INTRODUCTION TO HOSPITALITY

MANAGEMENT
Fifth Edition

CHAPTER 7
Restaurant Manager

Copyright © 2017, 2013, 2009

Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Chapter Objectives

• After reading and studying this chapter,

the student should be able to do the
following:
1. Describe a restaurant’s front of the
house.
2. Explain how restaurants forecast their
business.
3. Describe restaurant service.

continued on next slide

Copyright © 2017, 2013, 2009
Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Chapter Objectives

• After reading and studying this chapter,

the student should be able to do the
following:
4. Describe front- and back-of-the-house
systems.
5. Outline back-of-the-house operations.
6. Summarize restaurant management
financials.

Copyright © 2017, 2013, 2009

Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Front of the House (FOH)

• Operations are divided into two

sections: the front of the house (FOH)
includes anyone with guest contact
(dining room manager/hostess/bus
persons/servers) and the back of the
house (BOH) (kitchen manager/
cooks/prep
cooks/expediter/receiving/dishwashing)
.
continued on next slide
Copyright © 2017, 2013, 2009
Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Front of the House (FOH)

• The restaurant is run by the general

manager, or restaurant manager.
• Depending on the size and sales
volume of the restaurant, there may be
more managers with other
responsibilities.
• Managers should all be cross-trained to
relieve each other.

continued on next slide

Copyright © 2017, 2013, 2009
Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Front of the House (FOH)

• The hostess’ job is to greet the guests

and to manage seating in the dining
room sections.
• Tools such as seating charts and
reservations books help the hostess to
control the flow of seating.

continued on next slide

Copyright © 2017, 2013, 2009
Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Front of the House (FOH)

• The FOH must create and maintain a

curbside appeal—meaning keep the
restaurant looking attractive both
inside and out.
• In addition to the 7 steps of the table
service, servers are expected to be
NCO—neat, clean, and organized—and
to help ensure that the food is served
at the appropriate temperature.

Copyright © 2017, 2013, 2009

Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Restaurant Forecasting

• Most businesses, including restaurants,

operate by forecasting a budget of
estimated sales and costs for a year.
• These expenses are broken down in a
weekly and monthly basis. Sales
budgets are forecasts of expected
business.

continued on next slide

Copyright © 2017, 2013, 2009
Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Restaurant Forecasting

• The two components used in

forecasting are guest counts (covers)
and the average guest check.
• The guest count reveals the number of
guests patronizing the restaurant over
a period of time.
• The number of guests will vary during
the week.

continued on next slide

Copyright © 2017, 2013, 2009
Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Restaurant Forecasting

• Mondays are usually the slowest with

Friday, Saturday, and Sunday usually
providing up to 50% of the operation’s
revenue.
• Day of the week, meal period, previous
forecast materializations, and special
holidays are all factors of forecasting.

continued on next slide

Copyright © 2017, 2013, 2009
Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Restaurant Forecasting

• The average guest check is calculated

by dividing the total sales by the
number of guests.
• Multiplying the number of guests by the
average guest check reveals the
forecasted sales.
• The year is divided into twelve 28-day
and one 29-day accounting periods.

continued on next slide

Copyright © 2017, 2013, 2009
Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Restaurant Forecasting

• The 13 accounting periods, when

totaled, become the annual total.
• Beyond using forecasts for estimating
sales, managers also use them to
predict staffing levels and labor cost
percentages.

Copyright © 2017, 2013, 2009

Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Service

• Today, the quality of service has

become very important to American
diners.
• A new American service has emerged.
• A less formal yet professional approach
is preferred by today’s restaurant
guest.
• Servers are not merely order takers.

continued on next slide

Copyright © 2017, 2013, 2009
Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Service

• They are salespeople of the restaurant

and must learn to gauge the guests’
satisfaction levels and to be sensitive to
guests’ needs.

continued on next slide

Copyright © 2017, 2013, 2009
Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Service

• Restaurants in the United States,

Canada, and many other parts of the
world use American service, in which
food is prepared and appealingly placed
on plates in the kitchen, carried into
the dining room, and served to guests.

