies and wine shippers. the advantage of the fair he can acquire alcoholic beverage at a lesser price than
those sold normally but requires a licenced permission from the country of origin.
 UNIT 4
RECEIVING

The objectives for beverage receiving are similar in many ways to those of food receiving. However, as the value
of beverage purchases and the ensuing profits from the sale of beverages are high, it is important that due
attention is given to the receiving of beverages.
The Main Objectives Are To Ensure That:
1. The quantity of beverage delivered matches that which has been ordered. This requires a methodical approach to
checking the goods against the purchase order and the delivery note. Items would be in standard units of crates,
cases, etc., with standard contents of a specific size. Crates and cases should be opened to check for such things
as empty, missing or broken bottles.
2. The quality inspection is simple but again requires a thorough and methodical approach. It involves such things
as checking the brand name and label on each item, the alcohol proof, the vintage and shipper, against the
delivery note and the purchase order.
3. The prices stated on the delivery note are in accordance with the negotiated prices shown on the purchase order
form.
4. When the quantity or quality (or both) of the beverage delivered is not in accordance with the purchase order, or
an item is omitted from the order, that a request for credit note is raised by the receiving clerk or cellarman.
5. An accurate record is made in the goods received book recording details of the delivery.
6. An accurate record is kept of all chargeable empties delivered and returned.
7. Deliveries of beverages are timetabled with the suppliers, often to and afternoon, when receiving and cellar staff
are normally not so busy and the receiving area is free from other deliveries.

Importance Of Receiving Department:

 Not a revenue-producing department.

 Control of quality and quantity.
 Receiving of items through purchase orders/ daily perishable items.
 to keep a note regarding the agreement with the suppliers
 Standard specifications are taken into the consideration.

Duties And Responsibilities Of Receiving Officer:

 Receiving of goods by quality and quality.

 Compare with challans /bills/purchase orders.
 Checks for quality, packing, specifications and quality.
 In case of items for maintenance, housekeeping, stewarding, etc. it is checked by quantity.
 UNIT 4
 In case of perishables, these are checked for quality by the Main Kitchen Chef and by the Butchery Chef in case
if butchery items only.
 Selling of the scrap also.
 Making daily Receiving report, shortage receipt, scrap report, Gate pass and soft drinks book.

Receiving Procedure
1. Quantity Inspection
To ensure that the quantity of the goods delivered is in accordance with quantity listed on the purchase
order/invoice. This means that all goods will have to be weighed (for example, fresh fruits, vegetables, meat,
etc.) or counted (for example, cases, crates, boxes, sacks, etc.)
2. Quality Inspection
To ensure that the quality of the goods delivered is in accordance with the quality established in the standard
purchase specifications of the establishment.
3. Price Inspection
To ensure that prices stated on the invoice/delivery note are in accordance with the prices on the purchase order /
invoice.
4. Dispatch To Stores/User Departments
The goods, having been checked for quantity, quality, and price must be removed from the receiving area to
appropriate stores/user departments. For example, perishable food items to the kitchen and all other food items to
the stores.
5. Clerical Procedures
 Invoice stamping to acknowledge the receipt of supplies.
 Recording invoices on goods received book.
 Raising ‘Request for Credit Note’ for shortages, breakages, sub-standard items etc.
 Filling out meat tags for expensive food items.
 Forwarding completed paperwork to purchase office

STORING

Once beverages are received they must be removed immediately to the cellar and a tight level of control
maintained at all times.

The storage of beverage is ideally separated into five areas as follows:

1. The main storage area for spirits and red wine held at a dry and draught-free temperature 30° C. This area is also
used for the general collection and preparation of orders for the various bars and the storage of keg beers when
there is a reasonable turnover.
2. A refrigerated area of 10-15° C for the storage of white and sparkling wines.
3. An area held at a temperature of 5° C for the storage of bottled beers and soft drinks.
 UNIT 4
4. A totally separate area, from those above, for the storage of empty bottles, kegs and crates. This area needs to be
as tightly controlled as the beverage storage area, not only because of the returnable value of the crates and
bottles, etc. but to prevent free access by bar staff when an empty for full bottle method of issuing is in
operation.
5. Cellar: The merchandise is unpacked in the cellar and stored correctly (table wines with an alcohol content less
than 16% by volume are stored on their sides, bottles of fortified wine, sprits and vintage ports are stored upright)
on shelves or racks in the same order as on the standard bottle code/bin list. The objective for preparing a
standard bottle code/bin list is to eliminate the confusion of bottle sizes, spelling of names and different brands,
and to establish an appropriate starting point for the control of beverages. All requisitions, inventories, wine lists,
etc., are related to the code/bin list.
6.
An extract from a list could be as follows:
Bin number 100-149 English table wines
Bin numbers 150-199 Imported white wines
Bin numbers 200-299 Imported red wines
Bin numbers 300-399 Sparkling wines
Bin numbers 400-419 Scotch and Irish whisky
Bin numbers 420-499 Gin

To avoid confusion, the M is usually assigned for magnums, H for half bottles S for split bottles.

Cellar Records: As the value of cellar stocks is high, it is usual for the following cellar records to be kept.

A cellar inwards book: This provides an accurate reference to all beverages coming into the cellar and posting
data for the cellar as bin cards. Whenever necessary it is a useful check against the perpetual beverage inventory
ledger held in the food and beverage control or accounts office.

Bin cards: These are provided for each individual type of beverage held in stock and record all deliveries and
issues made, the cards being fixed on the shelves or racks against each beverage, the bin card numbers referring
to the same bin numbers as the wine list and originating from the standard bottle code list.

Cellar control book: This provides a record of all daily deliveries to the cellar and the daily issues of each
beverage from the cellar to the various bars and should cross-check with the entries on the bin cards and the
perpetual inventory ledger held in the food control or the accounts office.

Beverages perpetual inventory ledger: This master ledger, which is prepared in the control or accounts office,
consists of cards prepared for each individual type of beverage held in stock. The purpose is to keep a daily
record of any purchases of the separate types of beverages and of the quantities issued from the cellar to each
individual bar or other areas and to record a perpetual inventory balance for each item. The information is
obtained from the supplies delivery notes or invoices (adjusted at times with credit notes) and the daily beverage
requisition notes from the different bars. When the physical stocktaking of the cellar is undertaken, the physical
stock take figures should match to those in the perpetual inventory ledger.
 UNIT 4
Ullages and breakages: It is necessary for any ullages and breakage to be recorded on a standard form, together
with an explanation, and countersigned by a member of the food and beverage management department. The
frequency of the recording of any ullages and breakages would determine the necessity for management to take
corrective action.

The term ullage is used to cover all substandard beverages such as bottles of weeping wines, bottles of wine with
faulty corks, unfit barrels of beer, etc., which whenever possible, would be returned to the supplier for
replacement. Breakages of bottled beverages usually occur by mishandling by cellar and bar staff.

Empties return book: Many of the containers of beverages such as crates, kegs, beer bottles, soda syphons, etc.
are charged for by the supplier against a delivery. It is, therefore, necessary that control is maintained on these
charged items to ensure that they are returned to the supplier and the correct credit obtained. A container record
book is required which records all containers received from the various suppliers, containers returned and the
balance matching the stock take of containers.

