Managing for Profit
Chapter 13
David K. Hayes | Allisha A. Miller | Jack D. Ninemeier
The Professional
Restaurant Manager
Book Title
Author name
© 2012 by Pearson Higher Education, Inc
Upper Saddle River, New Jersey 07458 • All Rights Reserved
© 2014 by Pearson Higher Education, Inc
Upper Saddle River, New Jersey 07458 • All Rights Reserved
The Professional Restaurant Manager, 1e
David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier
The Budget Process
• Requires managers to consider future
external events and their financial
impacts.
• Challenges managers to recognize the
importance of sales when projecting
expenses and allows them to carefully
prioritize competing sales demands.
A well prepared operating budget is critical
because it:
Book Title
Author name
© 2012 by Pearson Higher Education, Inc
Upper Saddle River, New Jersey 07458 • All Rights Reserved
© 2014 by Pearson Higher Education, Inc
Upper Saddle River, New Jersey 07458 • All Rights Reserved
The Professional Restaurant Manager, 1e
David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier
The Budget Process
• Creates a standard (benchmark) against
which to compare actual versus budgeted
performance.
• Helps managers establish an appropriate
menu pricing structure.
• Communicates a realistic estimate of
future financial results to owners so they
can evaluate the restaurant as an
investment.
A well prepared operating budget is critical
because it:
Book Title
Author name
© 2012 by Pearson Higher Education, Inc
Upper Saddle River, New Jersey 07458 • All Rights Reserved
© 2014 by Pearson Higher Education, Inc
Upper Saddle River, New Jersey 07458 • All Rights Reserved
The Professional Restaurant Manager, 1e
David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier
The Budget Process
Importance of Budgeting Sales
Budgeted
sales
Budgeted
expense
Budgeted
profit
Book Title
Author name
© 2012 by Pearson Higher Education, Inc
Upper Saddle River, New Jersey 07458 • All Rights Reserved
© 2014 by Pearson Higher Education, Inc
Upper Saddle River, New Jersey 07458 • All Rights Reserved
The Professional Restaurant Manager, 1e
David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier
The Budget Process
Budgeting Sales
Step 5
Estimate impact of price changes on revenue
Step 4
Estimate long-term effect of menu changes on revenue
Step 3
Evaluate changes in external environment
Step 2
Evaluate changes in internal environment
Step 1
Review revenue data from previous years
Book Title
Author name
© 2012 by Pearson Higher Education, Inc
Upper Saddle River, New Jersey 07458 • All Rights Reserved
© 2014 by Pearson Higher Education, Inc
Upper Saddle River, New Jersey 07458 • All Rights Reserved
The Professional Restaurant Manager, 1e
David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier
The Budget Process
Monitoring the Budget
Variance is the difference between actual and
planned results.
Actual
$
expense
Budgeted
$
expense
$
Variance
Actual
expense
Budgeted
expense
Variance
%
Book Title
Author name
© 2012 by Pearson Higher Education, Inc
Upper Saddle River, New Jersey 07458 • All Rights Reserved
© 2014 by Pearson Higher Education, Inc
Upper Saddle River, New Jersey 07458 • All Rights Reserved
The Professional Restaurant Manager, 1e
David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier
The Budget Process
Monitoring the Budget
Step 4:
Take corrective action, if appropriate
Step 3:
Determine cause(s) of the variance
Step 2:
Identify areas of significant variance
Step 1:
Compare actual results from income statement to the budget
Book Title
Author name
© 2012 by Pearson Higher Education, Inc
Upper Saddle River, New Jersey 07458 • All Rights Reserved
© 2014 by Pearson Higher Education, Inc
Upper Saddle River, New Jersey 07458 • All Rights Reserved
The Professional Restaurant Manager, 1e
David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier
The Budget Process
Monitoring the Budget
Book Title
Author name
© 2012 by Pearson Higher Education, Inc
Upper Saddle River, New Jersey 07458 • All Rights Reserved
© 2014 by Pearson Higher Education, Inc
Upper Saddle River, New Jersey 07458 • All Rights Reserved
The Professional Restaurant Manager, 1e
David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier
The Budget Process
Return on Investment (ROI)
$100,000 $1,000,000 10% ROI
$100,000 $2,000,000 5% ROI
Book Title
Author name
© 2012 by Pearson Higher Education, Inc
Upper Saddle River, New Jersey 07458 • All Rights Reserved
© 2014 by Pearson Higher Education, Inc
Upper Saddle River, New Jersey 07458 • All Rights Reserved
The Professional Restaurant Manager, 1e
David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier
The Budget Process
Considerations for revising the budget
1
• The opening or closing of a competitor.
2
• Opening, by the same or different ownership, of
an identical restaurant in the property’s market
area.
3
• A significant and long-term change in major
menu ingredient prices.
Book Title
Author name
© 2012 by Pearson Higher Education, Inc
Upper Saddle River, New Jersey 07458 • All Rights Reserved
© 2014 by Pearson Higher Education, Inc
Upper Saddle River, New Jersey 07458 • All Rights Reserved
The Professional Restaurant Manager, 1e
David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier
The Budget Process
Considerations for revising the budget
4
• Significant and unanticipated increases in
fixed expenses, such as insurance or taxes.
