Why f&b gets little respect is easy to explain: It takes extra effort to properly manage concessions, where profits are built on a quicksand foundation of pennies, nickels and dimes. The margins can seem trivial contrasted with the intense micro-managing f&b deserves.

Add to this scenario f&b supervisors that get little support from senior management in terms of an f&b education (mainly because superiors themselves do not completely understand the complexities of f&b numbers beyond the profit and loss (P&L – spreadsheet), and the perfect recipe has been concocted for “leaving a lot of money on the table.”

So now that I have taken a potshot at the very people that read Park World, this inaugural piece will attempt to make amends with the introduction of an f&b tool rarely used, let alone discussed – the concept of the theoretical cost of goods (COG).

An operator will rely on the accounting department’s P&l to show the actual COG, usually expressed as a percentage of dollar goods used divided by net sales, (eg $5000 of inventory used within a certain period ÷ $15,000 in snack bar sales = 33% COG). If the percentage is close to budget targets or meets with so-called “industry standards,” that operator may be content with the results. Yet it is quite probable that these guidelines are misleading.

First, most parks have point-of-sale (POS) systems capable of tracking sales mixes, or how many of each menu item is sold. One would like to believe that at the least a manager is matching cash register tallies against inventory usages, for obvious reasons; it is a basic fundamental to help monitor for excess waste, portion control and pilferage.

But few are aware that the POS may have the capability to tell what the COG should be (hence the theoretical) a benchmark that can be compared to the actual COG. It is a report that takes into account not only menu prices and quantities sold, but also the “plate cost,” or what it costs to put together a specific menu item, whether a bottle of water or bacon cheeseburger with fries. (If the POS cannot do the report, it is easy to set up in Microsoft Excel.)

The key point to be made here is that every facility creates its own industry standard, based on the sales mix and menu prices set by the operator. To illustrate, an operator may be perfectly happy with a 31 per cent actual COG, because that is in the ballpark with what other facilities run. But it may turn out that the theoretical COG, based on what is actually selling in the park, is 27 per cent. On the above $15K in sales, that 4 per cent variance factors out to a $600 discrepancy that may be either missing product or lost revenues.

To emphasise, f&b is not a business that runs on autopilot. It demands an acute sense of awareness rooted in systems and procedures designed to identify possible red flags that the operation may not be running as smoothly as was thought.

Mike Holtzman is president of Profitable Food Facilities, a US-based hospitality design and consulting firm to recreational and family entertainment operations for the last 15 years. He may contacted at: mike@profitablefood.com

Printer friendly version

Email this article to a friend