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Hospitality Business Development
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Assignment 1
Contents
1. Objectives *
2. The Food & Beverage Outlet: Overview *
3. How is productivity monitored within Spes? *
4. A proposal to revise the monitoring method. *
5. Monitoring and assessment of the performance with the revised information for a two-week trading period. *
6. Critically evaluate revised information. Does it need changing? *
7. References *
8. Appendix *
Objectives
Consider how productivity is monitored within a food and beverage outlet. It is only concerned with how productivity is monitored. It is not concerned with how productivity is achieved.
critically evaluate the productivity monitoring
Propose and justify any revisions. What should be produced?
Monitor and assess performance, producing the revised information for a two-week trading period.
Critically evaluate revised information. Does it need changing?
The Food & Beverage Outlet: Overview
The food and beverage outlet that I have chosen to evaluate productivity is a restaurant located in the West End of London. For confidentiality reasons I have changed it name. I will call it "Spes". It is a small Italian restaurant with a medium/high cuisine. Obviously all their dishes have high-end Italian origins or themes. But Pizzas are not in the Menu.
The restaurant’s premises are in two floors. In the basement floor there are: a small dining room with two tables for six people each which is not in use any more; the kitchen and the toilets. The kitchen is small and narrow and all the machinery and equipment looks quite old. The restaurant is in the ground floor. It is quite spacious, luminous and cosy. It has a capacity for 56 covers distributed in 12 tables for 4 people and 4 tables for 2 people. The restaurant is open every day, including Sundays, from midday to 3 p.m. and from 6 to 11 p.m giving a potential for 112 covers per day. Unlike many similar restaurants in London, Spes does not have time limits per sitting. It is considering this for Friday and Saturday nights so that it can generate extra covers.
There is a total staff of 5 people. Two in the kitchen, the Chef and an assistant who not only cooks but he does the washing up as well. In the ground floor are the Manager and two waitresses who work part-time.
How is productivity monitored within Spes?
In Spes, there is no scientific monitoring carried out to evaluate productivity. Obviously the Manager knows the number of customers who ate in the Restaurant the previous days but no forecast is done. He believes that in the weekdays, in the lunchtime there are fewer customers 6 to 8 than for dinner which he says is around 10 to 12 customers. In the weekend the number of customers increases, (he says) with 10 to 12 in the lunchtime and 15 to 20 in the evenings. The food and beverage average spend per customer is around 30 pounds.
There is not much communication between the Manager and the Chef and the relationship appears to be poor. For this reason the Manager does not know much about kitchen matters and vice versa.
A proposal to revise the monitoring method.
Witt (1988) reports that for Leslie (1987) "monitoring can lead to a reduction in wastage and pilfering. Staff turnover should be watched, as a high level leads to high training costs. Data collection should lead to improved planing, lower costs and greater efficiency and provides a means of analysing performance. Monitoring andcontrol should take place whatever the size of the establishment."
Rimmington (undated) mentioning Jones (1990) and Heap (1992) manifest the importance in the hospitality industry to include intangible as well tangible inputs and outputs "total factor" when productivity is measured. Intangible factors such as atmosphere, management style, staff flair and expertise are important inputs. The intangible customer satisfaction is perhaps the most important food service output.
Taking in account the size of Spes I propose that its productivity should be monitored through measures which will be an influencing factor on management behaviour being sometimes physical measures, sometimes a combination among physical and financial measures. Establishing a specific period of time for analysis, these measures would be:
Labour ratios to know the relationship between the total outputs and the labour expenses. If the ratio is superior to the restaurant standard cost (could be 25% over the sales, for example) it means that it is necessary to adjust the personnel structure, either to sack someone or to reduced salaries. In the same way if we divided the meals produced between the labour hours worked, we will know as well if the personnel work properly and if their cost is correct compared with the restaurant standard. The same operation can be carried out to know if the number of persons who work in the kitchen and in the restaurant are adequate for the number of customers who visit the restaurant in the week days, the week-ends in lunch time and in the evenings.
Inventory: Carry out the inventory of the dining room, service and production areas a few times. Average the inventory levels and use that constant figure each time period. Add the estimated figure to physically counted storeroom inventories each period for the ending inventory. It is important to update the production inventory level at least once every two months. To do a periodical inventory has the undeniable advantage that there is always a control measure over the restaurant’s running.
Material ratios to evaluate the proportion between the total outputs and the amount spent in materials. Through this ratio we will know if the purchasing is done at the best price but respecting the quality of the products. Quality and productivity is a polemic issue. Pickworth (1987) asserts that there exists a relationship between quality and productivity and the strength of this relationship has been called "the wheel of fortune" since quality and productivity reinforce each other innovating and giving value to the customer. But by the other hand, as Rimmington (undated) suggests "the negative side of this positive synergy is of course the downward spiral, where productivity "gains" based on cost cutting can lead to a fall in quality standards.
Linked with this ratio, is the Food cost percentage, which is: Cost of Food sales divided by Food Sales. Gorodesky (1998) President of RAS maintains "that successful restaurants generate food costs in the low to mid 30´s. However different types of restaurants typically run higher or lower percentages- steak houses may run up to 40% whereas Italian restaurants may run about 28%. The cost percentage can be used to compiling the sales and costs consistently and regularly, as comparisons to previous performance can prove very helpful, identifying problem and trends- a decrease in food costs is as important to investigate an increase. From here, the Manager is positioned to tighten the food cost by standardising recipes, evaluating purchasing systems and taking others steps to create target food cost for the restaurant."