5
• Unplanned road construction that
significantly affects consumers’ abilities to
reach the restaurant.
Book Title
Author name
© 2012 by Pearson Higher Education, Inc
Upper Saddle River, New Jersey 07458 • All Rights Reserved
© 2014 by Pearson Higher Education, Inc
Upper Saddle River, New Jersey 07458 • All Rights Reserved
The Professional Restaurant Manager, 1e
David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier
The Budget Process
Considerations for revising the budget
6
• Natural disasters (floods/hurricanes) that
significantly affect forecasted sales.
7
• Significant changes in operating hours.
Book Title
Author name
© 2012 by Pearson Higher Education, Inc
Upper Saddle River, New Jersey 07458 • All Rights Reserved
© 2014 by Pearson Higher Education, Inc
Upper Saddle River, New Jersey 07458 • All Rights Reserved
The Professional Restaurant Manager, 1e
David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier
The Budget Process
Considerations for revising the budget
8
• Permanent changes in service style that
appreciably affect labor costs.
9
• Changes in financial statement formats and/or
bases for allocation of financial resources.
10
• The loss of especially skilled or talented
employees.
Book Title
Author name
© 2012 by Pearson Higher Education, Inc
Upper Saddle River, New Jersey 07458 • All Rights Reserved
© 2014 by Pearson Higher Education, Inc
Upper Saddle River, New Jersey 07458 • All Rights Reserved
The Professional Restaurant Manager, 1e
David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier
The Corrective Action Process
Model for Corrective Action
Book Title
Author name
© 2012 by Pearson Higher Education, Inc
Upper Saddle River, New Jersey 07458 • All Rights Reserved
© 2014 by Pearson Higher Education, Inc
Upper Saddle River, New Jersey 07458 • All Rights Reserved
The Professional Restaurant Manager, 1e
David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier
The Corrective Action Process
Decision Making Process
The Decision Making (Problem Solving) Process
• Step 1:
• Define the Problem
• Step 2:
• Generate Solution Alternatives
• Step 3:
• Evaluate Solution Alternatives
• Step 4:
• Select the “Best” Solution Alternative
• Step 5:
• Implement the Best Solution Alternative
• Step 6:
• Evaluate the Effectiveness of the Solution
Book Title
Author name
© 2012 by Pearson Higher Education, Inc
Upper Saddle River, New Jersey 07458 • All Rights Reserved
© 2014 by Pearson Higher Education, Inc
Upper Saddle River, New Jersey 07458 • All Rights Reserved
The Professional Restaurant Manager, 1e
David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier
The Corrective Action Process
Tactics to Implement Change
Continuous quality improvement (CQI)
Ongoing efforts within the restaurant to better meet
or exceed guests’ expectations and to define ways
to perform work with better, less-costly and faster
methods.
Book Title
Author name
© 2012 by Pearson Higher Education, Inc
Upper Saddle River, New Jersey 07458 • All Rights Reserved
© 2014 by Pearson Higher Education, Inc
Upper Saddle River, New Jersey 07458 • All Rights Reserved
The Professional Restaurant Manager, 1e
David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier
The Balance Sheet:
Summary of Financial Status
The balance sheet provides a summary of financial
sustainability.
It also indicates the amount of retained earnings:
the amount of profits made that have not been
withdrawn from the business.
Assets Liabilities Owner’s Equity
Book Title
Author name
© 2012 by Pearson Higher Education, Inc
Upper Saddle River, New Jersey 07458 • All Rights Reserved
© 2014 by Pearson Higher Education, Inc
Upper Saddle River, New Jersey 07458 • All Rights Reserved
The Professional Restaurant Manager, 1e
David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier
The Balance Sheet:
Summary of Financial Status
• Current assets
• Property and
equipment
• Other assets
Three types
of assets:
Book Title
Author name
© 2012 by Pearson Higher Education, Inc
Upper Saddle River, New Jersey 07458 • All Rights Reserved
© 2014 by Pearson Higher Education, Inc
Upper Saddle River, New Jersey 07458 • All Rights Reserved
The Professional Restaurant Manager, 1e
David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier
The Balance Sheet:
Summary of Financial Status
Current Ratio
Measures the ability of a restaurant to meet its
short-term debt.
Current
assets
Current
liabilities
Current
ratio
Book Title
Author name
© 2012 by Pearson Higher Education, Inc
Upper Saddle River, New Jersey 07458 • All Rights Reserved
© 2014 by Pearson Higher Education, Inc
Upper Saddle River, New Jersey 07458 • All Rights Reserved
The Professional Restaurant Manager, 1e
David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier
The Balance Sheet:
Summary of Financial Status
Solvency Ratio
Shows the relationship of a restaurant’s assets to
its liabilities
Total
assets
Total
liabilities
Solvency
ratio
Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.
You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.
Read moreEach paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.
Read moreThanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.
Read moreYour email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.
Read moreBy sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.
Read more