When one person operates a restaurant, and one of the simplest and most prevalent form of business organization. An attorney or accountant is not needed and a new proprietor is required to register the business name
Advantages of Sole Proprietorship
1. It is simple. You are
required, for tax purposes, to keep a formal set of books. The tax laws
and regulations require you to keep those records that will enable you
to accurately report your income.
2. Because all the earnings are yours, there is no problem about setting a reasonable salary that could be questioned when doing business in the corporate form.
3. Funds can be withdrawn from the business, subject to their availability, without tax consequences.
4. The business can be discontinued or sold with minimal tax consequences, compared with those arising in connection with the corporate form.
Disadvantages of Sole Proprietorship
1. You cannot be a participant in
your company's qualified pension or profit-sharing plans. A sole
proprietor can set up a Keogh retirement plan for self and employees
however law limits the amount.
2. The owner's liability for all of the restaurant's debts and any tort liability to third parties is unlimited. Theoretically, owner's limit their liability by incorporating however in most cases the owner's are called upon to endorse or guarantee the corporation's liabilities.
3. Sole proprietorship has no legal existence apart from the ownder. The death or incapacity of the owner has severe legal implications and results in the incorporation of the business, unless it has been willed to another person(s). Often, the willed property
must pass through probate, which can be time-consuming and costly in terms of legal fees.
To determine the _____________________, we divide the number of potential guests in the catchment are by the number of competing restaurants.
Fair Market Share
The _______________________ is a photo of the restaurants financial standing at a given moment in time usually at the end of the financial period or at the end of the financial year.
The purpose of the ___________________is to provide information to management about the financial performance (profitability) of the restaurant over a given period of time.
According to the Operating Ratios: Rent, Property Tax and Insurance should be in the range of ___ to ____%:
If a bank finds an application for a loan to be acceptable, the banker forwards the application to the SBA. As a rule, the SBA approves 50% of the loans in ___days and a further 35% in ___days.
True or False: A negotiated Triple Net Lease means that the Lessor pays for the insurance and taxes and improvements to the building.
The disadvantage of this entity type is that the owner/s cannot be a participant in the company's qualified pension or profit-sharing plans.
True or False: In a Partnership entity with Limited Partnerships, all partners (Managing and Limited) have equal voice in the restaurant operation
In setting up a corporation, the entrepreneur must keep in mind that to maintain control, she or he must own ____% of the corporation's stock.
According to the Rule of 72 if you invest $2,000 at an interest rate of 6%, how many years would it take before the $2000 becomes $4000?
The federal government requires the restaurant operator to pay: sales income tax to the city, state and federal governments; workers compensation; employee withholding for social security and income taxes, federal unemployment tax from the employees gross wages or salary. The percentage paid by the employee is _____%
True or False: The responsibilities of managers to stop sexual harassment may extend to controlling the behavior of guests.
Any venture where tow or more persons endeavor to make a profit. Taxes are the same as with a sole proprietorship.
Advantages of partnerships
1. If a partner receives a salary from the partnership, no payroll taxes are deducted.
2. Quite flexible for tax purposes and lends itself to situations whereby one partner supplies the capital and another supplies only services or services plus a lesser amount of capital.
Disadvantages of Proprietorships
1. Same disadvantages as sole proprietorsips.
2. In addition, each partner can create debts for the partnership
3. Each partnership interest is an asset that can under certain circumstances be subject to legal claims of an individual partner's creditors or other claimants.
4. Partnerships can be expected to dissolve someday (death, disagreement, etc.)
A legal entity similar to a person in that it ca borrow, buy, and conduct business and must pay state and federal taxes on profits. Corporations provide limited liability for the owner. Corporation owners cannot be sued for the debts of the corporation unless they personally guarantee them. Step 1-Hire and attorney for legal advice. Step 2-Select a state in which to incorporate. The entrepreneur (shareholders/stockholders) must own 50% of stock to regain control.
The process of writing off against expenses the cost of an asset over its useful life. Things such as furniture or buildings lower in value so money is set aside to replace those items. Tangible items that have a life span are depreciable while land is not.