Copyright © 2017, 2013, 2009

Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Suggestive Selling

• Suggestive selling can be an

exceptional tool to increase food and
beverage (F&B) sales.
• Servers report that most guests are not
offended or uncomfortable with
suggestive selling techniques.

continued on next slide

Copyright © 2017, 2013, 2009
Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Suggestive Selling

• Through training and practice, servers

become sellers.
• Guests will more likely be receptive to
suggestions from competent servers.

Copyright © 2017, 2013, 2009

Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
Front of the House Restaurant
Systems
• Point-of-sale or POS systems, are
common in restaurants and other
foodservice settings, such as stadiums,
theme parks, airports, and cruise ships.
• They are used to track F&B charges and
other retail charges that may occur at a
hotel or restaurant.

continued on next slide

Copyright © 2017, 2013, 2009
Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
Front of the House Restaurant
Systems
• The POS system is made up of a
number of POS terminals that interface
with a remote central processing unit.
• A POS terminal may be used as an
electronic cash register, too.
• Video monitors replace kitchen printers
to present orders to the kitchen staff
and monitor how long the orders take.

continued on next slide

Copyright © 2017, 2013, 2009
Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
Front of the House Restaurant
Systems
• Kitchen monitors are widely used in
quick-service restaurants (QSR) and
increasingly used in table service
restaurants (TSR).
• Guest services solutions help a
restaurant develop a dining relationship
with its guests.

continued on next slide

Copyright © 2017, 2013, 2009
Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
Front of the House Restaurant
Systems
• Their applications include frequent
diner programs, delivery management
with caller ID interface, guest accounts
receivable, and gift certificate
management.

continued on next slide

Copyright © 2017, 2013, 2009
Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
Front of the House Restaurant
Systems
• Applications are accessed through the
POS system and give restaurateurs the
opportunity to offer their guests
convenience, while allowing the
restaurateurs to track who their best
customers are.

Copyright © 2017, 2013, 2009

Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Back of the House Restaurant
Systems
• BOH applications, also called PMSs,
include inventory control and food
costing, labor management, and
financial reporting features.
• FOH systems track employee working
time.

continued on next slide

Copyright © 2017, 2013, 2009
Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Back of the House Restaurant
Systems
• A BOH management package adds the
ability to manage payroll and human
resource information.
• Labor management includes a human
resources module to track hiring,
personal information, vacations, tax
status, availability, and so forth.

continued on next slide

Copyright © 2017, 2013, 2009
Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Back of the House Restaurant
Systems
• Scheduling capability lets managers
create schedules based on forecasted
business.
• These are enforced as employees check
in and out, allowing management
control of labor costs.

continued on next slide

Copyright © 2017, 2013, 2009
Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Back of the House Restaurant
Systems
• The labor management package also
tracks actual working time and pay
rates, feeding data into a payroll
processor to generate paychecks and
file tax data.
• FOH and BOH systems post data into a
relational database on the CPU.
• Restaurant managers use these data
for reporting and decision-making.
continued on next slide
Copyright © 2017, 2013, 2009
Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Back of the House Restaurant
Systems
• It is important to get reports in real
time so that losses can be limited.
• Some reporting packages provide a
continuous graphical representation of
financial data.
• Personal digital assistants (PDAs) allow
improved time management and
speedier service.

continued on next slide

Copyright © 2017, 2013, 2009
Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Back of the House Restaurant
Systems
• They allow servers to post data on the
spot and not at a computer terminal.
• Orders don’t have to be written down.
• PDAs also can be used in hotels,
especially in housekeeping where they
can give housekeepers and the front
desk real-time information about room
status.