This is necessary to record the issue of drinks to the kitchen and other grades of staff as laid down by the
company policy.

ISSUING

Issuing of beverages should take place at set times during the day and only against a requisition note signed by
an authorized person, for example, head barman, banqueting head waiter, etc. Ideally, when the requisition is a
large one it should be handed in several hours before the items are required to allow the cellar staff plenty of time
to assemble the order together. Requisition notes are usually made in duplicate, one copy being retained by the
cellarman so that entries can be made to the cellar records and then it is passed to the control or accounts office,
while the second copy is retained by the person who originated the requisition and handed in with the daily
takings and other control documents.

The pricing of issues for beverages is different from that for food in that two prices are recorded, the cost price
and the selling price. The cost price is recorded to credit the cellar account and for the trading account and
balance sheet purposes.

The selling price is recorded for control purposes to measure the sales potential of a selling outlet using the basic
formula:

Opening stock + purchase – Closing stock = Total beverage consumed

Total beverage consumed = Beverage revenue

It should be noted that the above formula may be calculated for the value of stock and purchases either.

1. At cost price in order to compare the usage with the actual sales and to ascertain the profit margin and beverage
gross profit.
 UNIT 4
2. At sales price in order to compare potential sales with the actual recorded sales.
It is usually for the beverage revenue to be different from the sales potential figure because of such factors as a
high percentage of mixed drinks being sold or full bottle sales being made over the counter of a bar.

PRODUCTION CONTROL

Objectives Of Production Control

 To ensure that all drinks are prepared according to management’s specifications
 Take into account the tastes of expected customers
 To guard against excessive costs that can develop in the production process
 Management’s desire to prepare drinks of appropriate quality and size

Standards must be established for the quantities of ingredients used in drink preparation, as well as for the
proportions of ingredients in a drink. In addition, drink sizes must be standardized. When standards are set for
ingredients, proportions, and drink sizes, customers can have some reasonable assurance that a drink will meet
expectations each time it is ordered. Once these standards have been established and procedures have been
developed for training employees to follow them, they can be adhered to even in the face of a high rate of
employee turnover.

By establishing and maintaining these standards, managers also establish a means for controlling costs. When
drinks are prepared by formula and served in standard portion sizes, one portion of any drink prepared (e.g., a
daiquiri) should cost the same as every other portion of that same drink. In addition, because the sales prices for
drinks are fixed, the cost – to – sales ratio for one portion of any drink should be the same as the cost – to – sales
ratio for every other portion of that drink. If this is true, the cost – to – sales ratio for the overall operation should
be reasonably stable, provided that sales remain relatively constant.

Simply stated, once standards and standard procedures for beverage production have been established, it
becomes possible to develop a standard cost percent for operation with which the actual cost percent can be
compared.

Establishing Quantity Standards And Standard Procedures

As suggested earlier, one of the first steps in establishing control over beverage production is to standardize the
quantities of the most costly ingredients used: the alcoholic beverages. The quantities used by the bartender must
be controlled. To do so, one must determine in advance the specific quantities to be used for the production of
drinks and then provide the bartender with a means of measuring those quantities.
 UNIT 4
Most drinks prepared with spirits are a combination of one kind of liquor and a mixer. Scotch and soda, gin and
tonic, rye and ginger ale, and rum and cola are all examples of this type of drink.

A manager must determine in advance the specific quantity of the expensive ingredient — the liquor — that a
bartender should use to prepare any drink. The amount varies from bar to bar, but most have identified quantities
that fall between two extremes — as little as three – quarters of an ounce in some bars to as much as 2.

This quantity standard is established in advance by the manager and is the fixed quantity that will be given to a
customer in return for the fixed sales price of a drink. This is not to say that each type of drink should contain the
same amount of liquor as every other drink. Clearly, this should not be the case.

For example, management may specify that 1 ounce is the standard measurement for mixed drinks, but cocktails
such as martinis follow a recipe that calls for 2 ounces of gin or vodka. Once the quantity standard is established,
managers must provide bartenders with a means for measuring this quantity each time a drink is prepared. One
must keep in mind that wines, spirits, and some mixers are purchased in metric units, but bartenders preparing
drinks measures the ingredients in ounces.

STANDARD RECIPE

Standardized recipes are an important part of a well-managed food service program.

A standardized recipe specifically describes the exact, measurable amount of ingredients and the method of
preparation needed to consistently produce a high-quality product. The exact procedures, the type of equipment,
and the quantity and quality of ingredients are listed.

Advantages Of Standardized Recipes:

• Product Quality – Provide consistent high-quality food items that have been thoroughly tested and evaluated.

• Projected Portions and Yield – Accurately predict the number of portions from each recipe and clearly define
serving size or scoop. Eliminates excessive amounts of leftovers or substitutions because too little was prepared.

• Cost Control – Better management of purchasing and storage due to the exact amount of ingredients specified.

• Creativity – Using standardized recipes supports creativity in cooking. Employees should be encouraged to
continuously improve recipes. All changes need to be recorded so they can be repeated the next time the recipe is
used.

A Standardized Recipe Includes:

• Recipe Name / Recipe Card Number / Section / Meal Pattern Contribution – Include the name of the
recipe, the recipe card number, the section that the recipe should be classified under (bread/grains, entrée, etc.)
 UNIT 4
and the contribution that one serving makes toward the child nutrition meal pattern. Example: Pizzeria Pizza
Crust, B-48, Grains, 2.5 servings grain per portion.

• Ingredients – Listed in order of preparation and specifies the type of the food used, such as fresh apples;
canned corn; macaroni (uncooked); ground beef (raw).

• Weight and Measures – The weight and measures of each ingredient used in both weight and volume measure.
Note: weighing ingredients is faster, easier and more accurate.

• Procedure – Directions on how to prepare the recipe. Include directions for mixing, number and size of pans,
cooking temperature and time, and the directions for serving.

• Yield – The yield of a recipe should be recorded as the total weight or volume produced per 50 or 100 servings
(or other specified numbers of servings). Example: 50 servings: 23 pounds 4 ounces OR 100 servings: 46 pounds
8 ounces OR 50 servings: 1 quart 2 ¼ cups.

• Serving Size – List the number of servings that the recipe yields and the portion size to be served. Example: 50
– 1/2 cup servings. Consider including the suggested portioning tools to use. Example: 50 – 1/2 cup servings
(No. 8 scoop).

• Cost per serving (optional) – Determine the total cost to prepare the recipe and divide by the number of
servings prepared to equal the cost of one serving

STANDARD PORTION SIZE

There are four measuring devices commonly used by bartenders: shot glasses, jiggers, pourers, and automated
dispensers.

The Shot Glass

In some establishments, bartenders are provided with small glasses, called shot glasses that are used for
measuring. There are two kinds of shot glasses: plain and lined.

