In many respects, the other expenses related to food and beverage operations should be treated just like food and beverage expenses. For instance, in the case of cleaning supplies, linens, uniforms, and the like, products should be ordered, inventoried, and issued in the same manner used for food and beverage products.
Recall that, in most cases, reducing the total dollar amount of variable cost expenses is generally not desirable because, in fact, each additional sale will bring additional variable expense. In this case, although total variable expenses may increase, the positive impact of the additional sales on fixed costs will serve to reduce an operation’s overall other expense percentage. It is also true that an operation’s fixed costs can only be reduced when they are measured as a percentage of total sales. This is done, of course, by increasing an operation’s total sales.
To see how this occurs, let’s examine a shaved-ice kiosk called Igloo’s located in the middle of a small mall parking lot. Figure 8.9 demonstrates the impact of volume increases on both total other expense and other expense cost percentage. In this example, some of the other expenses related to food and beverage operations are fixed and others are variable. The variable portion of other expense, in this example, equals 10 percent of gross sales. Fixed expenses equal $150.
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Utility services costs are an extremely important category of other expenses related to food and beverage operations. To produce their menu items, serve, and clean up, restaurants typically use thousands of gallons of water, consume significant amounts of natural gas (generally used for cooking and water heating), and utilize a large number of kilowatt-hours (kWh)—the measure of electrical usage—each month.
Like food and labor costs, energy usage costs can be controlled. This process starts by understanding just where your restaurant uses its energy. Although the heating and cooling costs incurred by a restaurant in Alaska will be different from those of a restaurant in Arizona, the usage pattern shown in Figure 8.10 is a typical one. Your utility costs can (and should) be controlled, and learning and teaching your staff about the information in Figure 8.11 is a good way to start the process.
FIGURE 8.10 Typical Restaurant’s Energy Consumption Pattern
Activity Energy Use %
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“The piece looks great, but tell me about the prices one more time,” said Nigel, the manager of the Old Dublin Pub.
Nigel was talking to Alice Petoskey, the sales representative for Image Custom Printing.
Nigel had asked Alice for a quote on producing a flyer that would advertise the pub’s St. Patrick’s Day festivities to be held in just one month. Nigel planned to offer special menu items on that day, as well as discounted prices on the Irish-made beers he offered on tap. He had also arranged to hire a band to play traditional Irish music. He was now considering how best to advertise the event and all of the special activities he had planned at the pub on that day.
He and Alice were discussing prices for printing the beautiful flyer Alice’s company had designed for him.
“Okay,” replied Alice, “There is a one-time design and setup fee of $300.00, no matter how many pieces we print.
After that fee, the flyers are $0.50 per copy if you buy less than 1,000 copies, $0.40 per copy if you buy between 1,000 and 10,000 copies, and, like I was telling you, the best deal for you is if you buy more than 10,000 copies.
Then the price per copy goes down to only $0.25!”
1. What would Nigel’s total payment to Alice’s company be if he purchases 500 flyers? 6,000 flyers? 11,000 flyers? Use the following table to help you with your answer.
Number of Copies Cost per Copy Setup Fee Total Cost
2. What additional flyer-related costs will Nigel incur if he decides to purchase the advertising flyers from Alice?
3. Assume you are Nigel. What additional and potentially lower-cost advertising alternatives would you want to consider prior to agreeing to buy the flyers from Alice’s company?
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