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  • Cost Per Recipe Unit

    Cost Per Purchase/# Of Units Into Quantity

    Total Cost

    Quantity*Cost Per Recipe Unit

    Average Check

    Yearly Revenue/# of Guests Served

    Seat Turnover

    Available Seats/Guests Served

    Revenue Per Day

    Yearly Revenue/365 Days in A Year

    Guests Per Year

    Revenue Per Year/ Check Average

    Guests Per Day

    Guests Per Year/365 Days in a Year

    Turnover

    Guests Served (Guests Per Day)/ # of Seats

    Labor Cost %

    Total Cost of Staffing/Revenue Per Day

    Profit Margin

    Net Income/Total Revenue

    Cost of Sales

    Beginning Inventory + Purchases- Ending Inventory

    Food Cost %

    Food Cost of Sales/Food Revenue * 100

    Assets

    Liabilities+ Equity

    Current Ratio

    Current Assets/Current Liabilites

    Solvency Ratio

    Assets (total)/Liabilities (total)

    Average Food Inventory

    Beginning and Ending Inventory/2

    Food Inventory Turnover

    Cost of Food Revenue/Average Inventory

    Beverage Cost %

    Cost of Beverages Sold/Beverage Revenue

    The 5 P's

    Proper
    Planning
    Prevents
    Poor
    Performance

    Commercial Operations

    Maximize Profits. Freestanding Eating and Drinking Places
    Independent Properties
    Chain and Franchise Restaurants
    Lodging Food Service Operations
    Other Commercial Facilities
    Public Cafeterias
    Catering Operations

    Organization of Commercial Operations

    Independents
    Chain Restaurants
    Franchises

    Independent Operations

    Owned by an owner or owners who have one
    or more properties that have no chain
    relationship
    "mom and pop" operations

    Independent Operation Advantages

    Small initial capital investment
    lease land, facilities and equipment
    Low inventory
    Buying on credit

    Independent Operation Disadvantages

    High risk
    Lack of capital
    Long hours
    Need to know it all

    Chain Restaurants

    Part of a multi-unit operations
    May be owned by a parent company, a franchise company, or private owner or owners
    Share the same menu, equipment etc

    Chain Restaurant Advantages

    Advantages
    Ready access to cash and credit
    Ability to experiment without great risk
    Resources to hire staff specialists
    Greater access to useful comparative financial information

    Chain Restaurant Disadvantages

    Bureaucratic rules and procedures can slow response times to market changes

    Franchises

    Private / Company owner of a chain restaurant
    Pays fees to the franchise owner
    Must maintain business and quality standards

    Franchise Advantages

    Assistance in opening and operating the business
    Franchisor-sponsored training and materials
    Greater exposure and higher revenue because of extensive advertising and name recognition
    Lower costs due to volume purchasing
    Tested operating procedures

    Franchise Disadvantages

    Franchise contracts restrict style and methods of operation, products served, services offered, décor, and furnishings
    Franchise contracts usually favor the franchisor

    Noncommercial Operations

    Minimize Costs.Business / Industry Organizations
    Everything from gourmet food to vending machines
    Healthcare
    Self-operated or outsourced
    Educational Institutions
    Self-operated or outsourced

    Private Clubs
    Country (golf) Clubs, City Clubs, Athletic Clubs
    Leisure and Recreation Operations
    Theme Parks, Sport Arenas
    Transportation Companies
    Airlines, Trains, terminals
    Other Organizations
    Prisons, military, etc

    Restaurant Organizational Structure Around the World

    Asia - Many layers
    Labor is very inexpensive
    US - Few layers
    Labor costs are an issue
    Europe - Very flat
    Labor costs are high
    Unions

    3 General Categories

    Managers
    Supervisors
    Entry Level Production and Service Employees

    Top Managers

    Long term plans and goals
    Overall business environment (competition, economy, consumer preferences)

    Middle Managers

    Communication flows up and down
    Short term goals
    Manage the work of supervisors