A plain shot glass holds a predetermined quantity when filled to the rim. Plain shot glasses are available in a
number of sizes, from fractions of an ounce to several ounces. In any given bar, all such glasses should be the
same size. In many of the establishments that use shot glasses, bartenders are told to fill the shot glass and pour
the exact measure into the drink. In others, bartenders are provided with shot glasses that hold slightly less than
management is willing to give (? ounce, for example, if 1 ounce is the standard measure). Bartenders are
instructed to fill the shot glass, pour it into the drink, and then, in full view of the customer, pour an additional
small amount directly from the bottle into the glass. Some believe there is a positive psychological impact to this
practice: Customers think they are getting more than they are entitled to.

A lined shot glass is similar to a plain one, but a line is etched around the glass below and parallel to the rim. In
some bars, the standard of fill is to the line, which is in full view of both the customer and the bartender. Some
 UNIT 4
bars use shot glasses with deceptive lines so that when the bartender fills to the line on the inside of the glass, it
appears to the customer to go above the line on the outside. This is an optical illusion, but it can give the
customer a sense of getting something for nothing. Another variation on the lined – glass approach is to use
glasses that hold the standard measure when filled to the rim, but have lines etched in the glass at some level
below the rim. These are used for the same psychological reasons.

The Jigger

A jigger is a double – ended stainless steel measuring device, each end of which resembles a shot glass. The two
measuring devices that make up the jigger are of different sizes — one may hold 1 ounce and the other 1 ?
ounces. Many believe the jigger is necessary for the accurate measuring that ensures perfect cocktails. It can be
used for measuring straight shots as well, but is more useful for preparing cocktails that call for varying
quantities of ingredients. For measuring the ingredients required for these complex drinks, shot glasses are
inappropriate. Some cocktails call for such varied measures as 1 ounce of one ingredient and 1? ounces of a
second. To measure exact quantities of each ingredient, it is necessary to use the jigger. The Grandview Bistro
uses a jigger for preparing all cocktails. It has 1? ounces on one side and 1 ounce on the other.

The Pourer

A pourer is a device, fitted on top of a bottle, that measures the quantity poured from the bottle, limiting that
quantity to a predetermined amount. This is another way to control the quantity of liquor used in preparing
drinks. Several different types of pourers are available, but all operate on the principle of controlling the quantity
poured each time a bottle is used. In an establishment where 1 ounce is the standard measure, all bottles can be
fitted with devices that dispense just 1 ounce. Each time the bartender tips the bottle to pour, exactly 1 ounce is
dispensed. The psychological effect, if any, of these pouring devices, is widely disputed. Some think that the
customer is given the illusion of the bartender pouring freely; others argue that customers may feel a certain
resentment toward an establishment that neither trusts the bartender nor permits an extra drop to be dispensed to
a customer. Still, others believe that pourers are useful at service bars, which customers never see, but should not
be used at front bars, where customers watch bartenders mixing drinks. Most bartenders do not like these devices
because it takes slightly more time to pour a shot than other means. There are many pourers and other devices
associated with computer software, some of which are attached to liquor bottles. The following section discusses
several of them.

Automatic Pouring Systems

All automatic pouring systems are designed to regulate the amount of liquor transferred from the bottle to the
glassware.

How that is achieved is probably the biggest difference between each system. The most common method has a
special pourer that fits on each bottle; this is then used in conjunction with a ring or collar that slides over the
pourer and activates it. Most of these rings or collars are attached to the cash register or to a piece of hardware
that is designed to take the place of the cash
register. The wireless free pour is another system that is commonly in use in foodservice operations dispensing
liquor. This system has a radio transmitter, which transfers the data from the bottle to the software program and
stores the information there in order to generate reports when the manager dictates. The benefit of this type of
 UNIT 4
program is that there are no wires to interfere with the bartender ’ s activities, and the data is stored and available
to the manager to assist in important decisions. The downside to this system is that it does not control the
portions; therefore, this system is intended for use in an operation that is confident that the bartenders are
following standard recipes and are skilled enough to do so without the use of measuring devices.
Alcohol Controls sells a product called the Liquor Clicker. It is a liquor pour spout that fits on each bottle at the
bar. It portions every shot to the amount determined by management and tracks the number of shots dispensed on
an odometer-style counter. The software used with these pourers allows management to print a report that shows
the number of shots poured from each bottle, the potential revenue, and the actual revenue. Alcohol Controls also
has a liquor control system called the Spirit. Bottles are capped with a Brand ID Control Pour that will portion
every shot of liquor or glass of wine dispensed. Liquor cannot be poured until the bartender inserts the control
spout into the dispensing station ’ s activator ring Where the bartender mixes drinks. It is tied into a point – of –
sale (POS) system that records the sale.

The Automated Dispenser

Many companies have developed and successfully marketed various automated devices for dispensing
predetermined measures of liquor. These range from comparatively simple systems for controlling only the
pouring brands to elaborate electronic control systems that not only control ounces but also mix drinks at the
push of a button. These systems, costing many thousands of dollars, are usually linked to cash registers in such a
way that each sale is recorded on a guest check as the drink is prepared. In addition, meters record the quantities
used, and this makes accurate inventory control possible.

Glassware

In addition to controlling the quantity of liquor used in preparing each drink, it is desirable to control the overall
size of the drinks. Standardizing the glassware used for service makes this comparatively simple. It is the
manager ’ s responsibility to establish the standard portion size for each type of drink and to provide bartenders
with appropriate glassware.

BAR FRAUDS

Frauds By Customer

Customer Walking Without Paying

The primary kind of customer fraud is customers walking out without paying their checks. However, customers
may also cheat an establishment by a number of other methods. They may claim that the food was unsatisfactory
and thus indicate (usually the manager or host will make the suggestion) that they will not pay for it.
 UNIT 4

Bringing Foreign Article

Another possibility, which has occurred frequently, is for customers to indicate that their food contained some
foreign matter, such as glass or china, or even an insect (perhaps even brought in by the complaining customers).
Customer Making Unnecessary Complaints

Complaints are generally made to the waiter or waitress, who should, in turn, call the manager or host to solve
the problem. Since there is always the possibility that the events did in truth occur, the normal policy is to grant
free drinks or dinners to the guests to avoid embarrassment, to prevent possible lawsuits, and, of course, to
encourage the customers to return. In most cases of fraud, the guests will not return to perform the same type of
fraud nor will they return merely to buy a dinner.

In the case of falsified complaints, the establishment has no recourse except to treat the affair as a normal
business expense. In cases of walkouts, the house may have legal recourse, and of course, it can set up a control
system that minimizes the chances of this type of theft.

Customers normally cannot perpetrate any other type of theft, since they do not have access food or beverages.
Disputes may arise, however, as to the exact number of drinks that were served. In cases of parties where
payment is based on head counts, lower figures may be presented by the guests. However, verification can
readily be made by staff members.

