sales control in hotels

The Goals of Sales Control

Control is defined as a process used by managers to direct, regulate, and restrain the actions of people so that the established goals of an enterprise may be achieved. Revenue control is clearly an important goal of sales control, but it is not the only one. There are at least two others.

A second goal of sales control is to optimize the number of sales—to undertake those activities that are likely to maximize the numbers of sales or customers.

A third goal of sales control is to maximize profit. Profit maximization requires two essential activities: pricing products properly and selling those products effectively.

1. Optimizing number of customers

2. Maximizing profit

3. Controlling revenue

I. Optimizing number of sales:

Assuming that there are sufficient numbers of potential customers available within a reasonable distance from a particular restaurant—that is, that the target market is large enough—there are certain steps that can be taken to maximize the number of customers who will patronize the restaurant.

The following are the most important for most people:

1. Location

2. Menu item differentiation

3. Price acceptability

4. Decor

5. Portion sizes

6. Product quality

7. Service standards

8. Menu diversity

Location:

If one were to take a given population center and draw concentric circles around it, each one an additional mile from the center, and then place a restaurant on each of these concentric circles, as one could judge the effect of location in relation to the population center. Other things being equal, customers will normally choose the most convenient restaurant. In addition, there is a maximum time and distance that any customer will travel to reach any particular restaurant.

Menu differentiation:

Economists characterize goods and services as homogeneous or differentiated. This distinction is based on how similar or different goods or services are in relation to one another. A homogeneous product or service is one that is so similar to another that customers do not have a preference and will purchase whichever costs less. Therefore, there is a general “market price” for homogeneous goods and services, and no individual operator can raise prices without the risk of losing some or all customers. Differentiated goods or services, on the other hand, are sufficiently different from others in their class that customers develop preferences for them. Customers may actually consider differentiated products unique. The uniqueness can be real or imagined. As long as customers prefer one product or service over another, whatever their reasons for preference, that product or service is differentiated. Clothing is a good example of a product that can be frequently labeled differentiated.

The terms homogeneous and differentiated are useful for classifying menu items. To the extent that the foodservice operator can develop and include in the menu products that are differentiated, potential customers seeking those products are likely to be willing to travel greater distances and pay higher prices to obtain them. If Restaurant D offers menu items that customers in the population center consider both desirable and unique, the operator of the restaurant will have little difficulty increasing sales volume.

Unique menu items created for this purpose are called signature items. Signature items are often specially named for a restaurant, a chef, or a locality. Waldorf salad, for example, was originally a signature item created and served in one of New York’s most famous hotels. Many restaurant operators create signature items in order to attract greater numbers of customers.

PRICE ACCEPTABILITY:

One of the most important factors in customer selection of one restaurant over another is price. Given three foodservice establishments exactly alike in every respect except for menu prices, the one with the lowest prices will have the greatest sales volume.

Restaurant menu items tend to be price sensitive, meaning that there is a relationship between sales price and sales volume. As the price of a menu item is increased, it can be expected that fewer customers will order that item. In the food and beverage business, the more homogeneous a menu item, the more price sensitive it is. By the same token, the more differentiated the item is, the less price sensitive it is. This helps to explain why so many of the well known national chains charge approximately the same prices for inherently similar or homogeneous menu items.

For a menu item to sell, the menu sales price must be acceptable to the customer. The customer must judge that the value received, including the food and all the other items that go to make up the restaurant product, is sufficient to justify acceptance of the stipulated menu price. Obviously, every individual has a different perception of price acceptability.

Décor:

There is an old saying that “beauty is in the eye of the beholder.” This is particularly true with restaurant decor. Decor helps to differentiate one restaurant from another. Each establishment attracts customers who prefer—or at least accept—its decor. However, decor that some customers may find pleasing is likely to be less so to others. Family groups, for example, tend to prefer informal, light, bright, and cheerful interiors; those patronizing restaurants offering gourmet cuisine are likely to expect a more formal setting.

A restaurant’s decor helps determine not just the type of customer, but the number of customers as well. One key to restaurant success, then, is to select decor that will appeal to a sufficiently large segment of the targeted market and thus will help maximize the number of customers.

Portion sizes:

The quantity of the product given a customer must be appropriate to the clientele that a food and beverage operator wishes to attract. Young, active people are more likely to prefer larger portions, and some may select those restaurants that are the most generous with servings. Some older adults, on the other hand, prefer smaller portions. They may avoid restaurants offering large portions because they feel wasteful paying  for food they will not consume. It is clearly false to say that large portions always attract the greatest numbers of customers. Customers want value for their money, and portion size is only one of the factors they consider when determining whether any given establishment offers value. Portion sizes must satisfy the clientele a foodservice operator seeks to attract. If portions are too small, business will be lost. If they are larger than necessary, food will be wasted, food costs will be higher than necessary, and profits will be lower than they may have been.