Copyright © 2017, 2013, 2009

Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Back of the House

• The BOH refers to all areas that guests

do not typically come in contact with; it
is generally run by the kitchen
manager.
• The BOH includes purchasing,
receiving, storing/issuing, food
production, stewarding, budgeting,
accounting, and control.

continued on next slide

Copyright © 2017, 2013, 2009
Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Back of the House

• The kitchen manager, cook, or chef

begin the production process by
determining the expected volume of
business for the next few days.
• Much of the prep work is done in the
early morning and afternoon.

continued on next slide

Copyright © 2017, 2013, 2009
Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Back of the House

• The kitchen manager checks the head

line cook’s order, which will bring the
prep area up to the par stock of
prepared items.
• The kitchen layout is set up according
to the business projected, as well as
the menu design.
• The cooking line is the most important
part of the kitchen layout.
continued on next slide
Copyright © 2017, 2013, 2009
Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Back of the House

• The size of the kitchen and its

equipment are all designed according to
the sales forecasted for the restaurant.
• The kitchen will also be set up
according to what the customers prefer
and order most.

continued on next slide

Copyright © 2017, 2013, 2009
Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Back of the House

• Teamwork is especially important in the

kitchen—for example, helping each
other with the prepping and the
cooking.
• A number of chefs are joining the green
hospitality movement by encouraging
the purchase of sustainable farming
produce.

continued on next slide

Copyright © 2017, 2013, 2009
Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Back of the House

• More than 20,000 American Federation

members are emphasizing organic and
locally grown produce, whole-grain
breads, and grass-fed meat products.

Copyright © 2017, 2013, 2009

Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Kitchen/Food Production

• Practicing proper staffing is crucial in

running a successful kitchen.
• Overstaffing, rather than understaffing,
is often the best idea, because it is
much easier to send someone home
than to call someone in.
• Extra employees allow for cross training
and development.

continued on next slide

Copyright © 2017, 2013, 2009
Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Kitchen/Food Production

• Problems can also be eliminated if a

staffing plan is created.
• Also crucial to a smoothly run kitchen is
a competent staff.
• Implementing a comprehensive training
program is vital in the kitchen due to a
high turnover rate.
• Often, the most competent chefs are
used to train new hires.
continued on next slide
Copyright © 2017, 2013, 2009
Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Kitchen/Food Production

• Developing the skills of all employees is

critical to the growth and success of the
kitchen and, ultimately, the restaurant.
• A development program may consist of
delegating duties or projects to the
staff, allowing them to expand their
horizons within the kitchen and the
restaurant business.

continued on next slide

Copyright © 2017, 2013, 2009
Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Kitchen/Food Production

• Such duties include projections of sales,

inventory, ordering, schedule writing,
and training.
• When determining production, par
levels should be changed weekly
according to sales trends to help
control and minimize waste levels.

continued on next slide

Copyright © 2017, 2013, 2009
Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Kitchen/Food Production

• The use of production control sheets is

critical in controlling how the cooks use
the products since production plays a
key role in food cost.

Copyright © 2017, 2013, 2009

Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
Management Involvement and
Follow-Up
• Management should know firsthand
what is going on in the BOH.
• As management spends more time in
the kitchen, more knowledge is gained,
more confidence is acquired, and more
respect is earned.

continued on next slide

Copyright © 2017, 2013, 2009
Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
Management Involvement and
Follow-Up
• Continual management follow-up is
necessary to ensure that policies and
standards are being upheld.

Copyright © 2017, 2013, 2009

Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Employee Recognition

• Recognizing employees for their efforts

creates a positive environment that
motivates the staff to excel and to
ultimately produce consistently better
quality food for the guests.
• This is an important aspect of BOH
management.

Copyright © 2017, 2013, 2009

Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Purchasing

• Purchasing for restaurants involves

procuring products and services that
the restaurant needs in order to serve
its guests.
• Operators need to determine standards
to set up an effective purchasing
system.

continued on next slide

Copyright © 2017, 2013, 2009
Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Purchasing

• The following must be established:

standards for each food item, systems
to minimize theft/pilferage, par stocks,
who will do the buying, who will do the
receiving, storage, and issuing of items.
• Product specifications establish
standards for each product.

continued on next slide

Copyright © 2017, 2013, 2009
Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Purchasing

• Computerized or manual systems can

be used to minimize theft and
pilferage—but it can’t prevent it.
• An efficient and effective system
establishes a stock level that must be
on hand at all times; this is called par
stock.