    Supervisors

    Link between management and employees
    Use their technical skills (Scheduling, overlooking the immediate operation)

    Line managers

    In charge of one or more revenue generating departments that directly provide goods or services to guests

    Staff Managers

    Provide support and advice to line managers
    Human Resources Manager, Controller, Purchasing
    agent, Other staff specialists

    Typical Production/Back of House Positions

    Chef's - executive, sous (assistant), garde-manger, banquet
    Cooks - soup, sauce, fish, roast, pastry, relief, assistant
    Bakers - head bakers, assistant bakers, pastry chefs
    Pantry staff
    Stewards - chief stewards, porters, dishwashing employees
    Storeroom and receiving employees

    Typical Service Positions/Front of House

    Dining room managers
    Hosts / receptionists
    Food and beverage servers
    Buspersons
    Bartenders - public and service
    Cashiers
    Expediters
    Runners
    Curbside servers

    Things to Consider Before Starting a Food Service Career

    Jobs can be hard, with long hours
    Jobs usually involve serving others
    Starting compensation often above minimum wage
    Rapid advancement possible
    Salaries after five years quite competitive with other
    industries (discussion)
    Noncommercial opportunities are often underrated
    Positions expected to be available in all food service segments

    Management By Fear

    Firings continue until morale improves

    Lend a Helping Hand

    Managing by objectives and assitance

    Purpose of a Business

    To create a customer

    Management

    Using what you have to do what you have to do

    Management Resources

    (There are never enough)
    People
    Money
    Time
    Energy
    Products
    Equipment and Space
    (Procedures)

    Effective Manager

    Allocates resources wisely and make good decisions when solving problems critical to the operation
    acknowledge his mistake and learns from it

    Ineffective Manager

    Unable to make the best allocation and problem solving decisions
    does not realize that he did a mistake or perceive it as a weakness to acknowledge the mistake

    7 Management Tasks (POCSDCE)

    Planning, Organizing, Coordinating, Staffing, Directing, Controlling, Evaluatiing

    Planning

    Creating goals and objectives
    Developing action plans to reach those
    goals and objectives
    Gaining access to accurate, complete information
    Maintaining good communication with other
    managers
    Building flexibility into the plans
    Making sure plans are fully implemented

    Sequence of Planning

    Vision
    Mission
    Long-Range Plan
    Business Plan
    Marketing Plan
    Operating Budget

    Mission Statement

    blueprint of a company

    vision statement

    an architectural rendering of what the company will look like once it is successfully established

    Organizing

    Answers the question "How can we best assemble and use our limited human resources to attain our objectives?"
    Involves the establishment of
    organizational charts (authority and
    communication flow) (cont. updated)

    Coordinating

    Task to assigning work and organizing people
    and resources to achieve the operations
    objectives
    Effective channels of communication to transmit messages up, down and across the organization

    Achieving organizational goals can only happen if

    there is open communication between
    department heads and other department
    managers

    Delegation

    authority passed down the organization
    responsibility cannot be delegated

    Staffing

    Involves recruiting and hiring applicants
    Goal - bring the best-qualified employees
    How - through screening process
    Application forms
    selection tests
    reference checks

    Employee Orientation

    Necessary to properly introduce new employees to supervisors, co-workers, and the organization in general

    Directing

    Includes supervising, scheduling, and disciplining employees
    Know how to: motivate, gain cooperation, give orders, and bring out the best in people
    Issues: Employee turnover
    Why? - how to prevent?
    Opportunities: promotions

    Controlling

    Developing and implementing control systems
    purchasing, receiving, storing, issuing, preparing, and serving products.
    Control Process
    Establish Standards
    Measure Actual Operating results
    Compare Actual Results with Standards
    Take Corrective Action
    Evaluate Corrective Action

    Evaluating

    Reviewing the Operation's Progress - Goals
    Measuring Employee Performance
    Assessing the Effectiveness of Training Programs
    Very important to make time to evaluate