Only one or two systems of cash collection can eliminate the walkout fraud. Cash prepaid (for fast food) or
collected either by a cashier stationed at the beginning of food service (single-price dinners or buffets) or a
cashier at the end of the line in cafeteria eliminate customer fraud of this nature. A COD system comparable to
those used for beverages is occasionally used in food service

In every other system, there remains a possibility that the customer will walk out despite precautions by
management and by employees. It is impossible for a waiter or waitress to watch a table continually. Even with
team systems in which two servers work together—-one remaining in the dining room and the other placing
orders and relaying food from the kitchen—the team cannot watch every customer continually. A team system,
however, certainly is an. improvement over the individual server system. Likewise, a cashier cannot be expected
to stop every customer to determine if the check was paid, particularly during busy meal hours.
Using False Credit Card

Customers may also use credit cards that are worthless or attempt to pay with checks that are not honoured by
banks. Unless customers are known, it is best to avoid cashing checks if possible. If a check must be cashed,
adequate identification should be provided, and no check should be honoured for more than the value of the
dinner.
Counterfeit Currency

Occasionally customers will attempt, either intentionally or unintentionally, to give to cashier counterfeit
currency. In most cases, this currency will be easy to detect if proper cash handling procedure is followed. All
bills should quickly be examined on both sides and placed on the ledger of the register. It is hoped that this
 UNIT 4
cursory examination will detect most of the counterfeit money, although in some cases help of the expert can be
taken.

Frauds By Waiter And Waitress

Intentional Omission Of Items

Items are omitted from the bill in order to establish a rapport with customers, to increase tips, or perhaps to give
free merchandise to friends or fellow employees. This type of fraud occurs when inadequate dupe system or
validating systems are utilized. A full control system in organizations having full services is impractical since
accounting for items with a retail sales value of less than ₹1 is too costly. Bookkeeping costs would be excessive
in relation to income.

In some cases, the items that are to be sold are already under the control of the service staff, as in the case of milk
in individual containers or a 6-gallon refrigerated carton in the service area. No records are is maintained when a
waitress or waiter pours a glass of milk. Should this charge be omitted from the check, it would be impossible to
track down the guilty party, since a number of personnel may have access to the milk supply.
Reusing Of Checks

This type of theft may occur in any kind of establishment. For high volume operations, it is possible that a large
number of sales may be the small dollar amount. Thus customers presented with a particular check would have
no way of verifying whether it was their own or not since the dollar amount was correct and the items were the
same. With the abbreviation normally used on checks, it may be impossible for the guest to read a check without
an interpreter. So long as the dollar amount is correct, they are satisfied.unless the dollar amount is higher, most
customers do not care if they receive their own check.
Pocketing Checks Or Using Unauthorized Checks-

It is often possible to reproduce the checks that are used by an establishment. Certainly, if stock checks(not
specially imprinted ones) are being used, they may be readily be purchased by anyone form dealers. It is also
possible when checks are not numbered or recorded (and in those cases where the numbers are recorded but not
audited) for a waiter or waitress simply to pocket the check and the cash received, if other control systems are not
utilized.

Checks can be counted automatically by the utilization of a check numbering system similar to UPC(universal
product code) or those system s being used by banks. Each check is imprinted with a number that can be read by
a machine. If a number is omitted or the check not closed out, the machine will report this omission. These
systems are readily available that have been made in electronic technology.
Overcharging

This practice may occur when staff members are allowed to make corrections on the checks without supervision.
The customers may be charged for merchandise not received. Or higher prices may be entered on the check.
After the customer has paid the staff member, the correct prices and amounts are entered, the check is re-totalled,
and the difference is pocketed by the server.
Incorrect addition- intentionally adding a dollar to each check and pocketing the money when the check is
properly totalled can readily be performed, particularly if amounts are handwritten on the checks. Should the
 UNIT 4
error be discovered by the customer it is normally excused, since an error is over adding can be quickly
explained away as poor arithmetic.
Substitution

In some establishments with a fairly tight system of control, it may be impossible for a waitress or waiter to
supply friends with free merchandise. However, substitution can be made by ordering higher priced items from
the kitchen and charging for lower priced ones. The server orders a higher priced item but records a lower priced
item on the check. The friend is presented with a check for the smaller amount.
Falsification of tips or other charges

In some areas of the country, where many foods and beverage sales are complimentary, other incidents occur
where a dinner is a bing paid for by someone other than the guest. The extra amount of beverages or food may be
placed on the checks to increase the value of the sale. This extra food can be sold to other guests and the cash
received pocketed by the waiter or waitress. This padding of the bill may also be done whenever the tip may be a
fixed proportion of the total bill. If the sales are increased by 1000rs the tip may go up to 100rs or more. When
given a free dinner the guest does not closely inspect the items on the bill. Instead, he or she merely gives a brief
inspection, signs for the full amount, and leaves a tip based on the total value listed on the check.
Incorrect Change

Shortchanging of the customer is possible no matter what system is used. It cannot be prevented without s
shopper system, which may or may not be able to detect the fraud. Certainly, if repeated complaints by customers
occur, immediate action must be taken.
A shopper system is one in which a person unknown to the regular employees is hired to come into the store and
posing as a customer, checks on the efficiency of the operation and various segments of the system.
Split Rings

When a waiter or waitress also handles the cash registers, split rings may occur this situation arises when for
example, a check for 1000rs is rung up 500rs and 400rs. The owner has lost 100rs which the waiter or waitress
pockets.
By ringing the second time, the waiter or waitress prevents the customer from seeing the actual amount of the
first ring-up. The customer usually presumes there was a simple error. Should anyone question the two rings for
one check, the waiter or waitress merely states that he or she made an error on the first ring and rang 900rs by
mistake. Using a cash register with a tape and giving guests receipt will help to alleviate this type of fraud.

Bartenders Fraud Or Errors

A bartender who handles cash(using a register) has the same opportunity of theft as a waiter or a waitress- and
the same chance of error.
 UNIT 4
Cashier Theft Or Error

The possibility of theft for the cashier is more restricted than with either bartender, waiters, or waitress since they
normally do not handle the products sold. If the cashier is responsible solely for cash collection, errors or theft
may occur under any of the following categories;
1. Cashier keeps the money and pockets or destroys a check.
2. Cashier changes the total of the check after collection.
3. Cashier bunches sales, split-rings, or under rings.
4. The cashier gives incorrect change.
5. Cashier performs incorrect addition.
6. Cashier falsifies payout or adds items to complimentary checks and removes them from other checks.
 UNIT 4

BOOKS MAINTAINED

The books maintained for beverage control are:

 Cellar inward book

 Bin card
 Cellar control book
 Beverage perpetual inventory ledger
 Breakage book
 Empty return book
 Hospitality book
 Cellar Inventory Control Ledger

1. Cellar Inward Book

This book contains records relating to all inward beverages and used for posting data for the cellar man’s bin
cards.

2. Bin Cards/Stock Cards

For each individual beverage item, a separate bin card is prepared. It records the item held in stock, deliveries
and issues made. These cards are fixed on the shelves or rack against each beverage. Each bin card number refers
to the same bin number as the wine list and originates from the standard bottle code list.

3. Cellar Control Books And Daily Issues Record

It contains all daily deliveries to the cellar and daily issues of each beverage from the cellar to the various bars. It
should cross-check with the entries in the bin cards and the perpetual inventory ledger held in the control or
accounts office.