Allows greater depreciation during the early life of a building or equipment, less depreciation later. A start-up business usually needs all the depreciation dollars it can get. Rapid depreciation results in lower taxes during the early years of the restaurant with greater after-tax income.
Assumes a fixed life for an item (seven years for an oven). The cost of the item is divided by the expected life to arrive at the depreciation allowance.
Advantages of Training
To produce desired behaivor-attitudes and skills appropriate for producing food and service that pleases restaurant clientele.
Chef de Cuisine/Executive/Head Chef
This person is in charge of all things related to the kitchen, which usually includes menu creation, management of kitchen staff, ordering and purchasing of inventory, and plating design.
The second in command and direct assistant of the Chef. This person may be responsible for scheduling and substituting when the Chef is off-duty,will also fill in for or assist the Chef de Partie (line cook) when needed, inventory, cleanliness of the kitchen, organization and constant training of all employees, taking commands from the Chef and following through with them,responsible for line checks and rotation of all product. Smaller operations may not have a sous-chef, while larger operations may have several.
Chef de Partie/Line Cook/Station Chef
Under the Sous Chef, in charge of a specific area of production. Line cooks are often divided into a hierarchy of their own, starting with "first cook", then "second cook", and so on as needed.
A commis is a basic chef in larger kitchens who works under a chef de partie to learn the station's responsibilities and operation. This may be a chef who has recently completed formal culinary training or is still undergoing training
Responsible for all sautéed items and their sauce. This is usually the highest stratified position of all the stations.
Prepares fish dishes and often does all fish butchering as well as appropriate sauces. This station may be combined with the saucier position.
Prepares all fried items; this position may be combined with the rotisseur position.
Prepares hot appetizers and often prepares the soups, vegetables, pastas and starches. In a full brigade system a potager would prepare soups and a legumier would prepare vegetables.
Butchers meats, poultry and sometimes fish. May also be responsible for breading meats and fish.
Is qualified in making baked goods such as pastries, cakes, biscuits, macarons, chocolates, breads and desserts. Pastry Chefs can specialize in cakes in patisseries or bakeries by making wedding, cupcakes, birthday and special occasion cakes. In larger establishments, the pastry chef often supervises a separate team in their own kitchen or separate shop.
Pantry Chef/Garde Manger
Responsible for preparing cold foods, including salads, cold appetizers, pâtés and other charcuterie items.
Individual Table Service
Table service where there are no sections and servers fend for themselves to get tables.
Mise en place
The precise assembly of ingredients and equipment required for the preparation of a recipe
A technique of preparing food during slack times then individually vacuum packing items to be refrigerated for future use
The combined costs of food and labor, usually expressed as a percentage of sales. It should not go above 55-60% of sales.
Expenses that change proportionately to fluctuations in sales (Ex. Food and beverage costs)
Expenses normally unaffected by changes in sales volume. (Ex. Real estate taxes, depreciation on equipment, insurance premiums)
the degree of caution and concern for the safety of himself/herself and others an ordinarily prudent and rational person would use in the circumstances
Mobil Travel Guide
Lists thousands of hotels/motels and restaurants located in more than 4,000 cities. Solicitations from restaurant operators are accepted.
Largest distribution of travel guides reaching more than 40 million members. Those near major tourist attractions are preferred. Solicitations from restaurant operators are welcome.