    Primary Groups

    Guests
    Owners
    Area / Regional Dir.
    Managers
    Employees

    Secondary Groups

    Suppliers
    Local Community
    Nuisance Concerns
    Env. Concerns
    Entertainment
    Civic
    Gov. Reg. Agencies

    Managements Responsibility

    Meet or exceed the guest's wants and needs
    The ability to do this will help achieve success

    Marketing Defined

    Seeing the business from the perspective of the guest - how the business is portrayed and viewed
    Marketing initiatives have to be supported by top mgmt
    Use strategies that focus on what is best for the guest
    Use guest-friendly systems
    Talk about service routinely

    Identify market area characteristics: demographic information about potential guests in general, ages, gender, level of education, marital status, number of children, family income, type of employment, location of residence. Also areas volume of retail sales, the number and types of industrial and commercial business, the impact of tourism, available transportation.
    Evaluating proposed site: researching how many people living or working 1. in the surrounding metropolitan area 2. within walking distance 3. within easy driving distance. Parking issues, traffic flow patterns, distance from exists of highways, location of other attractions
    Analyzing the competition: inventory of all competing food and beverage facilities in the projects market area; location, type of restaurant, source and volume of business, days and hours of operation, menu prices, guest check average, type of service, number of seats, availability of alcoholic beverages, entertainment, promotional efforts, chain affiliation
    Estimating demand: using the areas food and beverage sales, surveys
    Projecting operating results: First, second and third years financial operational results

    ...

    Feasability Studies

    Designed to give an organization an idea of the probability of success of a location
    Done by various agencies outside/inside organization
    Used for financing, potential investors and developers
    Identify market area characteristics
    Evaluating proposed site
    Analyzing the competition
    Estimating demand
    Projecting operating results

    Ongoing Market Research

    Property analysis
    Competition analysis
    Market analysis
    Guest profile
    Marketplace factors and trends

    Property analysis: a written unbiased appraisal of a food service operations production and service areas, products and services.
    Competition analysis: Visit the competition!!!
    Market analysis: A market is a group of guests with similar needs, wants, backgrounds, incomes and buying habits. Market analysis involves guest profile research, and identification of marketplace factors and trends
    Guest profile: guest's data, age, gender, address, frequency of visits etc
    Marketplace factors and trends:

    ...

    Marketing Plan

    Translates marketing research into strategies and tactics to achieve organizational goals
    Select target markets
    Determine objectives
    Create action plans and goals
    Evaluate and revise

    Select target markets: Ie. Senior citizens during late afternoons
    Determine objectives: Generate $1,200 weekly in incremental revenues through early dining specials for diners over the age of 55.
    Create action plans and goals: 1) Newspaper ads (1 week) 2) Coupon program (7/15/06) 3) Sales and follow-up calls to nearby retirement centers.
    Evaluate and revise: 1) Assess incremental revenue data 2) Interview diners over the age of 50 3) Solicit input from ee's

    ...

    SMART goals

    Specific
    Measurable
    Attainable
    Realistic
    Time Bound

    Sales
    Internal
    Any effort to increase revenue from guests who are already at the restaurant
    suggestive selling
    internal merchandising (food cart, table tents)
    special promotions (coupons, gift certificates)
    External
    sales calls to generate more business

    ...

    Advertising
    Newspapers
    Outdoor signs
    Magazines
    Radio
    Television
    Direct mail
    The Internet

    ...

    Public Relations
    Publicity

    ...

    Market segmentation: process of dividing a total market into several relatively homogeneous groups

    ...

    Geographic segmentation: dividing an overall market into homogeneous groups on the basis of population locations

    ...

    Demographic segmentation: distinguishes markets on the basis of various demographic or socioeconomic characteristics

    ...

    Psychographic segmentation: divides consumer markets into groups with similar psychological characteristics, values, and lifestyles

    ...

    Product-related segmentation: dividing consumer market into groups based on buyers' relationships to the good or service
    The most popular approaches are based on benefit sought, usage rates, and brand loyalty levels

    ...