4. Beverage Perpetual Inventory Ledger

It is a master ledger maintained in account and control office. It is prepared for each individual types of beverage
held in the stock. Each type of beverages purchased, quantities issues from the cellar to each individual bar or
other area and perpetual inventory balance for each item are recorded in this ledger. The sources of information
for this ledger are: invoices or suppliers notes, credit notes, daily beverage requisition from different bars. The
perpetual inventory figure of this ledger must tally with the physical stocktaking of the cellar.
 UNIT 4
5. Breakage And Ullages Form/Book

Breakages of bottled beverages occur by mishandling by cellar and bar staff. The ullages cover all substandard
beverages such as bottles of weeping wines, a bottle of wine with faulty corks, unfit barrels of beers etc. which
would be returned to the supplier for replacement. A record of the above items with an explanation and
countersigned by food and beverage manager is prepared in this standard format.

6. Container Record Book/Empties Return Book

There are many containers such as:-

 Crates
 Kegs
 Beer bottles
 Soda syphons etc
There are generally charged by the suppliers against a delivery. A control is maintained on these charges items to
ensure that they are returned to the supplier and the correct credit is obtained. This book contains all information
about containers received from various suppliers, container returned and balance which must match with the
physical stock taken of the empties.

7. Hospitality Book

Issues are made from cellar to the kitchen and other entitled staff as laid down by establishment’s policy. A
complete record of these issues is maintained in this book.

8. Cellar Inventory Control Ledger

The control office maintains the master to record, full details of the movement in and out of the cellars and the
balance of stock in hand and the value of the balance cost. It is prepared from the beverage control records

..................................................THE END..................................................
 UNIT 5

UNIT – V

MENU MERCHANDISING

Menu Merchandising – Menu Control, Menu Design & Layout-Components required to design a good menu..

Types of Menus, Menu as Marketing Tool, Pricing of Menus, Menu Engineering – Definition, Menu Engineering

Worksheet- classification of selling items into four quadrants, Limitations of Menu Engineering.

MIS – Reports – Calculation of actual cost – Daily Food Cost – Monthly Food Cost – Statistical Revenue
Reports – Cumulative and non-cumulative.
 UNIT 5
MENU CONTROL: MENU MERCHANDISING

There are a number of basic factors you have to be considered to ensure the efficacy of menu as an in-house
effective sales tool for optimizing sales.

Menu presentation is very important as it identifies the image and personality of that particular unit or
department whether it is a steak-House or a cocktail bar.

The following points should be taken into consideration:

1. Attractive: The menu should be attractive;’ The first’ impression of the menu should be that it looks interesting
and inviting and that the customers will really want to read it.

2. Cleanliness: It should be clean. Although this appears to be obvious it is something that is frequently ignored by
hoteliers and caterers. If it is intended that a particular menu is to be offered frequently it is well worth
considering having them either’ plastic coated so that they can be regularly wiped clean, or printed on
inexpensive paper or card and regularly replaced or contained within a presentable and durable cover.

3. Legible: It should be easy to read. It is usual to use different sizes of typeface for such things as headings and the
items appearing under them. How typeface styles are used can help customers to make their choice of food and
beverage items more easily. The use of attractive graphics, colour and blank space can also help with aiding
customers to make their selection by directing and attracting their eye. What is not required is that a menu should
resemble a page from a railway or bus timetable with its mass of information produced in an unattractive style
which besides failing in so many other ways would also be annoying to the customer.

4. It should complement the occasion. It is necessary that the general presentation of the menu is not only in
keeping with the decor of the room but also suitable and complementary to the occasion. Obvious examples are a
restaurant within a holiday camp, a kosher wedding, a state banquet and bistro, where a different style and
presentation are necessary for each.

5. It should reflect current awareness. The menu should take into consideration the current trends in eating habits,
so as to be fully aware of customer requirements.
 UNIT 5
PRICING OF MENUS: MENU MERCHANDISING

 The pricing of a menu is “art of pricing”. The successful management analyses the food cost and other
overheads, the guest’s ability to pay for the menu and competitors menu pricing before fixing the menu
and its prices.

 Usually, the menus are priced by the General Manager, Chef, Food and Beverage Manager, Sales
Manager, Purchase Manager.

 Each and every factor like food cost, raw material price, competitor’s menu price, guest ability to pay,
etc. are considered while fixing the price.

Factors to be considered while fixing the selling price- Some factors involved in menu pricing include

 Elasticity of Demand- It means that demand can fluctuate in response to other factors, such as change in pricing,
food quality or environment

 Perception of value- It is what the customer believes the meal worth. You may offer the item at low cost but
have relatively high selling price. Different geographical areas or classes of society can have a different
perception of value. Value is sometimes expressed as quality per price and makes it possible to impose higher
prices for prestige and price- sale appeal.

 Competition- One should constantly aware of what prices are offered by your competitors for same services.

 Relationship between Menu, Prices and Volume- Two schools of thoughts are there you are trying to make a
small profit per item by selling many items or high profit per item by selling fewer items.

 Profit in Rupee, not Percentage- Many operation stress percentages in their menu pricing. A menu item may
very profitable on a percentage basis but because of lower sale, it might bring little profit.

 Total Cost Consideration- In setting their menu price, many operations concentrate primarily on the raw food
price involved. Nowadays other cost is significant and should be considered

 Contribution to profit- Selling price must provide an adequate share of fixed cost and other overheads and a
good margin of profit.

 Long term implication for pricing- If an operation has a reputation of high or low menu price, it can be
difficult to change in short run of business. Some commercial operation creates financial difficulty for
themselves when they try to raise their prices since they have low price reputation or vice- verse.
 UNIT 5

PRICING METHODS

The menu price fixed should be acceptable to hotel/restaurant and guest. By reducing the price hotel tries to
attract more guests and hence try to increase the sale. The large sale reduces the fixed cost per guest and hence
hotel makes the profit in spite of having a low price. Some hotels may prefer to keep high price and look for
high-income guests only who can sell more per cover, in spite of having low sale hotel may still make a profit. It
is very difficult to fix the menu/dish price.

The following are the common pricing methods:

 The Factor System- This is also known as a multiplier or mark up system. The raw food cost (RFC) is
multiplied by pricing factor(Pf) to provide menu selling price( MSP). The pricing factor is determined by
dividing desired food cost percentage into 100. If a 40% food cost is desired, dividing 0.40 into 100 will give
pricing factor of 2.5.

 The Prime Cost Factor- The prime cost system considers not only raw food cost but also direct labour cost.
Direct labour cost includes those cost involved in preparation. It does not include service, sanitation or
administrative labour cost then it is multiplied by pricing factor
Prime Cost ( PC) = Raw Food Cost ( RFC) + Direct Labour Cost ( DLC)
Prime Cost ( PC) x Pricing Factor ( PF) = Menu selling Price (MSP)

 The Actual Pricing Method- This method includes all the cost plus a desired profit to determine the menu
selling price.

 Demand Oriented Perceived Value Pricing- This method is based on the perception of guest and that means
what the guest feels after seeing the dish. The price of food matching is perception of Value for money. Eg The
guest in a silver service restaurant is ready to pay than in a self service cafeteria.

 Price based on Competitor’s Price- This is the simplest method of pricing. Here the caterer does not work on
cost, profit etc and on the contrary caterer takes pricing of competitor’s price as a guideline and fixes his price
may be slightly higher or lower.