Similar to the above mentioned Material ratio is the Beverage Cost which in a profitable restaurant could generate a 22% to 28% figure. The beverage cost is the result of dividing the Cost of Beverage Sales between the Total Beverage Sales. Soft drinks, juices, coffee and other-non alcoholic beverages sales are included in the food cost calculations and not beverage cost calculations. In the same way as he maintained in relation with the Food Cost, Gorodesky assert that the identification of the Beverage Cost is very helpful to know the trends and the evolution of people’s preferences. Controlling the Beverage Cost is the best way to ensure high control and therefore see the maximum potential wine and spirits sales.
I think to have a full knowledge of the productivity of Spes it would be interesting to calculate the following ratios as well:
Total food and beverage sales divided by covers sold
Total food and beverages sales divided by kitchen staff number
Total food and beverage sales divided by covers available
Total food and beverage sales divided by serving staff number
Total food and beverage sales divided by all the staff number
Total food and beverage sales divided by staff costs
Total food and beverage sales divided by operating hours
Total food and beverage sales divided by trading area (sq. m)
Total food and beverage sales divided by fixed costs
Total food and beverage sales divided by staff and fixed costs
Covers sold per operating hours
Covers sold per trading area(sq. m)
Covers sold per kitchen staff
Covers sold per serving staff
Covers sold per all staff
Monitoring and assessment of the performance with the revised information for a two-week trading period.
In the Appendix pages are all the mentioned ratios about the productivity of Spes. Pages 1 and 2 of the output represent the productivity and performance monitoring during two-week period - Fortnight 1. Contrary to prior assumptions, Monday seems to be quite active with 45% and 37% of covers sold on the two Mondays. Tuesday seems to be poor with 7% and 26% of covers sold whilst Friday was surprisingly incactive with only 18% and 22%. The second Saturday produced a 99% score compared with a 49% score on the first Saturday.
Critically evaluate revised information. Does it need changing?
In my opinion there are two important things missing from the weak report on page 1 and 2.
The first is an examination of daily variation. Counterintuitively, Monday appears to be more busy than Friday for example, but just in two weeks it is difficult to draw any firm conclusion.
To develop this daily analysis we need data for several weeks and I would recommend a minimum analysis over 8 weeks. To do this I have pages 3 to 8 of the Appendix to show an analysis over 3 Fortnights. Pages 9 and 10 show the average and summaries over the entire 8-week period including the original 2-week period selected for the initial analysis. From this table, we can see (page 9) that the percentage of covers sold by example on Monday is 30% but on Saturday is 80%. The figure for Friday is 53%.
Such a longer run daily analysis can allow us to manage the number of staff working daily. We can also more efficiently manage the buying of food and reduce waste.
Another improvement to the initial analysis on pages 1 and 2 could be to refine the monitoring to identify productivity per person. Do individual serving staff generate high value food and beverage sales? Or is it simply the location of the tables? Do the window tables or fire-side tables generate more beverage sales or the reverse? For all this in order to get statistically significant results a longer period than two weeks is required.
The Weather pattern also needs to be analysed and compared with performance. Do rainy days produce more customers? Many retail stores place great emphasis on weather forecasts in their planning.
It would also be useful to track important sporting fixtures on television. The World Cup football made an impact on a number of businesses. Some, of course, depending on their clientele would attract business during such events.
Finally, whilst I am pleased with the interesting results produced on Pages 1 and 2 of the Appendix and more please with the results in Pages 3 to 10, further refinements would help. The figures are interesting but generate more questions than answers.
References
Witt A. Christine and Stephen F. Witt (1989) " WHY PRODUCTIVITY IN THE HOTEL SECTOR IS LOW" Department of Management Science and Statistics, University College of Swansea, UK,
Leslie D, "The Control Function and the Hospitality Industry" (1987) Services Industries Journal Vol. 7 No. 2. Pp 207-15.
Rimmington Mike and Clark John (undated) "Productivity in food service systems".
Jones P. (1990) "Managing foodservice productivity in the long term: strategy, structure and performance. International Journal Hospitality Management, 9 (2) 144-5
Heap J. (1992) " Productivity Management: a Fresh Approach" London: Cassell.
Pickworth James R. (1987) "Minding the Ps and Qs. Linking Quality and Productivity
Gorodesky Ron and Lange Kate (1998)" For profit’s Sake, Inventory your Food Cost"
Gorodesky Ron and Ed McCarron (1998) "For profit’s Sake- Inventory your Beverage Cost "Issue 12, Restaurant Report.
Payne Kirby D. (1997) "Increasing Food and Beverage Revenues in Hotels" American Hospitality Management.
Maldelbaum Robert (1997) Productivity and Pricing Perpetuate Profits, PKF Consulting.
Appendix
Pages 1 & 2: Data from a two-week period – fortnight 1
Pages 3 to 8: Data from three preceding two week periods – fortnights 2, 3, 4
Pages 9 & 10: Summary and averages of the 4 two week periods – fortnights 1 to 4
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