    Personal influences on consumer behavior include individual needs and motives, perceptions, attitudes, learned experiences, and their self-concepts
    Interpersonal determinants of consumer behavior include cultural, social, and family influences

    ...

    Transaction marketing: characterized by buyer and seller exchanges with little or no ongoing relationships between parties

    ...

    Relationship marketing: developing and maintaining long-term, cost effective exchange relationships with individual customers, suppliers, employees and other partners for mutual benefit
    Can help all parties involved by:
    Mutual protection against competitors
    Lower costs
    Higher profits
    Preferential treatment
    Lifetime value of a customer: the revenues and intangible benefits from the customer over the life of the relationship, minus the amount the company must spend to acquire and serve that customer

    ...

    Frequency marketing: program that rewards purchases with cash, rebates, merchandise, or other premiums

    ...

    Affinity program: marketing effort sponsored by an organization solicits involvement by individuals who share common interest and activities

    ...

    Co-marketing: two businesses jointly market each other's products

    ...

    Co-branding: occurs when two or more businesses team up to closely link their names for a single product

    ...

    Menu Pricing Styles

    Table d'Hôte: (tobble dote), (fixed price menus) complete meal for one price; Banquet & Big Mac Meal menu

    À la Carte: items are listed and priced separately

    Combination table d'Hôte / À la Carte:

    Menu Schedules: How often the menu is used.
    Fixed Menu: A Single menu that is used daily - Issue with book statement "Fixed menus work best at food service establishments where guests are not likely to visit frequently, or where there are enough items on the menu to offer an acceptable level of variety for repeat guests." - McDonalds, Burger King, KFC???
    Cycle Menu: The menu changes every day for a certain period of days, then the cycle is repeated. Usually range from one to four weeks. Important to find the right balance in the length of the cycle. Too short: menu items repeated to often which can lead to guest dissatisfaction. Too long: production and labor costs involved in purchasing, storing and preparing may not be costly.
    Menu Types: Designed around the three traditional meal periods.
    Breakfast: Standard (juice, fruits, eggs, cereals, pancakes, etc.
    Lunch: Variety (fast meals and smaller portions,
    Dinner: Main meal of the day, greater variety, larger portions and thus higher priced items.

    ...

    Specialty: Large variety of specialty menus. Most common:
    Children's: The goal is to entertain the kid(s) long enough for the parents (and other guests) to eat in peace. Menus shaped like cartoon characters, dinosaurs or rocket ships etc.
    Food is familiar, simple and (nutritious) portions are usually small at a reasonable price.
    Ritz Carlton "Healthy Taste" website
    Senior Citizen's: Health and price conscious.
    Alcoholic Beverages: Separate Menu,
    Dessert: Dessert Trays or Carts. Advantages of a separate dessert menu: 1. offer more items, 2. more room for bold graphics and descriptive copy, 3. specials.
    Room Service: offer limited number of items. Door knob menu, menu available on in-room TV.
    Take Out: items that can keep an acceptable quality level over a (long) period of time. Inexpensive to make - website menus.
    Banquet: B menus are most often pre-made in order of pricing - guest can make changes. Mgrs select food that can keep a high quality over and be mass produced.
    California: B-fast, Lunch and dinner on the same menu and served at all times every day.
    Ethnic: Seeks to appeal to guests who like a particular cuisine. Italian, Greek, Scandinavian, Japanese etc. Question: Applebee's, Olive Garden, Red Lobster, Seasons 52, Brio,

    ...

    Menu Planning

    The success of an f & b operation
    depends largely on its menu.
    Properly planned menu creates a smooth
    work flow, guests will be served effectively and financial goals met.
    Poorly planned menu creates operational issues that will lead to guest dissatisfaction, lower employee morale and a less than optimal financial bottom line.

