Quality as an Improvement Philosophy: Management of Employee Turnover Rate
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Transcript of Quality as an Improvement Philosophy: Management of Employee Turnover Rate
Restaurant Operations Management: Principles and Practices © 2006 Pearson Education, Inc. Ninemeier/Hayes Upper Saddle River, NJ 07458
Quality as an Improvement Philosophy: Management of Employee Turnover Rate
OH – 16.1
(Food Servers’ Turnover Rate)Current
1 Year 5 Years Goal
Long-Term Future
50% 40% 20% 10%
Restaurant Operations Management: Principles and Practices © 2006 Pearson Education, Inc. Ninemeier/Hayes Upper Saddle River, NJ 07458
Effective Restaurant Managers:
• Can never be content about “how things are now”
• Must be concerned about ways to make improvements in their operations
• Must utilize the present situation as the benchmark (starting point) for planning an improvement process
OH – 16.2
Restaurant Operations Management: Principles and Practices © 2006 Pearson Education, Inc. Ninemeier/Hayes Upper Saddle River, NJ 07458
Calculation of Actual Food and Beverage Costs with Adjustments for January, 20XX
OH – 16.3
Part A: Food Cost
Value of Food Inventory(Beginning of Period, Jan. 1) $ 83,575
Value of Food Purchases (During January) 187,615
Total Value of Food Available (During January) $ 271,190
Value of Food Inventory (End of Period, January) (89,540)
Total Unadjusted Cost of Food Used (January) 181,650
Add Adjustments to Total Cost of Food Used Transfers to Beverage 6,550
Deduct Adjustments to Total Cost of Food Used Transfers to Beverage Transfers to Labor Cost (Employee Meals) Transfers to Marketing
(4,175)(8,900)
(3,750) (16,825)
Net Cost of Food Used (January) 171,375
Assume January Food Revenue = $508,620
Food Cost % (Unadjusted) = $181,650 = 35.7% $508,620
Food Cost % (Adjusted) = $171,375 = 34.0% $508,620
Restaurant Operations Management: Principles and Practices © 2006 Pearson Education, Inc. Ninemeier/Hayes Upper Saddle River, NJ 07458
Calculation of Actual Food and Beverage Costs with Adjustments for January, 20XX (continued)
OH – 16.4
Part B: Beverage Cost
Value of Beverage Inventory (Beginning of Period, Jan. 1)
$ 19,550
Value of Beverage Purchases (During January) 38,950
Total Value of Beverages Available (During January)
$ 58,500
Value of Beverage Inventory (End of Period, January)
(15,715)
Total Unadjusted Cost of Beverages Used (Total Period)
42,785
Add Adjustments to Total Cost of Beverage Used Transfers from Food 4,175
Deduct Adjustments to Total Cost of Beverages Used
Transfers to Food Transfers to Marketing
(6,550)(1,275) (7,825)
Net Cost of Beverages Used (Total Period) 39,135
Assume January Beverage Revenue = $168,750
Beverage Cost % (Unadjusted) = $ 42,785 = 25.4% $168,750
Beverage Cost % (Adjusted) = $ 39,135 = 23.2% $168,750
Restaurant Operations Management: Principles and Practices © 2006 Pearson Education, Inc. Ninemeier/Hayes Upper Saddle River, NJ 07458
All About Food and Beverage Transfers
OH – 16.5
Impact onFood Costs Beverage
Costs• Transfers from Beverage Increase Decrease
• Transfers to Beverage Decrease Increase
• Transfers to Food Increase Decrease
• Transfers from Food Decrease Increase• Transfers to Labor Cost Decrease Not Common
Practice• Transfers to Marketing Decrease Decrease
Restaurant Operations Management: Principles and Practices © 2006 Pearson Education, Inc. Ninemeier/Hayes Upper Saddle River, NJ 07458
Steps in Problem Analysis Process
OH – 16.6
Step 1:
Step 2:
Step 3:
Step 4:
Set Expectations
Assess the “Actuals”
Analyze the Variance
Determine Whether Problem Exists
Restaurant Operations Management: Principles and Practices © 2006 Pearson Education, Inc. Ninemeier/Hayes Upper Saddle River, NJ 07458
“It's All in the Numbers”
OH – 16.7
