Get a grip! Prevent high costs on Food & Beverage
Get a grip!
The end of the month is near. You grab your laptop, and you look at the numbers. Turns out that the purchase percentages on Food & Beverages are pretty high. Sounds familiar? Nothing is more annoying than determining – too late – that your costs are out of line. How do you solve that? The numbers tell the tale!
Hindsight is never the best option. It is difficult to find the correct cause when the costs are too high. The administration does not come up with a clear answer right away. It is a combination of the purchase price, usage, waste, failure, and sales price. Does your hotel have fluctuating purchase percentages? Are you structurally higher than desired? Then keep on reading!
In this fourth blog, I’ll zoom deeper into the purchasing cost of Food & Beverage. This department has, as the name indicates, two large expense items that you can influence on a daily basis. That means it can go either way. Either the costs will become sky high, or you can make money because you manage it well.
‘Make a pre-calculation and check the supplies and the purchasing price on a regular basis. That provides structure and gives you grip.’
The purchase percentages are divided into the purchase of Food (food cost) and Beverage (beverage cost). In the Statler platform, we will then subdivide the beverage cost into coffee/tea, sodas, beer, wine, and liquor. The purchase percentage of coffee/tea and soda is usually around 20%. The other categories tend to score between 25 and 30%.
The first step on the road to control is a pre-calculation of the drink menu. You decide the retail price based on agreed-upon purchase prices. Make sure that the ‘top runners’ are calculated better than the margin that you are aiming for. It is common for a pre-calculation to be done when a company starts up or if you switch suppliers. My advice: do it more often! At least once or twice a year (because of price increases of suppliers).
Then you focus on the sub percentages. Make sure that there are groups for coffee/tea, sodas, beer, wine, and liquor in the cash register. You have to ‘shoot’ these costs to your PMS and (eventually) your accounting system. On the purchasing invoice, it is important that there are purchasing ledgers for coffee/tea, sodas, beer, wine, and liquor. That makes it a lot easier to determine the cost price percentages per segment. You can read more about the administrative processing of food/beverage costs in a separate blog!
‘Prevent your profits from leaking out. Register your costs, from use up to cash register registration.’
Are the purchase percentages higher than expected? Then you can now zoom into one (or more) of these five percentages in a targeted manner. If you would like to know where your profit is leaking out, perform the following check-up.
Purchase prices; check and see if the agreed-upon purchase prices are invoiced that way.
Supply management; make a ‘goods circular account’ of a number of items. In this, you highlight the numbers of a single week: the starting supply, purchases, sales, and end supply. This must add up. Of course, you can use different intervals, such as two weeks. What does this information yield? Together with the operation you can follow the process and show that there is a check-up system in place.
Then you can scrutinize the different parts.
Cash register registration: are all complimentary drinks and drinks for the staff registered?
Quantity: are the correct measurements for pouring quantity used? (Note that much is lost within your beer tap system).
Make sure that usage is registered during events and parties so that you can calculate the percentage.
Software: enter the sales of drinks (in Statler Daily), so an overview in purchases already becomes clear during the month. Awareness of the purchase prices ensures that the percentages will line up more towards the pre-calculation.
An (un)usual habit
Every hotel has its own habits. Ingrained patterns that you often lose sight of. There is no right or wrong, but it never hurts to do random stock checks. This way you may find out that a manager is in the habit of taking a Baileys at the end of his shift. Every month two bottles are purchased, but they never show up in the cash register. Or you discover that a daily regular customer always receives a free drink, that is not registered. Because of these habits, a part of your beverage cost is being given away. As long as this is a conscious policy, it does not need to be a problem. But you do need to realize that it influences the purchasing percentage.
The food cost is calculated per kitchen. Most hotels only have one single kitchen. So, that means one single percentage for a possibly large turnover. Usually, the turnover ratio for food/beverages is 3:1. That makes it even more important to focus on a good percentage.
Here the pre-calculation is also essential. It needs to be calculated for every change of menu. When menus are used for periods that are longer than six months it really is a good idea to re-check them. Prices vary more often and usually the supplier does not tell you this specifically.
‘Hidden costs can cause the counter to go sky-high sometimes. Do you know how many products end up in the garbage every day? '
The food cost of a hotel is usually a combination of breakfast, á la carte, banquets, bar, and room service. Each with their own slant – and so, in the end, a weighed food cost. For breakfast and banquets, the food cost is usually lower. For á la carte, bar, and room service it tends to be higher. You can also make separate post-calculations for the two.
Convenient to remember! For the breakfast and banquet buffets, you will want to check the real usage and the waste periodically. Take for instance a week in which you register how much you actually use for breakfast and what you throw away. Then divide this by the actual revenue; this is how you calculate the food cost of the breakfast. This also gives you data analyses of used and discarded items. It offers you handles to improve certain points. So, this is valuable information!
When post-calculating items á la carte you randomly have a few dishes made (every week). Based on the pre-calculation you check the quantity and the purchase price of the dish. It could say for instance that a tournedos weighs 180 grams, while on the purchase invoice the butcher possibly delivers an average of 195 grams. Or side dishes are more generous than on the pre-calculation. This gives the chef valuable information. He then can adjust his work method right away.
The numbers tell the tale
Would you like to work towards an optimal food and beverage cost? No, this is not that easy. It is not an automatic process, with a simple press of a button. You must spend time and energy in registering, pre-calculating, and post-calculating. Make it a set part of the business process! Of course, this does not all have to end up on the plate of the chef. By designing the correct administration and efficient check-ups, much can be achieved. If you take a yearly Food & Beverage turnover of for example € 1,000.000, then savings from 30% to 29% yields a nice € 10,000. Isn’t that what you do this for?
Statler BI is the indispensable management tool in the hotel industry. Discover the advantages and find inspiration in our client cases. The program integrates data from several systems. That means complete and clear reports. In the Daily, you can find costs and productivity of Food & Beverage. Two factors that management and employees can influence the most in their daily, weekly, and monthly reports. And that yields a lot: a motivated team and a beautiful result.
Stefan van Heerwaarden
Owner Statler BI
Strategic solutions based on data. That means looking beyond the numbers! A sharp analysis leads to the practical management of your hotel. The result? Better profit margins, satisfied owners, motivated staff, and happy guests.