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The effect of price and volume on revenue

Table 7.1
OHT 7.1 Cousins et al: Food and Beverage Management, 2nd edition © Pearson Education Limited 2003
Key points of revenue appraisal
• Revenue is product of price and volume
• Appraisal needs to take account of changes in both
price and volume
• Averages not always accurate and prone to
misinterpretation
• Allow for inflation and/or price rises
• Need to compare like with like
• Incorporate 12-month rolling totals to determine
true trends and performance
• Revenue cannot be fully appraised by itself

OHT 7.2 Cousins et al: Food and Beverage Management, 2nd edition © Pearson Education Limited 2003
Calculation of change in costs and revenues

Table 7.2
OHT 7.3 Cousins et al: Food and Beverage Management, 2nd edition © Pearson Education Limited 2003
Examples of cost percentages for
foodservice operations

Table 7.3
OHT 7.4 Cousins et al: Food and Beverage Management, 2nd edition © Pearson Education Limited 2003
Key points of cost appraisal
• Structures vary, and change over time
• Can be measured in cash or percentages
• Proportional relationship between costs
• Relationship between costs and inflation
• Cross-sectional and time-series analyses useful
• Incorporate 12-month rolling totals to determine true trends
and performance
• Operators with the lowest costs perceived as having a key
advantage
• Allocating indirect costs more complex than direct costs

OHT 7.5 Cousins et al: Food and Beverage Management, 2nd edition © Pearson Education Limited 2003
Example profit and loss account

Table 7.4
OHT 7.6 Cousins et al: Food and Beverage Management, 2nd edition © Pearson Education Limited 2003
Comparison of gross profits

Table 7.5
OHT 7.7 Cousins et al: Food and Beverage Management, 2nd edition © Pearson Education Limited 2003
Comparison of operating profits

Table 7.6
OHT 7.8 Cousins et al: Food and Beverage Management, 2nd edition © Pearson Education Limited 2003
Yield comparisons

Table 7.7
OHT 7.9 Cousins et al: Food and Beverage Management, 2nd edition © Pearson Education Limited 2003
Relationship between revenue, costs
and profits in foodservice operations

Figure 7.1
OHT 7.10 Cousins et al: Food and Beverage Management, 2nd edition © Pearson Education Limited 2003
Comparison of GP in relation to revenue

Table 7.8
OHT 7.11 Cousins et al: Food and Beverage Management, 2nd edition © Pearson Education Limited 2003
Comparison of GP and GP %

Table 7.9
OHT 7.12 Cousins et al: Food and Beverage Management, 2nd edition © Pearson Education Limited 2003
Sales mix example

Table 7.10
OHT 7.13 Cousins et al: Food and Beverage Management, 2nd edition © Pearson Education Limited 2003
Effect of changed sales mix

Table 7.11
OHT 7.14 Cousins et al: Food and Beverage Management, 2nd edition © Pearson Education Limited 2003
Sales mix example (beverages)

Table 7.12
OHT 7.15 Cousins et al: Food and Beverage Management, 2nd edition © Pearson Education Limited 2003
Example of profitability calculations

Table 7.13
OHT 7.16 Cousins et al: Food and Beverage Management, 2nd edition © Pearson Education Limited 2003
Example of popularity and profitability ranking

Table 7.14
OHT 7.17 Cousins et al: Food and Beverage Management, 2nd edition © Pearson Education Limited 2003
Menu engineering matrix

Figure 7.2
Adapted from Kasavana and Smith 1999

OHT 7.18 Cousins et al: Food and Beverage Management, 2nd edition © Pearson Education Limited 2003
Comparison of net operating profit measures

Table 7.15
OHT 7.19 Cousins et al: Food and Beverage Management, 2nd edition © Pearson Education Limited 2003
Key points of profit appraisal
• Be clear how profit measures are contrived
• Compare like with like
• Appraise against objectives to give value
• Setting objectives includes subjective judgements
• Sales mix analysis determines real trends
• Profit percentages measure efficiency, not profitability
• Percentages allow for comparison only, cash contribution is what is
being sought
• Comparison with industry norms can be useful
• Use rolling 12-month totals to determine true trends and performance
• Take account of stakeholders’ priorities

OHT 7.20 Cousins et al: Food and Beverage Management, 2nd edition © Pearson Education Limited 2003
Customer importance/operation
achievement matrix
Achievement by operation
Importance to customer

Figure 7.3
OHT 7.21 Cousins et al: Food and Beverage Management, 2nd edition © Pearson Education Limited 2003
Customer importance/operation
capability matrix
Ability of operation
Importance to customer

Figure 7.4
OHT 7.22 Cousins et al: Food and Beverage Management, 2nd edition © Pearson Education Limited 2003
Customer importance/staff importance matrix
Importance to staff
Importance to customer

Figure 7.5
OHT 7.23 Cousins et al: Food and Beverage Management, 2nd edition © Pearson Education Limited 2003
The three levels of strategy and the
relationship between them

Figure 7.7
OHT 7.24 Cousins et al: Food and Beverage Management, 2nd edition © Pearson Education Limited 2003
SWOT matrix
Strengths Weaknesses

List of strengths List of weaknesses

List of 1 2
Opportunities opportunities Strengths to make Weaknesses which
use of prevent exploitation
opportunities of opportunities
List of threats 3 4
Threats Strengths to Weaknesses which
counter threats prevent countering
threats

OHT 7.25 Cousins et al: Food and Beverage Management, 2nd edition © Pearson Education Limited 2003
Eight possible strategic routes for
foodservices operations

added value
Perceived

Cost to the customer


Figure 7.9
Adapted from Johnson and Scholes 1999

OHT 7.26 Cousins et al: Food and Beverage Management, 2nd edition © Pearson Education Limited 2003
Ansoff’s growth matrix with alternative
strategies/directions
Products
Markets

Figure 7.11
OHT 7.27 Cousins et al: Food and Beverage Management, 2nd edition © Pearson Education Limited 2003
Strategic means and assessing options
• Strategic means
• Internal development
• Mergers and acquisitions
• Joint development
• Assessing options
• Suitability
• Feasibility
• Acceptability

OHT 7.28 Cousins et al: Food and Beverage Management, 2nd edition © Pearson Education Limited 2003

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