Restaurant Operations Management: Principles and Practices © 2006 Pearson Education, Inc. Ninemeier/Hayes Upper Saddle River, NJ 07458
Revenue Levels Impact Food and Labor Cost Percentages
OH – 16.8
Actual Revenue Compared to Budget
Food Cost Percentage
Labor Cost Percentage
Greater No Change Decrease
Lower No Change Increase
Restaurant Operations Management: Principles and Practices © 2006 Pearson Education, Inc. Ninemeier/Hayes Upper Saddle River, NJ 07458
Potential Reasons for Revenue Problems
OH – 16.9
REVENUE PROBLEMS
Potentially Manageable Reasons Potentially Unmanageable Reasons
Revenue theft by employees Ineffective marketing/sales tactics Guest-relations issues New and significant competition for
the same guest market Operating hours are longer than
necessary; incurred labor costs are not offset by sufficient revenue
Significant layoffs within the community reducing the size of the guest market
Economic recession Significant capital improvement/
remodeling project leading to restaurant downtime
Street/other community improvement project yielding difficult/no access to property
Shortage (lack) of key menu ingredients which require popular items to be temporarily removed from the menu
Restaurant Operations Management: Principles and Practices © 2006 Pearson Education, Inc. Ninemeier/Hayes Upper Saddle River, NJ 07458
Potential Reasons for Food Cost Problems
OH – 16.10
FOOD COST PROBLEMS
Potentially Manageable Reasons Potentially Unmanageable Reasons
Revenue theft [1]
Failure to effectively follow procedures for effective purchasing, storing, issuing and producing food products Improper/inaccurate procedures to calculate actual food costs[2]
Ineffective selling techniques resulting in sales of higher food cost items Portion control issues
Significant increases in costs paid for food Shift of guest preferences to higher- food cost menu selections Storage losses (for example, refrigerator/freezer breakdown requiring stored food to be destroyed) Shift to more convenience foods in efforts to reduce labor costs
[1] The food cost percentage is a function of food costs divided by revenue; therefore, revenue theft yields a higher food cost percentage. The real problem could be theft of revenue rather than excess funds being spent for food.[2] See discussion of actual food cost calculations earlier in this chapter.
Restaurant Operations Management: Principles and Practices © 2006 Pearson Education, Inc. Ninemeier/Hayes Upper Saddle River, NJ 07458
Recap: Food Server Guest Check Averages
OH – 16.11
Restaurant Operations Management: Principles and Practices © 2006 Pearson Education, Inc. Ninemeier/Hayes Upper Saddle River, NJ 07458
Worksheet for Weekly Food Cost
OH – 16.12
Restaurant Operations Management: Principles and Practices © 2006 Pearson Education, Inc. Ninemeier/Hayes Upper Saddle River, NJ 07458
Labor Cost Analysis
OH – 16.13
Week of: 7/16/XX
Dishwashers PayRate
Schedule Actual Variance
Hours Pay Hours Pay
(1) (2) (3) (4) (5) (6) (7)
Armon $7.55 35 $264.25 38 $286.90 ($22.65)
Catalina $7.85 30 $235.50 35 $274.75 ($39.25)
Billy $6.90 35 $241.50 37 $255.30 ($13.80)
Omar $7.80 15 $117.00 10 $ 78.00 $39.00
$858.25 $894.95 ($36.70)
Restaurant Operations Management: Principles and Practices © 2006 Pearson Education, Inc. Ninemeier/Hayes Upper Saddle River, NJ 07458
Steps in Corrective Action Process
OH – 16.14
Step 1:
Step 2:
Step 3: Utilize a Decision-MakingProcess
Consider Problems Identified by Analysis
Prioritize Problems
Unmanageable Manageable
Restaurant Operations Management: Principles and Practices © 2006 Pearson Education, Inc. Ninemeier/Hayes Upper Saddle River, NJ 07458
Prioritizing Problems: Assess the Economic Impact
OH – 16.15
A. Would you rather increase revenue or decrease variable costs? (Answer: Ideally both!) What about in the example below? Priority: To increase revenue by $2,000 or to decrease variable costs by $2,000.