Evaluates and recommends restaurants and hotels. The stars are based on five criteria: quality of products, mastery of flavor and cooking, personality of the cuisine, value of the money, and constistancy between visits
Fast Casual Restuarant
Self service (not table service), fresh made to order, high food quality ingredients, priced in between QSR and Casual, upgraded decor, not drive through, carry out (Ex. Panera, Chipotle)
Quick Service Restuarant
Many locations, Variety of demographics, Limited menus, Competitive prices, Fast service (many self-service), Many part-time employees, unskilled labor, skilled management, drive throughs Chains dominate, simple units (Ex. McDonald's, KFC)
Table service, Usually no alcohol, competes with QSR and Casual, Home meal replacement, many breakfast and lunch only restuarants, (Ex. Boston Market, Friendly's, Denny's)
Table service and serve liquor, Check average $14-$22, specialty establishments (steak, seafood), Ethnic restuarants, Eatertainment (Rainforest Cafe, Hard Rock) (Ex. Chilies, Fridays)
Taken the place of fine-dining, becoming more sophisticated, professional and attentive service, unifying theme (P.F. Changs), Menu varied, Wine prevalent, Higher check average, Themes, Celebrity owned, (Ex. Cheesecake Factory)
Small area (less than 100 seats), Low table turnover, Independently owner/operated, Professional chefs, High quality products and service, Skilled workers, Devoted management, Heavy wine sales, Priced for exclusivity (Ex. Seasons 52)
Advantages of Franchises
1. Able to experiment for less risk
2. Resources to hire staff specialists
3. Greater access to useful comparative financial info
4. Marketplace recognition
5. Advertising help
6. Systems development
7. Economy of scale purchasing
8. Loans are more likely
Disadvantages of Franchises
1. Bureaucratic rules and procedures can slow response times
2. Not always in tune with market changes
3. Little or no room for creativity
4. Less "local driven"
5. Long-term contract
6. As good as worst chain member
A method of doing business wherin a franchisor liscenses trademarks and methods of doing business to a franchisee in exchange for a one-time franchise fee and a recurring royalty fee
Pays fees to the franchisor (4-6% weekly), must maintain business and quality standards, Improve the leasehold, lease or purchase equipment, hire employees and operate, Pay 2.5-3.5% national advertising fee weekly, pay additional local marketing fees
Must access product formulas and operational systems, Site evaluations, training programs, operations manual, representative on site during opening, periodic operations and on-going support, informative publications, marketing and advertising support, site selection help, assistance with building and design, help with opening, train managers and staff,
Advantages of being a Franchisee
1. Assistance in opening and operating the business
2. Franchisor-sponsored training and materials
3. Greater exposure and higher revenue due to extensive advertising and name recognition
4. Lower costs due to volume purchasing
5. Tested operating procedures
Disadvantages of being a Franchisee
1. Franchise contracts restrict styles and methods of operations, products served, services offered, decor, and furnishings
2. Franchise contracts usually favor the franchisor
3. Pay an upfront franchise fee
4. Pay 4-6% royalty fee out of your pocket monthly, whether you make a profit or not
Advantages of being a Franchisor
1. Do not have to invest in capitol
2. Do not have to invest operating funds
3. Receive a fee upfront
4. Receive a monthly fee regardless
5. Every franchisee=more advertising exposure
6. Every franchisee=better economy of scale
Disadvantages of being a Franchisor
1. Is only as strong as his weakest link
2. Must enforce policies
3. Hard to serve every market
4. Can be liable for accidents
5. Do need to provide training and quality control monitering
6. Kept in check and balance by franchisee board
Table d'hote menu
Offers a selection of several dishes from which patrons choose to make a complete meal at a fixed price. The advantage of this menu is value. The advantage for the restauranteur is the number of menu items is limited
Repeat in cycle every few days (normally 7, 10, 14, or 28 days) and are generally use in institutions
Named because in many CA restaurants guests may order an item from the menu at any time of the day, can have a seperate menu for each meal-breakfast, lunch,dinner, and perhaps brunch.
Occassionally used to attract tourists'attention to a particular restuarant, underlining the value and acceptability to a guest who may be traveling in a foreign country where the food may be decidedly different.
Meaning "to taste with relish". Is a sample of the chef's best dishes. Served in several courses showcasing the chef's flair for combining flavors and textures.
POS Point-of-Sale System
Software that records the data of each guest order and can be programmed to provide a variety of data on demand.