 Marginal Pricing- The cost can be divided into two categories fixed and variable cost. Usually caterer first aim
at getting Break Even Sale. After the BEP any cost which occurs is known as marginal cost and cover the
marginal cost and profit is marginal pricing.

 Gross Profit Method- This method involves in finding gross profit per person and adding the price of an extra
item to the main meal cost and arriving at the selling price of each menu items.
 UNIT 5
Selling Price = Cost main item + Accompanying dish + other items cost + GP
 Food Cost Method – In India, it is the most common method of fixing price. Hotel decides to maintain a certain
food cost. Before fixing the price, the portion size and the food cost of the dish are calculated. After knowing the
food cost then the selling price is decided.

TYPES OF MENUS: MENU MERCHANDISING

1. TABLE D HOTE MENU

This is a French word which means food from the host’s table. A table d hote menu offers a complete meal at an
affixed price for the guest no matter how much food has been consumed. This menu can include appetizer.
 Banquets
 Buffets
 Coffeehouses
 Cyclical menu

2. ALA CARTE MENU

 Breakfast menu
 Luncheon menu
 Dinner menu
 California menu
 Ethnic menu
 Speciality menu
 Room service menu
 Lounge menu

3. OTHER TYPES OF MENU

 Du jour menu
 Wine menu
 Dessert menu
 UNIT 5
MENU AS MARKETING TOOL

 Menus have a lot of sale value.

 To make the best or most effective use of menus as a means of advertising and selling is a MENU
MERCHANDISING.

 It is the piece of advertising which is sure to be read for this reason. Every detail of the menu deserves the
closest Scrutiny.

 The menu must fit the market, the facility, the ability of employees if the operation is to succeed.

 The menu should have the merchandising effect it should help you sell what you want to sell more, and it
should also help the guest to choose from the menu what he wants without much loss of time and due
consideration should be given to the paper on which it is printed, format and layout etc.

In order to increase the merchandising value of Menus, the following points should be considered while
designing a Menu.
1. Clean
The presentation of dirty, spotted, worn menu is the poorest way to start a meal. We all know that cleanliness is a
must in our business. A soiled menu has a very poor merchandising value; it may raise doubt regarding the food
being prepared hygienically. Menu with the continuous long use is likely to get soiled. Soiled menus must be
changed with new menus. For this reason, the menus cards should not be very expensive. If the investment is
high you may be reluctant to discard soiled menus. To keep the menus in good conditions the first important
thing is that the paper selected should be of reasonably good quality. The cover should be attractive and glazed.
The front cover may also be protected by plastic folders. The inner contents should be changed as and when
required. It is a very wrong practice to change the prices on the menu with ink.

2. Legible
This means that menus should be easy to read. The type selected should be attractive and easy to decipher. It
should be of sufficient size so that most people, including the elderly or those with glasses, can read it with ease.
As far as possible the menus should be printed. Typewritten menus should be avoided. They are invariably
carelessly typed with misspelt words and smeared carbon. Menus should be written in double spacing as single
spacing causes confusion and overcrowding. Single spacing tends to give a menu the quality of a telephone
directory. Clear readability with plenty of wide space is essential. Easy readability is a must, as menus are meant
to be read. The managers must see the lighting arrangements at all tables so that menus can be read. Whether
they can be read easily or not. Customers are annoyed when a menu is indistinct or light so poor that they cannot
read it.

3. Menu Structure / Format

The format of the menu should suit contents of the menu. As far as possible different formats should be used for
different meals. (Breakfast, Lunch, Dinner etc). The format of the menu will also depend upon the type of
establishment, its standards and nature e.g. hotels, cafeterias, clubs, etc. The menu should not run on many pages.
Two pages menu is considered to be good. Many inserts should be avoided. Don’t forget to include the hotel
address. The back of the menu can be used for the wine list. But a separate wine list is more advisable.
 UNIT 5

4. Organized
A menu should be well organized. Similar items should be grouped together and attractive headings may be
assigned to the groups. The purpose of a well-organized menu is that the customer should be able to find what
he/she wants quickly without reading the entire menu. Most of us start reading anything at the top left to
cocktails and appeti ers would be best in this position. Try to group all the categories in an easy to find manners
like appeti ers, sandwiches, salads, entr e, desserts, and beverages.

5. Restricted Menus
The menu should be short as far as possible i.e. the number of dishes on the menu should be limited. Keeping
long menus is a poor merchandising policy. There are some operators who may believe that more items you have
on the menu the more business you will do. But actually, it usually works in reverse.

The following are the DISADVANTAGES of Very Long Menus

 Confuse the customers and make the selection time longer for them.
 Overburden the kitchen and serving staff.
 Do not allow the attention of chef towards the presentation and making of the dish. Increased wastage as there
will be more leftover.
 Slow service as a waiter has to wait for a very long time for the customer to make his selection.
 Create bottlenecks in the preparation and service area.
 Buying, receiving, storing, etc of the food becomes difficult and more space is required for storage.
 Hamper the effectiveness of control process.
It may be well realized that over if the menu has many items there would still be some guests who would ask for
something else. The basis of limiting the menu is to learn about the items which are most popular. The man
responsible for planning the menus should check from time to time the sale analysis for different dishes and the
items which do not sell reasonably should be removed. Limited should not mean any choice or change at all.
Establishments that have permanent regular client le must change the menus and should provide ample choice.
Establishments which have more of tourist business and where the customers change they don’t need to change
menus frequently.

6. Easy to change
Even the most carefully planned menus must be changed from time to time. The change may be necessary
because of change in prices, need to add or drop some items for a varied variety of reasons. If a menu is hard to
change there may be temptations to mark out items with pencils or pen, write in items, or worst of all scratch out
the old prices and write in the new. The changed prices on the menu have a poor merchandising effect. The menu
format and design should be such so that it can be changed with the needs of the time.

7. Fit the operation

To serve good food with prompt service, you must have a menu designed to fit the place. It must match the size
and types of equipment, their capacity, and also the skill of the personnel. Never blindly follow your competitors.
Never include any item unless you can effectively prepare to sell it.
 UNIT 5
8. Merchandising effect
Design your menu to sell the items you want to sell your speciality or an item that can be served fast and is
profitable. Such items should be tactfully located different typefaces can be used to emphasise one item over
another or attractive borders can be used to make something stand out. While listing the items the one you want
to sell fast can be placed at or near the top, since many people read only until they find an item that appeals to
them, rather than studying the entire list. Suggest proper cocktails or drinks with a particular food.
Accompaniments should be restricted and specialized.

9. Language
Many guests are embarrassed to ask what a foreign term means and will pass on to something that they
understand where a menu is written in French, the English equivalents should be given. It is a good idea to
describe the dishes in the language which is understood by the majority of guests.

10. Effective description and descriptive headings

Descriptive headings mean quoting such headings on the menu various groups of food which will attract the
attention of the customer and will indicate the nature of dish more clearly. The headings assigned to different
groups should be interesting and should capture the imagination of the guests.

