Chapter 2

The Control
Process
Principles of Food, Beverage, and Labour Cost Controls,
Canadian Edition

Principles of Food, Beverage, and

Labour Cost Controls, Second
Canadian Edition

The Control Process

2.1 Define control; examples and significance

2.2 List the four steps in the control
2.3 Cite eight control techniques
2.4 Describe the steps and prepare a budget
2.5 Explain significance of the costbenefit ratio
in control decisions
2.6 Identify what to consider when deciding to
make a product in-house or outsource

Principles of Food, Beverage, and

Labour Cost Controls, Second
Canadian Edition

Learning Objectives

 Control: Power over events to achieve or

prevent an outcome
Cost Control: Process to regulate costs and
guard against excessive costs
Standards: Rules or measures established for
making comparisons and judgments
Standard cost: Cost of goods and services
identified, approved and accepted by
management

Principles of Food, Beverage, and

Labour Cost Controls, Second
Canadian Edition

Important Control
Definitions

 Standard procedures: Established as the

correct methods, routines and techniques for
day-to-day operations
Budget: Realistic expression of managements
goals and objectives expressed in financial
terms
Control system: Collection of interrelated and
interdependent control techniques and
procedures

Principles of Food, Beverage, and

Labour Cost Controls, Second
Canadian Edition

Important Control
Definitions

1. Establish standards and standard procedures

for operation.
2. Train all individuals to follow established
standards and standard procedures.
3. Monitor performance and compare actual
performances with established standards.
4. Take appropriate action to correct deviations
from standards.

Principles of Food, Beverage, and

Labour Cost Controls, Second
Canadian Edition

Steps in the Control

Process

1.
2.
3.
4.
5.
6.
7.
8.

Establishing standards
Establishing procedures
Training
Setting examples and directing
Observing and correcting employee actions
Requiring records and reports
Disciplining employees
Preparing and following budgets

Principles of Food, Beverage, and

Labour Cost Controls, Second
Canadian Edition

Control Techniques

 The operating budget will detail the operational

direction and your expected financial results.
The operating budget may be broken down into
shorter periods, to compare to actuals;
Identify concerns
Take remedial action
Consider a flexible budget

Principles of Food, Beverage, and

Labour Cost Controls, Second
Canadian Edition

The Budget

The Budget

Budgeted Revenue - Budgeted Expense = Budgeted Profit

Principles of Food, Beverage, and

Labour Cost Controls, Second
Canadian Edition

Just as the income statement tells you about

your past performance, the budget is developed
to help you achieve your future goals.

 To prepare the budget and stay within it,

assures you meet predetermined profit levels.
The effective foodservice operator builds a
flexible budget, monitors it closely, modifies it
when necessary, and achieves the desired
results.

Principles of Food, Beverage, and

Labour Cost Controls, Second
Canadian Edition

The Budget

10

Developing the Budget

1. Prior period operating results
2. Examine the external environment to assess any
conditions that could affect sales volume in future
3. Review any planned changes in the operation that
would affect sales volume
4. Determine the nature and extent of changes in cost
levels
5. Have the projections for sales, costs and profits
approved by management

Principles of Food, Beverage, and

Labour Cost Controls, Second
Canadian Edition

To establish any type of budget, have the following

information available:

11

Monitoring the Budget

In general, the budget should be monitored in
each of the following three areas:
2. Expense
3. Profit

Principles of Food, Beverage, and

Labour Cost Controls, Second
Canadian Edition

1. Sales

12

 As business conditions change, changes in the

budget are to be expected. This is because
budgets are based on a specific set of
assumptions, and as these assumptions
change, so too does the budget that follows
from the assumptions.

Principles of Food, Beverage, and

Labour Cost Controls, Second
Canadian Edition

Monitoring the Budget

13

 Budgeted profit must be realized if the operation

is to provide adequate returns for owner and
investor.
The primary goal of management is to generate
the profits necessary for the successful
continuation of the business. Budgeting for
these profits is a fundamental step in the
process.

Principles of Food, Beverage, and

Labour Cost Controls, Second
Canadian Edition

Monitoring the Budget

14

 The cost/benefit ratio is the relationship

between the costs incurred in instituting and
maintaining a control system, and the benefits
or savings derived by doing so.
Benefits must always exceed costs. Before
instituting any new procedures for control,
management should first determine that the
anticipated savings will be greater than the cost
of the new procedures.

Principles of Food, Beverage, and

Labour Cost Controls, Second
Canadian Edition

Cost/Benefit Ratio

15

 Consider quality standards

Reliability and service of distributor
Compare true cost of house-preparation
Raw ingredients
Labour
Skilled staff
Utility and energy
Customer satisfaction
Staff morale

Principles of Food, Beverage, and

Labour Cost Controls, Second
Canadian Edition

In-House or Outsource

16

Key Terms
Budget, p. 51
Control, p. 40
Control process, p. 42
Control system, p. 57
Cost control, p. 41
Costbenefit ratio, p. 60
Flexible budget, p. 57
Make in-house versus outsource
Operating budget, p. 52
Procedures, p. 47
Quality standards, p. 46
Quantity standards, p. 46
Sales control, p. 43
Standard cost, p. 47
Standard procedures, p. 47
Standards, p. 46
Static budget, p. 53
Training, p. 48

determination, p. 62

Principles of Food, Beverage, and

Labour Cost Controls, Second
Canadian Edition

17

Principles of Food, Beverage, and

Labour Cost Controls, Second
Canadian Edition

Chapter Web Links

Food Cost Control: http://foodcostcontrol.blogspot.com/

18

Copyright 2014 John Wiley & Sons Canada, Ltd. All rights
reserved. Reproduction or translation of this work beyond that
permitted by Access Copyright (The Canadian Copyright
Licensing Agency) is unlawful. Requests for further information
should be addressed to the Permissions Department, John
Wiley & Sons Canada, Ltd. The purchaser may make back-up
copies for his or her own use only and not for distribution or
resale. The author and the publisher assume no responsibility
for errors, omissions, or damages caused by the use of these
programs or from the use of the information contained herein.

Principles of Food, Beverage, and

Labour Cost Controls, Second
Canadian Edition

Copyright

19