Advantages of a POS System:
-Elimination of arithmetic errors
-Improved guest check control
-Increased average guest check
-Faster reaction to trends
-Reduced labor costs
-Reduced late charges
A program that presents methods for systematically ridding kitchens of pathogens. The system follows seven basic steps:
1. Identify hazards and asses their severity and risks
2. Determine critical control points (CCP) in food preparation
3. Determine critical control limits (CCLs) for each CCP identified
4. Monitor CCPs and record data
5. Take corrective action whenever monitoring indicates a CCL is exceeded.
6. Establish an effective record-keeping system to document the HACCP system
7. Establish procedures to verify that the HACCP system is working
FDA-Food and Drug Administration
Quality standards and the standards of fill of container are concerns. The FDA also requires labeling on most food items containing several ingredients. The common or usual names of all ingredients, listed in descending order of their presence by weight, must be on the container. All foods shipped interstate come under the jurisdiction of the FDA.
-Dry storage should be 50-75 degrees
-Produce should be stored at 37-40 degrees
-Meat and poultry should be stored at 33-38 degrees
-Dairy should be stored at 33-38 degrees
-Seafood should be stored at 33-38 degrees
-Temperature danger zone 40-140 degrees
-Final rinse of dishwashing machines is 180 degrees
-Chemical sanitation is most effective at temps between 75 and 120 degrees
On-sale general beverage license
Authorizes the sale of all types of alcoholic beverages-namely beer, wine, and distilled spirits for consumption on the premises.
Off-sale general beverage liscense
Authorizes for the sale of all types of alcoholic beverages for consumption off the premises in original, sealed containers.
On-sale beer and wine beverage liscense
Authorizes the sale on the premises of all types of beer, wine, and malt liquor
Off-sale beer and wine beverage liscense
Authorizes the sale of all types of beer, wine, and malt beverages for consumption off the premises in original containers
On-sale beer beverage liscense
Authorizes the sale on the licensed premises of beer and other malt beverages with an alcoholic content of 4 percent or less by weight.
Champagne, sparkling white wine, sparking rose wine. Sparkling comes from addition of CO2. 2nd fermentation in the bottle with methode champenoise.
Sherries (Spain), ports (Portugal), Madeiras, and marsalas. Meaning that brandy or wine alcohol has been added to them, giving a unique taste and increasing alcohol content by 20%.
Vermouth and Apertif. Flavored with herbs, roots, flowers, barks. These wines can be sweet and dry. Normally enjoyed before a meal to stimulate digestive juices.
Food or drink go through a chemical change caused by enzymes produced from yeast.
1. Yeast cells use carbohydrates in fruits and grains (ex. fermenting grapes for wine), in order to grow cells.
2. When they break down the carbohydrate (as sugar) they give off carbon dioxide and alcohol
3. Alter appearance and/or flavor of beer, cheese, wine, yogurt, or liquor.
SBA (Small Business Association)
Loan program that has helped
launch some of the nation's biggest success stories. Use the program to
start, acuire, or expand their business. Loans have four basic
1. The right type of business
2. A clear idea of which loan program is best for you
3. Knowing how to fill out the application properly
4. Willingness to provide the detailed financial and market data required
Return on Investment
The profit expected. Owners
invest for ego, family employment, and livlihood. The return depends on
alternatives. CD or money market fund; Stock market or mutual funds at
4-8%. Therefore considering risk-would hope for 12-18% return/yield.
Operating profits+RE appreciation+Depreciation tax advantages
-Consider risks and rewards
Population group with similar characteristics (needs, wants, income, background, buying habits, and so on). A restaurant aims to address th wants and needs of specific market segments. When the product matches the desired segment's wants and needs, a successful marketing relationship is formed. Groups that respond in a similar way must be idendifiable, measurable, and of appropriate size. In addition, they must be reachable by advertising media.
Agreement of promise made between 2 or more parties; courts will enforce (the Law provides a remedy). Must have:
1. Proper Form
2. Legal Capacity
6. Genuine Assent
Difference between marketing and sales
Marketing focuses on the needs and satisfaction of customers; sales focuses on the distribution of products to customers.
The share of the market that a business has. The average number of guests who would, if all other things were equal, eat at any of the competing restaurants. You must divide the number of potential guests in a catchment area by the number of competing restaurants. The market share goal is to be the leader in the market segment.