continued on next slide

Copyright © 2017, 2013, 2009
Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Purchasing

• The person who is responsible for

ordering and the person who is
responsible for receiving should not be
the same person.
• Keeping these responsibilities separate
is important to guard against theft.

continued on next slide

Copyright © 2017, 2013, 2009
Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Purchasing

• Pre-purchasing functions include -

planning menus, determining the
quality and quantity needed to produce
the menus, determining the inventory
of stock levels, identifying items to
purchase and the amount to be
purchased, and writing specifications
and market orders for purchase.

continued on next slide

Copyright © 2017, 2013, 2009
Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Purchasing

• Purchase orders come as the result of

the product specifications.

Copyright © 2017, 2013, 2009

Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Receiving

• When placing an order, the restaurant

operator specifies the time and day the
delivery is to be made.
• Receiving is a point of control in the
restaurant.

continued on next slide

Copyright © 2017, 2013, 2009
Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Receiving

• The purpose is to ensure that quality,

quantity, and price are what was
ordered.
• Perishable items may go directly to the
kitchen and non-perishable items go
into storage.

Copyright © 2017, 2013, 2009

Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Storing/Issuing

• Control of the stores is often a

problem; therefore records must be
kept of all items going into, and being
removed from, stores.
• The more people who have access to
the storage areas, the more difficult it
is to maintain strict controls.

continued on next slide

Copyright © 2017, 2013, 2009
Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Storing/Issuing

• Items should only be released when an

authorized requisition has been
completed.
• First-in–first out (FIFO) ensures stock
rotation by placing the most recent
purchases in rotation, behind previous
purchases.

Copyright © 2017, 2013, 2009

Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Budgeting

• Budgeting costs fall into two

categories:
– Fixed costs are constant, regardless of
the volume of business; and
– Variable costs fluctuate with the volume
of business.

Copyright © 2017, 2013, 2009

Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Restaurant Accounting

• One of the most important goals of any

business is a fair return on investment,
otherwise known as profit.
• Accounting for income and
expenditures is a necessary part of any
business enterprise.

Copyright © 2017, 2013, 2009

Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Balance Sheet

• A balance sheet reflects how the assets

and liabilities relate to the owner’s
equity at a particular moment in time.
• It is used by owners and investors to
verify the financial health of a business.

continued on next slide

Copyright © 2017, 2013, 2009
Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Balance Sheet

• Restaurants are one of the few,

fortunate types of businesses to
operate on a cash basis for income
receivables.
• There are no outstanding accounts
receivables because all sales are in
cash.

Copyright © 2017, 2013, 2009

Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
Operating or Income Statement

• The income statement, which is for a

month or a year, begins with F&B
sales; from this total the cost of F&B is
subtracted and the remaining total is
gross profit.
• Other expenses and sources of income
are identified by category to eventually
realize net income.

continued on next slide

Copyright © 2017, 2013, 2009
Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
Operating or Income Statement

• Managing the money to the bottom line

requires careful scrutiny of all key
results, beginning with the big-ticket
controllable items such as labor costs,
food costs, and beverages, on down to
related controllable items.

continued on next slide

Copyright © 2017, 2013, 2009
Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
Operating or Income Statement

• Additionally, management may want to

compare several income statements
representing operations over a number
of different periods.

Copyright © 2017, 2013, 2009

Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Operating Ratios

• Operating ratios are industry norms

that are applicable to each segment of
the industry.
• Several ratios are good barometers of a
restaurant’s degree of success.

continued on next slide

Copyright © 2017, 2013, 2009
Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Operating Ratios

• Some ratios are:

– Food cost percent
– Beverage cost percent
– Labor cost percent
– Contribution margin and
– Prime cost.

Copyright © 2017, 2013, 2009

Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Food Cost Percentage

• Food cost percentage equals cost

divided by sales times 100 and is a
comparison of cost of goods sold to
sales.

continued on next slide

Copyright © 2017, 2013, 2009
Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Food Cost Percentage

• Food cost percentage has long been

used as a yardstick for measuring the
skill of the chef, cooks, and
management to achieve a
predetermined food cost percentage—
usually 28% to 32% percent for a full
service restaurant and a little higher for
a high-volume, fast-food restaurant.

