Foundations of cost control by daniel traster chapter07

Beverage Cost Percent• Often tracked separately for beer, wine, liquor, and non-alcoholic drinks • BC% usually lower than FC% • Biggest challenge in tracking BC% is that the same liqu

Class Name

Instructor Name

Date, Semester

Foundations of Cost Control

Beverage

Control

chapter 7

Opening Question

• Both use standard recipes

• Both require quality and quantity

standards.

• Both require menu prices that cover cost

per portion and a contribution margin.

• Both can have costs tracked as a percent

of sales.

What control concepts have we studied so far that crossover easily to beverages?

Some Key Differences for Beverages

customer’s

request Differences

Types of Liquor

• May only have well brands. Catering Bars

• For special events.

• May offer a very limited liquor selection.

Beverage Yields

Wine and beer sold by the bottle have a yield

of 100%

Y% = yield in oz ÷ oz in original container

Yield percent accounts for evaporation and

spillage and is calculated by seeing how many ounces or drinks a container yields

Calculating Cost per Portion for a Single

Liquid Beverage

1 Convert AP$ (from invoice) to units that

match EP portion size

2 Calculate EP$ = AP$ ÷ Y%

3 Cost per portion = EP portion size X EP$

What is the cost per portion for 1 ¼ oz shot

of tequila that costs $17.50/750 mL bottle and has a yield percent of 94.7%?

Costing Multi-Ingredient Beverages

• The spreadsheet is identical to the one

used for food recipes, except…

―BC% replaces FC% (conceptually the same but often

different numbers in the operation)

―SF% may or may not apply

―There is no Q Factor

When costing multi-ingredient beverages, you

must use a recipe costing spreadsheet.

Recipe Costing Example

Margarita SF%: 1.2% Cost per Portion:

Portions: 1 BC%: 20% Selling Price:

Total

SF adjusted total

Recipe Costing Example Solution

Margarita SF%: 1.2% Cost per Portion: $0.78

Portions: 1 BC%: 20% Selling Price: $3.90

Determining Sales Prices

Determining the sales price is the same process

as for food The food cost method is the most

common approach

Determining Sales Prices

BC

SP x BC%

BC= Beverage Cost 14

Beverage Cost Percent

• Often tracked separately for beer, wine,

liquor, and non-alcoholic drinks

• BC% usually lower than FC%

• Biggest challenge in tracking BC% is that

the same liquid earns different amounts of money depending on how it is sold

Use BC% to monitor compliance with company quality and quantity standards

Three Methods for Reconciling Alcohol Standard vs Actual Costs and Sales

Cost Method

Liquid Measure

MethodSales Value

Method

The Cost Method

1 Conduct a physical storeroom inventory

2 Inventory the bar as well

3 Compare cost of beverages sold to beverage

sales to get beverage cost percent

The Cost Method is similar to tracking food

cost:

Cost Method: Cost of Food Sold

- Promotions and Write-Offs

Cost of Beverages Issued (from storeroom)

Step One

Cost Method: Cost of Food Sold

Bar Inventory Differential =

Opening Bar Inventory – Closing Bar Inventory

• Accuracy of the differential depends on how

one measures the contents of each open

bottle at the bar.

• Measure partials by eye, by ruler, or by scale.

• Differential may be positive or negative.

Step Two

Cost Method: Cost of Food Sold

Cost of Beverages Sold =

Cost of Beverages Issued + Bar Inventory

Differential

• If differential is negative, it results in the

number being subtracted.

Step Three

Cost Method: Cost of Food Sold

Cost of Beverages Sold (BC) ÷ Beverage Sales

• BC% can be done separately for beer, wine,

liquor, and non-alcohol by calculating each

category’s cost and sales totals separately

Step Four

Cost Method

• Using the cost method, each category’s BC%

should remain relatively consistent from

month to month; OR

• Use sales records and recipe costing sheets

to determine standard beverage cost for that month Actual and standard cost (or actual and standard BC%) should be fairly close

Example 7e

The data set on the next slide is from a

restaurant bar Calculate cost of beverages

sold and BC% for this operation.