-Cover Sheet (Executive summary, Statement of purpose, Table of Contents, Name and legal structure)
-Description of Business (Mgmt. philosophy-mission/ goals/strategies/type of organization, mgmt qualifications/experience/capabilities)
-Description of Concept Liscences and Lease (Concept,Menu, Menu Pricing, Liquor Liscence/Health/Fire Permits, Business Liscence, Lease)
-Market Analysis and Stategy (Target market, demographics, market potential/size/rate of growth
-Advertising and promotional campaign
-Existing Restaurant Balance Sheet
Owners - share/stockholders - elect a board w/ final responsibility to operate restaurant. Shareholders not responsible for corp. debts. Investors contribute paid-in capital or loans (repayment is tax-free & interest tax deductible)
Part-Time Employees Advantages
Don't have to pay benefits, Can be scheduled to fit the peaks and valleys in sales
Part-Time Employees Disadvantages
Possible lack of continuity which increases the need for training, Most don't want to work there as a permanent career, more people who are not motivated to want to learn job
Liquor's alcohol content.U.S. proof - twice % of alcohol
(80 proof = 40% alcohol) . Beer 4-8% vs Wine 9-16%)
Beverage Cost percents
Management decides on selling price & mark-up for beer, wine & liquor (Sets standard for beverage cost %)
Normal pouring cost for beer - 24- 25%, Wine pouring cost - 26-30%, Liquor pouring costs 16-20% of sales.
Combined beverage pouring cost s/b 23-25%
[drink cost/selling price x100]
May range from 16% of sales per
week in a quick service restaurant to 28% in a casual operation and up
to 40% in an upscale. Payroll Related costs fall into 2 categories:
Variable (% ratio to payroll)
- Servers & Part-time
Fixed ($ amount per employee on payroll).
- Managers + Administrative
Moment of Truth
Any time a guest has an opportunity to form an impression about the hospitality organization
Many servers are skilled performers. Server & guest are both actors in the play. Once the meal is finished, the play is over, the guest leaves & the server moves on to next stage.
Many servers look at the
customer-server relationships as a battle of wits w/ a guest as
opponent. Object of the game: extract maximum tip possible. At end of
each evening, word is passed as to who received most in tips.
If servers pitted against each other & prizes for most tips, easy for dining room to degenerate into a game w/ guest as secondary participant. One way to ensure harmony among all restaurant's personnel - insist that tips be pooled.
3 Compartment Sink
A dishwashing system in which there are three compartments, the wash, rinse, and sanitize; the wash is a brush with 110 degrees water with detergent; the rinse is for removing the soap from the item being washed, because detergent may make the sanitizing agent less effective; the third compartment is used to removed bacteria and germs, and can be either 171 degrees or higher, or use a diluted chemical. the rubber mat drains glasses
Fermented juice of freshly gathered grapes. Yeast enzymes convert grape sugars to alcohol and CO2
How wine is made
1. Crush-Mixture of grape pulp, skins, seeds & stems
2. Ferment-Yeast acts on sugar to produce alcohol & CO2
3. Rack-Settles before it is poured into barrels
4. Mature-Age it
The Rule of 72
With pension plans, they are not taxable to particpants. To calculate how fast an investment doubles itself if no taxes are paid, divide the rate of return into 72 and you get the number of years required to double your money at that rate of interest. (Ex. 8 percent (72/8)=9 years
Kitchen Display Systems
Provide highly visible, real-time info to manage and control kitchen efficiency. Displays food orders for preparation and monitors the timing of orders for speed of service. Provides status about the status of each table and captures service times for management reporting. Statistics such as service times for each guest check and table, average prep times, and reports on kitchen performance.
Soft Server Approach
A more descreet way of serving. (Ex. This evening the chef has prepared her signature peach melba, a traditional sundae consisting of French vanilla ice cream, a fresh peach half, laced with Melba (raspberry) sauce. May I bring you one?