SOME EXAMPLES
 Sea Coast Delights
 Gourmet Selection
 From The Sizzling Platter
 Oyster Bar
 Dessert Delicacies
 Broiled To Your Order
 Chef’s Specials

The explanation of dishes in detail should be avoided, but a brief description should help the customer in making
a prompt and suitable selection. Dishes should be described in such a way that a common customer should be
able to understand how he is going to get his food and should be able to visualize it. The aim of the description
should be to inform the guest regarding the form of food served (method of cooking, cut, hot or cold, etc).
A careful thought given by the person in-charge of making the menu regarding the description, location and the
inclusion and omission of certain words help considerably in making a menu worth. It is a good merchandising
policy to add extra you are giving to the customer for example instead of writing simply as ‘fillets of sole bonne
femme’ it is better to feature it as ‘fillets of sole bonne femme’ served in a white sauce with fresh mushrooms
and potato borders’. Such a description adds to the value of the dish. The inclusion of words “with” and “and” in
describing the dish add to the value of dish to the customer. Associating of the names of places of origin in
describing the dishes are informative and has better sales appeal
There are words that should be sparingly used on the menu as they are uninviting and lack sales appeal. These
are plain, boiled, hashed, minced, mashed etc. Instead of writing as plain omelette writes as golden or natural.
Spinach should be listed as leaf or garden instead of plain. Mashed potatoes can be better listed as whipped or
snowflake. Boiled potatoes as natural or as parsley instead of boiled write as poached or steamed.
The association of some words like fresh tender, green, young, spring, new, chilled, special, choice (The word
fresh is not exclusively used for vegetables, fruits etc, otherwise customer might think that the food is canned or
stored) in describing or featuring the dish on the menu has better merchandising appeal.
 UNIT 5
 Grilled Spring Chicken
 Tender Meat/Beef
 Fresh Mushrooms
 Tender Lamb Chops
 New Spring Broccoli
 New Potatoes
 Fresh Fruit Salad
 Young Turkey
 Melon Frapp
 Chilled fruit
 New (Bermuda potatoes, cabbage vegetables)
 Green (peas, cabbage, apple, olives)
 Young (chicken, vegetables, turkey, lobster, beets, carrots)
 Spring( vegetable, chicken, lamb salad, onion)
 Garden (vegetable salad)
 Tender (young carrots, buttered beet baby spring lamb chops, roast spring lamb).

CONSTRAINTS OF MENU PLANNING: MENU MERCHANDISING

 Skill of staff.
 Facility Layout/Design
 Availability of ingredients.
 Availability of Equipment
 Type of target market
 Seasonality of business
 Quality Levels and Costs
 UNIT 5
DEFINITION AND OBJECTIVES: MENU ENGINEERING

Menu engineering is the study of the profitability and popularity of menu items and how these two factors
influence the placement of these items on a menu. The goal is simple: to increase profitability per guest.

The marketing-oriented approach to the evaluation of a menu with regards to its present and future content,
design and pricing is termed as menu engineering. Its origin is based on the famous Boston consulting group
portfolio technique.

The concept of menu engineering requires f&b managers to adapt themselves to the contribution that menu items
make to the total profitability of a menu. The menu engineering high lights the good and the poor performer in a
menu, and provides vital information for making the next menu more acceptable and appealing to the customer
and also more profitable for the management.

Why Menu Engineering:

 Helps to foodservice operator when to keep menu items and when to take off items from the menu.
 Helps to determine which menu items are over or underpriced.
 Helps in designing profitable menu.
 Helps to select the menu items to be repositioned to gain popularity.
 Helps to revise recipe and portion size of the menu item.
 Helps in monitoring menu performance.

Menu engineering focuses on the three main elements:

1. Demand: The number of customers who visited the restaurant and had meals in the restaurant. The feedback
form is filled up by them and their remarks regarding the menu are taken into account.
2. Menu Mix: The dishes which are more ordered by the guests are analysed to know that which set of dishes are
more popular and how management can improve its profitability by having menu mix.
3. Contribution: The gross profit earned by selling a particular menu is analysed and compared with the other
menus gross profit (Gross profit = Sales – food cost/variable cost).

The following pre-requisites are must for using this technique:

1. Standard recipes: All recipes prepared by the kitchen must be of a standard including its portion size,
presentation of the dish, accompaniments served, etc. This will ensure the accurate food cost.
2. Uniform rate: The rates of all the raw material must be standard and uniform so that there is no variation in food
cost for the menus.
3. Sales analysis: The sales analysis of each menu and meal must be done carefully and it must be accurate so that
the different menus sales can be analysed. This can be done by making analytical sales summary sheet.
4. Computers: for the purpose of calculating sale, food cost, gross profit, etc. It is recommended that the computer
should be used so that all calculation are done accurately and with speed.
 UNIT 5
METHODS: MENU ENGINEERING

Using this simple mix, menu items can be grouped depending upon the popularity among guests, gross profit
contribution etc. The four squares of the matrix commonly plotted depending upon the performance of items in a
particular square.

On a graph comparing popularity to profit, using data from a recent time period such as the previous 30 days,
plot menu items. It should look something like this:

Average
gross margin
of all menu
dishes
 UNIT 5
Stars: High Profitability and High Popularity

Your stars are… well, the stars on your menu! As such, your menu design should highlight them. Rather than
experiment with these menu items, keep them consistent, and promote them in any way you can.

Plowhorses: Low Profitability and High Popularity

Plowhorses are popular staples that you’re actually losing money on. The goal is to create more profitable
versions of these items without decreasing volume. For example, you may have a signature sandwich special in
this category. You might try experimenting with less expensive meats in the sandwich to create a more profitable
version. If there’s a larger menu item in this category, see if portion size is killing profit; are customers leaving
these menu items on their plates? You may want to decrease the portion size slightly while improving the
appearance of the product. Here are some more ideas to combat rising food costs without raising menu prices.

Puzzles: High Profitability and Low Popularity

Puzzles are the items on your menu that are highly profitable, but difficult to sell. Investigate whether customers
like the taste of these items. You may need to reinvent these items, but sometimes simply lowering prices will
increase popularity enough to produce higher overall profits. You may also want to feature these items on your
menu, make them specials, or position them in a different way.

Dogs: Low profitability and low popularity

Dogs are your menu items that ust aren’t contributing to profit enough. Consider omitting your dogs. However,
be careful. You may have a menu item that is a staple among some customers but not others (your kid’s mac and
cheese, for instance). Instead of deleting these dogs, you can de-emphasize them by hiding them on your menu.

MIS (MANAGEMENT INFORMATION SYSTEM)

Management Information System or ‘MIS’ is a planned system of collecting, storing, and disseminating
data in the form of information needed to carry out the functions of management.

To the managers, Management Information System is an implementation of the organizational systems and
procedures. To a programmer, it is nothing but file structures and file processing. However, it involves much
more complexity.