Copyright © 2017, 2013, 2009

Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Contribution Margin

• The contribution margin is the amount

that a menu item contributes to the
gross profit, or the difference between
the cost of the item and its sale price.
• Some items contribute more than
others on the menu; therefore food
operators focus more attention on the
items that contribute more dollars.

Copyright © 2017, 2013, 2009

Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Labor Cost Percentage

• Labor costs are the highest single cost

factor in staffing a restaurant.
• Labor costs include salaries, wages,
benefits, and training costs.

continued on next slide

Copyright © 2017, 2013, 2009
Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Labor Cost Percentage

• Labor costs are generally compared to

sales as a percentage of sales, either as
a whole or by labor category.
• Labor costs are calculated by taking the
cost of labor and dividing it by sales for
the same period.

Copyright © 2017, 2013, 2009

Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Prime Cost

• Combined food, beverage, and labor

costs are known as prime costs.
• Prime costs should not go above 60%
to 65% of sales.

Copyright © 2017, 2013, 2009

Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Beverage Cost Percentage

• The beverage cost percentage is

calculated similar to food cost
percentage and is used to compare the
cost of goods sold to sales.

Copyright © 2017, 2013, 2009

Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
Lease and Controllable Expenses

• The best lease is long term with options

for renewal and should not exceed 5%
to 8% of sales.
• Lease costs are determined in different
ways—by square foot, flat monthly
rate, monthly rate plus a percentage of
sales, etc.

continued on next slide

Copyright © 2017, 2013, 2009
Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
Lease and Controllable Expenses

• Most leases are triple net, which means

that the lessee must pay for all
alterations, insurance, utilities, and
commercial fees.
• Some restaurants pay a combination of
a flat amount based on square footage
and a percentage of sales.

Copyright © 2017, 2013, 2009

Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Controllable Expenses

• Controllable expenses are all the

expenses over which management has
control.
• They include labor, direct operating
expenses, food costs, marketing, etc.

Copyright © 2017, 2013, 2009

Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
Restaurant Manager Job Analysis

• The National Restaurant Association

(NRA) has formulated an analysis of the
foodservice manager’s job by function
areas and tasks, which follows a natural
sequence of functional areas from
human resources to sanitation and
safety.

continued on next slide

Copyright © 2017, 2013, 2009
Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
Restaurant Manager Job Analysis

• Key elements that must be addressed

by foodservice managers include:
– Recruitment and training
– Orientation and training
– Scheduling for shifts
– Supervision
– Employee development
– Accounting
– Cost control
continued on next slide
Copyright © 2017, 2013, 2009
Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
Restaurant Manager Job Analysis

• Key elements that must be addressed

by foodservice managers include:
– Scheduling and coordination
– Planning
– Communication
– Marketing management
– Facility maintenance

continued on next slide

Copyright © 2017, 2013, 2009
Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
Restaurant Manager Job Analysis

• Key elements that must be addressed

by foodservice managers include:
– F&B operations management
– Service
– Sanitation and safety

Copyright © 2017, 2013, 2009

Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
 Recycling

• At the end of the night in most

restaurants, leftover food, paper,
bottles, and cardboard are typically put
in a dumpster.
• Separating garbage is dirty; it requires
people and time.
• But, many operators say making minor
changes reduces trash and helps the
budget.
Copyright © 2017, 2013, 2009
Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.
Trends in Restaurant Operations

• A few trends include more restaurant

food truck and mobile vendor
operators, simplifying menus, increased
use of technology, delivery, fast fresh
casual, credit card guarantees and
overbooking, and more large retail
restaurants.

Copyright © 2017, 2013, 2009

Introduction to Hospitality
ICD-10-CM/PCS Coding: A Management,
Map to Success
Fifth Edition
by Pearson Education, Inc.
Lorraine
John R. Walker
M. Papazian-Boyce
All Rights Reserved.