The Seven Commandments of Customer Service
1. Tell the Truth
2. Bend the rules-you can bend it in order to give better service
3. Listen actively, almost agressively
4. Put pen to paper-A letter or email after a conversation can confirm details or say thanks
5. Master the moments of truth-Pay attention to details, customers will notice
6. Be a fantastic fixer-Apologize, listen and empathize, fix the problem quickly and fairly, offer atonement, keep your promise, follow up
7. Never underestimate the value of a sincere thank you
SWOT Analysis (strengths, weaknesses, opportunities, threats)
Done by comparing the organization to its competitors and the general business environment and configure the points of comparison.
Fair Market Share
The average number of guests who would, if all other things were equal, eat at any of the competing restaurants. Divide the number of potential guests in a catchment area by the number of competing restaurants.
3 Product Levels
1. Core product-the function part of the product server for the customer. Offering a relaxing and memorable evening
2. Formal product-The tangible part of the product. Includes physical aspects of the restaurant and its decor. Incldues food, beverages, parking, type of restaurant, location.
3. Augmented product-Includes the other services suc as acceptance of credit cards, valet parking, and table reservation service.
Conveys to the guest the best face or image of the restauarant, what people like most about it, or how it stands out from the competition. (Ex. if value is the best feature, emphasize in postioning statement and ads)
Innovative menu items added to maintain or boost sales. By keeping consumer interest stimulated, can increase market share and profit.
When restaurant owners want their restaurant to be different in one or more ways to call attention to the food or ambiance.
Calculates the cost of the ingredients and multiplies by a factor of 3 to obtain a food cost percentage of 33. For example, if cost of ingredients is $3.24, selling price would be $9.75 ($3.24 x 3=$9.75)
After doing cost-based pricing first and compare with competition. If there is a significant difference then the operator must choose another item or alter the ingredients of the existing item to bring its price in line.
A method of computing a product's selling price so that the price contributes to the gross income even if a contribution to net income is not possible and labor costs must not be too much and when combined food and labor cost should not go above 55-60% of sales. (Ex. cost-based would be $21 for fish so need to do contribution) S & D +/or Loyalty +/or Value
AP (as purchased)
The total product as it comes into the restaurant. (Production loss+Edible portion)
EP (Edible portion)
The usable portion of a product. (As Purchased Price $/Yield %) [when calculating put yield % in decimal format]
The percentage of the product that you can actually use. Servable weight (edible or usable after cooking & trimming)/Original weight (as purchased & before cooking/trimming)
Hors d'oeuvres, soup, seafood, entrée, grillades (grilled meat), legumes, salads, desserts
In this approach, the best menu items are those that have the highest contribution margin per unit and the highest sales. By combining food-cost percentage, contribution margin, and sales volume you can find the "prime" items which have a low food cost % and a high contribution margin weighted by sales volume.
Considerations in menu planning
Needs and desires of guests in target market and trends, capability of cooks, equipment capacity and layout, consistency and seaonsal availability of menu ingredients, price and pricing strategy, nutritional value, contribution theory, accuracy in menu, type of menu, actual menu items, menu analysis, menu design and layout, standard recipes, food-cost percentage
EEOC (Equal Employment Opportunity Commission)
The organization to which employees or job applicants may appeal if they feel they have been discriminated against. Applies to discrimination based on race, sex, religion, color, national origin, veteran status, age, mental or physical disabilities.
-An employer cannot make sexual advances or demandss as a condition of employment or advancement
-Cannot abolish an employee's job because the employee refuses sexual advances by the employer or supervisory personnel
-Cannot refuse to investigate complaints from an employee that supervisor personnel have engaged in it
-Can be perpetrated by any sex
-Employers are liable for harassment conducted by their employees, supervisory or nonsupervisory
Alcoholic Beverage Liscenses
A general liquor lisense and a beer and wine liscense. Both must be applied for from the state liquor authority. Lengthy application process
Quid Pro Quo Sexual Harassment
When something is given in exchange for something else as a basis of employment decisions by a supervisor
Environmental sexual harrassment:
Harassment is considered a violation when they interfere with the employee's work performance or create an intimidating, hostile, or offensive working environment.
Third-party sexual harrassment
Involves a customer or client and an employee. The customer or client may harass the employee or the other way around.