The three components of MIS provide a more complete and focused definition, where System suggests
integration and holistic view, Information stands for processed data, and Management is the ultimate user, the
decision makers.
 UNIT 5
Management information system can thus be analyzed as follows:

MANAGEMENT

Management covers the planning, control, and administration of the operations of a concern. The top
management handles planning; the middle management concentrates on controlling; and the lower management
is concerned with actual administration.
INFORMATION

Information, in MIS, means the processed data that helps the management in planning, controlling and
operations. Data means all the facts arising out of the operations of the concern. Data is processed i.e. recorded,
summarized, compared and finally presented to the management in the form of MIS report.
SYSTEM

Data is processed into information with the help of a system. A system is made up of inputs, processing, output
and feedback or control.

Thus MIS means a system for processing data in order to give proper information to the management for
performing its functions.

REPORTS: MIS (MANAGEMENT INFORMATION SYSTEM)

A management information system (MIS) is a computerized database of financial information organized and
programmed in such a way that it produces regular reports on operations for every level of management in a
company. It is usually also possible to obtain special reports from the system easily. The main purpose of the
MIS is to give managers feedback about their own performance; top management can monitor the company as a
whole. Information displayed by the MIS typically shows “actual” data over against “planned” results and results
from a year before; thus it measures progress against goals.
Some of the MIS reports which are used in Food & Beverage sector:-
 Audit report.
 Sales report department wise.
 Consolidated revenue analysis.
 Multiple reports.
 Stores, receiving, HR, Accounts, security, and all the major department can maintain reports and records through
this system.
 Preparation of budget on the basis of initial data retrieved from the system.
 Consumption report.
 Cashiers summary.
 Void /cancellation report.
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 Cover analysis.
 Popularity by menu item.
 Settlement report.
 In-house guest directory.
 Spoilage report and etc.

CALCULATION OF ACTUAL COST: MIS

Restaurant owners, managers and chefs all stress over food costs. They are never low enough. At its heart, lies
the challenge of balancing the (rather) static cost of the item displayed on the menu with the daily variations in
cost for its ingredients.
How to Calculate Actual Food Cost

When you ask (or are asked) what your food costs are, Actual Food Cost is probably what is being referred
to. Actual Food Cost is a straight-forward calculation, but it relies on taking careful and regular inventory counts.
The formula for Actual Food Cost is:
 Actual Cost of Goods Sold = (Beginning Inventory + New Inventory Purchased) – Ending Inventory
 Actual Food Cost (as a percentage) = (Actual Cost of Goods Sold / Food Sales) x 100

If you use an inventory platform (Any Software) to place your food orders and track what you have on hand, this
can be calculated automatically in a exportable report.

A few things to remember. When taking inventory, it needs to be done either at the end of the day or the
beginning of the day. Accurate inventory counts cannot be made while items are being sold or delivered. If the
cost of something has changed (for example you have two cartons of eggs, that were purchased at two different
prices), use the most recent unit cost.
How to Calculate Theoretical Food Cost

Theoretical Food Cost is what, in an ideal world, your Food Cost should be. To calculate it, you need a very
accurate tally of what and how much of each ingredient goes into a menu item. For example, in the case of a
bacon cheeseburger, this might be the four ounces of ground beef, one bun, three strips of bacon, two slices of
cheese, one ounce each of ketchup, relish, mustard, the portion of fries and so on. You would also include the
“paper costs” like one napkin, one wrapper and one bag. Additionally, you need to how many of each item you
have sold for the period (this should be easily exportable from your Point of Sale system) and total dollars in
sales made.
 Theoretical Cost of Goods Sold = (Item A Food Cost x Units of A sold) + (Item B Food Cost x Units of B sold)
+ (and so on)
 Theoretical Food Cost (as a percentage) = Theoretical Cost of Goods Sold / Food Sales
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 Because each restaurant has so many items sold and so many ingredients for each item, this is a very
difficult calculation to do manually.

 If your Sales data is synced with your Inventory system, this is likely a report that can be run with no
manual intervention.

 Ideally it is run every time you calculate your Actual Food Cost, so a comparison can be made and major
discrepancies investigated. Theoretical and Actual Food Costs will never match, what you are looking for
is trends when the divergence is increasing or there are sudden changes.

MONTHLY FOOD COST: MIS

Monthly food costs are determined by taking a monthly physical inventory of food stock, evaluating the
inventory, and then adjusting the valuation to more accurately reflect the cost of food consumed.

The basic formula to determine the cost of food in a month is:

Cost of food = Opening inventory + Purchases – Closing inventory

For example, if opening inventory is ₹10 000 and purchases amount to ₹7500, and the closing inventory (which
is also the beginning inventory for the next month) is ₹9000, then the basic cost of food is:

cost of food = opening inventory + purchases – closing inventory

= ₹10 000 + ₹7500 – ₹9000
= ₹17 500 – ₹9000
= ₹8500

The value of the inventory is the critical component in deriving an accurate cost figure from the basic
formula given above.

The information needed to accurately assess the value of inventory is obtained from daily receiving reports (that
is, purchases), perpetual inventory cards (that is, inventory records that indicate what is in storage and what
supplies have been removed from storage at the request of the kitchen), and by doing a physical inventory.

FOOD COST REPORT

A monthly food cost report is often required by management. The basic form of the food cost report tends to be a
comparison of food cost percentages.

Percentages are used instead of actual net food cost as such costs vary according to sales. Percentage food cost
tends to remain constant regardless of sales.
Food cost percentages

Food cost percentages are computed by using the following equation:

food cost percentage = net food cost/food sales

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For example, if net food costs are ₹5500 and food sales were ₹13 700, then

food cost percentage = net food cost/food sales

= ₹5500/₹13 700
= 0.401
= 40%

The food cost report often compares the current month’s results with the food cost percentage of the previous
month or the cost percentage of the same month a year ago

Management can then decide if monthly food costs are under control.

Date Food Costs Food Sales Food Cost Percentage

Last month ₹8000 ₹32 000 25.0%

Previous month ₹8500 ₹30 000 28.3%

Same month last year ₹9500 ₹31 000 30.6%

CUMULATIVE AND NON-CUMULATIVE: MIS

Commulative simply means Increasing or enlarging by successive addition.

To understand it better consider following example:

Cumulative Cost Records

The easiest way to keep track of daily food costs is to use a form like the one shown in Figure. On this form, the
cost of direct supplies, the cost of stores, total costs today, cumulative cost for the month, sales for the day,
cumulative sales for the month, cost percentages for the day, and cost percentages for the month can be entered.

Note that the form does not take into account transfers.
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Some POS systems have this feature and can be used to track daily food costs.

Cost Cost to Sales Sales to Cost % Cost % to

Date Stores Directs
Today Date Today Date Today Date

Daily cumulative food cost record

A new form is started each month. Nothing is carried forward from month to month. The month-end totals
should be close to the figures obtained using other monthly food cost procedures, such as those calculated after
doing a physical inventory.

The information needed to fill in the food cost record are the daily food purchase reports for direct costs, copies
of requisitions for stores, and the daily sales figures.

Daily cumulative food cost record

The daily cumulative food cost record will quickly indicate if daily food costs are getting out of hand. A single
bad food cost percentage day may not be anything to worry about as supplies charged against that day may not
have been entirely used that day. For example, directs might be received only twice a week and so on those days,
costs will look high. However, the directs might be used over a period of two or three days. Changes in the
pattern of the cost percentages may indicate problems.

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