Assume Current Data
Increase Revenueby $2,000
Decrease Costsby $2,000
Revenues $ 12,000.00 $ 14,000.00 $ 12,000.00
Variable Costs (70%) (8,400.00) (9,800.00) (6,400.00)
Fixed Costs (20%) (2,400.00) (2,400.00) (2,400.00)
“Profit” $ 1,200.00 $ 1,800.00 $ 3,200.00
Increasing revenue by $2,000 only yields a $600 increase in profit ($1,800 - $1,200); decreasing variable costs by $2,000 increased profit by $2,000 ($3,200 - $1,200).
Restaurant Operations Management: Principles and Practices © 2006 Pearson Education, Inc. Ninemeier/Hayes Upper Saddle River, NJ 07458
More on Prioritizing Problems: Assess the Economic Impact
OH – 16.16
B. Which of the following costs would you first “manage”? (Answer: Hopefully both at the same time!) If not, which is the priority?
Budget Actual Difference
Food Cost 34% 36% (2%)
Beverage Cost 26% 31% (5%)
At first examination, it appears “obvious” that beverage costs represent the biggest problem: a 5% variance from expected costs compared to only 1% variance for food costs. However, after we learn more details, our opinion of the largest problem changes
FOOD
Actual Budget Difference
Food Revenue $450,000.00 $450,000.00
Food Cost % 36% 34%
Food Cost $162,000.00 $153,000.00 ($ 9,000.00)
BEVERAGE
Actual Budget Difference
Beverage Revenue $105,000.00 $105,000.00
Beverage Cost % 31% 26%
Beverage Cost $32,550.00 $27,300.00 ($ 5,250.00)
As seen above, a 2% variance in food costs represents $9,000 in higher-than-expected costs (and lower profits). By contrast, a 5% variance in beverage costs results in $5,250 in higher-than-expected costs (and lower profits). Clearly, after any “quick fix” with the beverage operation, the manager's attention must be directed to food control activities.
Restaurant Operations Management: Principles and Practices © 2006 Pearson Education, Inc. Ninemeier/Hayes Upper Saddle River, NJ 07458
Basics of the Decision-Making (Problem-Solving) Process
OH – 16.17
STEPS EXAMPLE
Step 1: Define the Problem
Step 2: Generate Solution Alternatives
Step 3: Evaluate Solution Alternatives
Step 4: Select the “Best” Solution Alternative
Step 5: Implement the Solution Alternative
Step 6: Evaluate the Effectiveness of the Solution
Guest check average for food has been declining for each of the last three months
Need to utilize suggestive selling Need to evaluate menu (components and design) to
determine if changes can increase revenues Errors in equipment/procedures used to calculate data Theft of revenue by food servers
Guest shoppers did not observe suggestive selling; training needed to implement suggestive selling program
Menu recently re-designed; guest counts are up slightly An auditor has found no “bookkeeping problems”
suggesting employee theft
Implement a suggestive selling program
Train service staff; implement a contest (all servers with a specified minimum guest check average win complimentary meals and sweatshirts)
Determine the extent to which the guest check average increases after the suggestive selling training program has been implemented
Restaurant Operations Management: Principles and Practices © 2006 Pearson Education, Inc. Ninemeier/Hayes Upper Saddle River, NJ 07458
Some Tactics to Reduce Resistance to Change
• Involve employees in the decision-making process. • Inform employees in advance about changes that will
impact them.• Select an appropriate time to implement the change.
(“Trying something new” during an extremely busy shift is never a good idea!)
• Share past successes; review related changes that have benefited the employees and the organization.
• Reward employees for sharing ideas in the decision-making process that benefit the restaurant and the employees.
OH – 16.18