    Three basic rules to plan a menu

    Know your guests
    Know your quality requirements
    Know your operation

    Menu Planning

    Theme or Cuisine:
    Cost (budget):
    Ingredients Available:
    Equipment Concerns
    Personnel Concerns
    Peak Volume Prod.
    Sanitation Concerns
    Layout Concerns

    Selecting Menu Items

    Old Menus
    Books
    Trade Magazines
    Cookbooks
    Websites

    ...

    Business balance: Relationship between food costs, menu selling prices, the popularity of items, and other financial and marketing considerations. Menu Engineering

    Aesthetic balance: The degree to which meals have been constructed with an eye to the colors, textures, and flavors of foods.

    Nutritional balance: Historically for non-commercial operations (Health Care, Nursing Homes, Schools). Now - Seasons 52

    ...

    Menu Design
    Menu items organized to encourage guests to order them. A good menu compliments the restaurant atmosphere (theme, décor etc.).
    Copy: Depends on the operation, it's guests, and the meal period. Kids menu - entertaining, lunch menu - short and to the point, dinner menu - descriptive in explaining items. Divided into three elements: 1. Headings, Descriptive Copy, Supplemental Merchandising Copy
    Headings: Include: Appetizer's, Soups, Entrees. Subheads: Steak Seafood, Today's Specials and names of individual menu items. Keep menu item names simple - not to confuse guests.
    Descriptive Copy: Informs the guests about menu items and help increase sales. Menu item main and second ingredient and method of preparation. Too much info etc can turn the guest away. Generally, short to the point sentences are better than long explanatory sentences.
    Truth-in-menu-laws: Grading, Freshness claims, Geographical origin, Preparation, Dietary or Nutritional claims, Portion sizes.
    Supplemental Merchandising Copy: Devoted to subject other than the menu items - basic info about the operation such as address, phone number etc. History of restaurant, co's mission statement, even poetry.

    ...

    Layout: Making a rough draft of the menu. Planning the layout includes:
    Listing menu items in the right sequence
    2. Placing the menu items names and descriptive copy on the page
    3. Determining the menu's format
    4. Choosing the right typeface and paper
    5. Integrating artwork

    Cover: A well designed cover communicates the image, style, cuisine and even the price range of the operation. It helps to set the mood and creates expectations of the dining experience offered.

    ...

    Cover
    Appearance (not cluttered)
    Basic info - on back cover
    Heavy, durable and grease resistant
    Cover design should fit the operation
    Colors - important
    Cost

    ...

    Menu too small: crowded menus - not appealing
    Type is too small: Not every guest have 20/20 vision, light in the restaurant can be dim.
    No or inadequate descriptive menu: sometimes name of item is not enough
    Every item treated the same: Menu items needs to stand out to be noticed
    Some of the operation's food and beverage are not listed: All menu items should be listed on various menus
    Clip-on problems:
    Basic information about the property
    Blank pages

    ...

    Menu Mgmt. Software

    Pre-costing analysis- determines a menu's profitability before actual production and service; this is how ideal food cost is developed.
    Post-costing analysis - based on actual sales, not forecasted sales
    Menu mix- relates the sales of a particular item to the total number of menu items sold (# of items sold / total # of items)

    Contribution Margin

    Calculated by subtracting an items' food costs from its selling price
    Chicken sandwich sells for $8.99 and food cost is 30%....the contribution margin is-
    $8.99 x .30= $2.70 food cost
    $8.99 - $2.70= $6.29 contribution margin

    Stars- high in contribution margin and high in menu mix (soft drinks)
    Plow horses- low in contribution margin and high in menu mix (loss leaders- sale items)
    Puzzles- high in contribution margin and low in menu mix (Double Whoppers)
    Dogs- low in contribution margin and low in menu mix (some diet or low carb. items)

    ...

    Standardized Recipie Purpose

    Consistency - Quality and Quantity
    List of Ingredients for Ordering
    Control Waste / Cost
    Method / Instructions
    Quality Standards
    Equipment Needed

    Ingredient File: contains important data about each purchased ingredient, including code numbers and descriptions, as well as ingredient's;
    Purchase unit and cost per purchase unit, 2. Issue unit and cost per issue unit, 3. Recipe unit and cost per recipe unit.