Example 7e

• opening storeroom inventory = $38,740

• closing storeroom inventory = $35,490

• purchases = $71,750

• transfers in = $860

• transfers out = $1,730

• promotions = $220

• bar opening inventory = $1,270

• bar closing inventory = $1,430

• total bar beverages sales = $381,400

Cost of beverages sold = $73,910 + (-$160)

= $73,750 BC% = $73,750 ÷ $381,400 = 19.3% 26

The Liquid Measure Method

• Use sales data and recipes to calculate

how many oz of each liquor should have been consumed in prior period.

• Requires scale to measure partial bottles.

• Save empty bottles to track used bottles.

• Easier with automated dispensers.

The Liquid Measure Method counts liquor, not

dollars

The Sales Value Method

• Challenge lies in that the same alcohol can

sell for different prices based on how it is sold (shots vs cocktails; mugs vs

pitchers, etc.)

In the Sales Value Method, the manager

compares money that should have been made in sales from each bottle of alcohol to actual sales during the period

Sales Value Method

To account for varied sales values:

1 Make an adjustment to standard sales totals

based on the actual drinks sold; add or

subtract the extra sales dollars made or lost for each drink sold differently from a shot or bottle

2 Base the expected sales value on the bar’s

historical average sales for that value (not

menu price); remains constant over time if menu mix does not change Compare

expected to actual.

Sales Value Method

3 Calculate a standard deviation from sales for each category of alcohol Calculate potential sales value of inventory used assuming all

liquor sold as shots, wine as bottles, beer as glasses Compare potential sales value to

actual sales totals and determine the percent difference This difference should remain

constant month to month with constant sales mixes.

Universal Method Response

• Investigation may reveal improper

measuring, giving away drinks, or record sales.

off-the-No matter which method is used,

managers should investigate any

unacceptable variances between

standard and actual data

Beverage Portion Control

Beverage Portion Control (cont.)

Portion Control and Glassware

• Most drinks are paired with a specific glass

and filled to the rim, so it is impossible to

over-pour

• Right glassware makes the portion look large

while controlling portion size

• Wine is the exception as it is not filled to the

top of a wine glass To control, pour into

another measurement container first and

then pour into the wine glass (Aerates wine, too!)

Alcohol Laws and Ethics

All restaurants and bars need licenses to sell alcohol When licenses are limited by the state,

restaurants may adopt a “bring your own”

vs.

Alcohol Laws and Ethics

• Cannot sell legally to minors or intoxicated

guests; risks loss of license

• To maximize profit, push quality, not quantity

higher quality alcohol for a drink

an alcohol-related accident to sue the

business and server who sold alcohol to the perpetrator of the accident.

Common Forms of Theft at Bars

Common Forms of Theft at Bars

• Playing with the Cash Register

―Do not allow bartenders to leave the cash drawer open

―Keep tip jar away from register; use POS system

―Give each bartender a separate cash drawer that only the manager closes out

―Swap cash drawers mid-shift to see if they match the register

Common Forms of Theft at Bars

• Playing with the Inventory

―Controlled with automated dispensing systems.

―Bottles marked with a stamp to spot unauthorized bottles.

―Maximum par stock at the bar.

―Forbidding employee bags or coats behind the bar.

―Using a bottle exchange system (return empties to get new bottles).

―Requiring employee to sign for requisition at pick-up.

Non-Alcoholic Beverages

Non-Alcoholic Beverages

• Good sources of profit.

• When costing, include common add-on’s

(honey, sugar, milk, etc.) and assume an

average number of refills.

• Maintain quality and quantity standards for

production, storage, and portion size as with any other product.

• Control which beverages employees may

consume for free on site.