1 Chapter 1- Why Is Understanding Food & Beverage Financial Calculations Important?

Food and beverage calculations are the foundation for running a successful food service business. By understanding these calculations in this course, you will be well-equipped to make sound financial decisions and control costs, whether managing a food & beverage business for someone else or your own business. This course will explore why these calculations over the next 15 weeks:

Cost Control: Food and beverage calculations help managers/owners understand where their money goes by tracking ingredient costs, labor costs, and other expenses to identify areas for improvement and implement cost-saving measures. There are many ways to control costs as an owner/manager: Standardized Recipes, Purchasing Specifications, Minimizing Waste, and Proper Scheduling of your hourly staff, to name a few.

Profitability: Imagine creating a dish that looks amazing but loses money with every order. Food cost calculations, a cornerstone of profitability, help you understand the exact cost of each menu item and what your contribution margin is for each dish.

Inventory Efficiency: Food is money, and proper inventory management minimizes waste. Calculations like inventory turnover and usage rates help determine how much stock to keep on hand, preventing overstocking, which ties up cash and risks spoilage, and understocking, which leads to lost sales and frustrated customers.

Menu Engineering: Numbers can be your secret weapon for crafting a popular and profitable menu. Menu engineering helps you identify the most and least profitable dishes, allowing you to analyze recipes, adjust portion sizes, or experiment with lower-cost ingredients while maintaining quality and flavor. Menu engineering and menu pricing involve calculating which dishes are the most profitable. Understanding food cost percentages, portion control, and pricing strategies to ensure the menu generates enough revenue to cover expenses and make a profit.

Budgeting Brilliance: Creating and following a budget is crucial for financial stability within the food & beverage industry. Food and beverage calculations can help you achieve your desired profit margin, empowering you to make informed decisions about other expenses and avoid overspending. Sales forecasts help you predict future demand, allowing you to plan staffing, inventory purchases, and menu adjustments to capitalize on seasonal trends or special events.

Informed Decision Making: Data is king in the food and beverage industry. By understanding basic financial calculations, you can learn how to make data-driven decisions about everything from purchasing to staffing to marketing, aiming to create a more efficient and profitable operation.

Throughout this semester, you will have the ability to:

• Make data-driven decisions that optimize profitability.
• Maximize efficiency in all areas: increase sales while controlling labor, food & beverage costs.
• Develop a menu that is both delicious and cost-effective.
• Create a realistic budget and stick to it.
• Understand how to read and interpret income statements, balance sheets, and cash flow statements.
• Plan and adapt to changing market conditions such as increased ingredient costs, labor costs, and governmental regulations.