    Standard Recipe File: contains recipes for all menu items.
    Sub-recipe: recipes included as ingredients within a standard recipe
    Chaining recipe:

    ...

    When developing a standard recipe - requires standardizing existing recipes according to a series of steps.

    ...

    Recipie Considerations

    Employee Skill Level
    Vocabulary
    Weights & Measures
    Uniformity of Products
    Equipment
    Exact Instructions

    Standard Purchase Specifcations

    Function
    Size
    Weight
    Count - each
    Other quality factors



    Ensures the right quality products
    are consistently available

    Recipie Measurement

    Scaling (weight)
    Volume (how much space does it take up)
    Count (count)
    Trim (waste)
    Portion Control

    Volume

    1 Tablespoon (T) = 3 Teaspoons (t)
    1 tablespoon (T) = ½ oz
    1 cup = 8 ounces (oz)
    2 cups = 1 pint = 16oz
    2 pints = 1 quart (qt) = 32oz
    4 qts = 1 gallon (gal) = 128 oz
    1 liter = 33.8 oz

    Weight

    Does not translate to volume
    (how much space does it take up)
    1 oz = 28 grams
    16 oz = 1 pound (#)
    2.2 # = 1 kilo

    Production Loss
    = As Purchased (AP) -- Edible Portion (EP)

    ...

    Yield Percentage
    = Servable weight
    Original weight

    ...

    Cost per servable pound
    = As Purchaded Price
    Yield %

    ...

    Desired Portion Yield = Conversion
    Original Portion Yield Factor

    ...

    Total yield:
    20# roast potatoes yields 80 portions
    New yield 120 portions. How much is needed

    Desired yield 120
    Original Yield 80 = 1.5 conversion factor

    20# x 1.5 = 30# potatoes

    ...

    Changing Portions:
    Original Yield: 90 4oz portions = 360oz
    Desired Yield: 60 3oz portions = 180oz

    desired Yield 180 = .5 conversion factor
    Original Yield 360

    Multiple each ingredient in the recipe by .5

    ...

    To Determine Meal Costs...

    Cost all items combined to form meal
    Determine portion costs of items
    For example: cost of entrée, salad, dressing, roll, butter
    Combine to get meal costs

    BEverage Costs

    Determine the standard recipe for a drink
    Determine cost per ounce
    Price per bottle / ounces per bottle
    Add ingredient costs
    To determine drink cost percentage - drink cost / selling price x 100

    Subjective Pricing
    Reasonable price method: Uses a price that the manager think will represent a value to the guest. Price "fair and equitable"
    Highest price method: Manager set the highest possible price that he thinks that the guest will pay
    Loss - leader price method: Manager sets an unusually low price to attract business or volume
    Intuitive price method: Managers takes a wild guess - trial and error method

    ...

    Objective Pricing
    Desired food cost percent - i.e. 30% food cost take cost /.30 = price
    Profit pricing -
    Allowable food costs = forecasted food revenue - non food expenses - profit requirements
    Allowable food costs/forecasted food revenues = food cost percentage

    ...

    Profit Pricing: Forecasted sales (700,000)- expenses (360,000)- profit requirements (65,000) = allowable food costs (275,000)

    ...

    Contribution Margin

    The amount of money a certain menu item is leaving to help with profits after costs
    Lower cost of the food bought does not mean that the item will contribute more - it depends on pricing and volume
    Selling price - food cost = contribution margin

    Cost of sales:
    Beginning inventory + Purchases - Ending inventory
    Food Cost Percentage
    Cost of food sold / Food revenue
    Beverage Cost Percentage
    Cost of beverage sold / Beverage revenue
    Labor Cost Percentage
    Labor costs / Total F & B revenue
    Average Check
    Total F & B revenue / Number of guests served
    Seat Turnover
    Number of guests served / Number of available seats

    ...

    CHAPTER 13 BRUh

    ...

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