Product quality:

Quality is a term that conveys different meanings to different people. Those with particularly refined tastes—people sometimes referred to as gourmets—are more likely to seek perfection in food and may be inclined to accept nothing less. For them, this may mean that the quality of restaurant food must meet a long list of criteria: All ingredients must be fresh rather than canned or frozen; soups must be prepared from freshly made stocks; vegetables must be cooked only until just tender; and so on. Unless the food products offered in a particular restaurant meet their exacting quality standards, they will not patronize it. In any given population, various segments demand food products of various levels of quality. It is the responsibility of management to assess the market and then to offer products of an appropriate level of quality such that they will appeal to a large enough segment of the market to ensure the level of sales volume required for profitability.

Service standards:

Anyone who has patronized restaurants and other foodservice operations can recognize that there are a number of different types of service available. Some service is of very high quality; some much less so. Fast-food restaurants and cafeterias tend to provide comparatively little service beyond the basic requirements, whereas some classic hotel dining rooms and large numbers of fine restaurants offer extraordinary levels of service, with some appearing to have more staff than customers. In establishments offering extensive service, it is sometimes of the very highest quality—swift, unobtrusive, and approximating an art form. More commonly, however, the service is likely to be indifferent—slow, disorganized, intrusive—and the servers obviously untrained.

MENU DIVERSITY:

With the exception of those offering relatively homogeneous products that are commonly accepted and consumed in vast quantities because of their comparatively low prices, most restaurants find it necessary to have a broad range of items on the menu. A menu that includes only two or three entre´e choices is clearly of more limited appeal than one offering twelve or fifteen. Any given diner would be more likely to find an acceptable entre´e on the longer menu. In restaurants that depend heavily on repeat business, a limited menu can have significant negative impact on the number of times any given customer will return within a specific period of time. The number and range of items on any menu are governed by several important considerations, including the equipment available in the kitchen, the culinary abilities of the kitchen staff, and the cost considerations that arise when the large number of items offered results in considerable leftover food. As a general rule, the greater the scope of the menu consistent with these other considerations, the larger the segment of the market to which the menu will appeal and the more likely the restaurant will be to succeed.

II. Maximizing profit

There are two principal means for maximizing profit: pricing products properly and selling those products effectively.

Pricing Products Properly:

Restaurants normally have standard sales prices for the menuitems they offer. The sales prices for menu items are usually established by restaurant owners or managers and are communicated to customers via printed menus or conspicuously posted signs. Because the sum of the prices paid by all customers for their menu selections is the total food revenue for a restaurant, it should be evident that these sales prices are critically important in determining the degree of profitability for any restaurant. Cost is normally the most significant consideration in establishing the sales price for any menu item. In any given restaurant, higher-cost items typically have higher sales prices than lower-cost items. Steak, for example, usually commands a higher sales price than spaghetti because the portion cost is higher. However, cost is not the only determinant of price.

There are a number of methods for establishing menu prices. Many of these, however complex they may appear, are variations on three basic approaches:

1. Matching competitors’ prices

2. Calculating prices from costs and cost percents

3. Adding desired contribution margins to portion costs

Matching Competitors’ Prices:

Perhaps the most widely used approach to menu pricing is one that may best be described as “follow the leader”—establishing prices that meet those of competitors. This is an approach commonly employed by those who have little or no idea of the costs of the items they sell. Many who adopt this approach believe that if a nearby competitor manages to stay in business by, say, selling burgers for Rs.20.25, then they can do the same. When they later discover they are nearing bankruptcy, they can never quite understand why. The use of this imitative approach is not restricted to those who lack the knowledge to do otherwise; it is not  uncommon among seasoned and successful operators. Many restaurateurs believe that if their prices are higher than those of nearby competitors, they will lose business to the competition. Tacitly, they are defining their products as homogeneous rather than differentiated. In many cases, they are correct: They are offering price-sensitive, homogeneous products. Restaurants featuring such common items as pizza, fried chicken, or hamburgers can be very much alike in products, services, and prices.

Calculating Prices from Costs and Cost Percents:

The second approach to menu pricing, calculating prices from costs and cost percents, has two variations. In both cases, portion costs must first be determined by means of the techniques. Given

portion cost for any menu item, one can calculate a menu price so that the portion cost will be some fixed percentage of that price. If, for example, a restaurateur wanted food cost-to-sales ratio to be 40 percent, he or she could set a menu price for each item merely by dividing .4 into the portion cost and adjusting the resulting answer to a suitable amount to print in a menu. Thus, a figure such as $14.24 would be adjusted to $14.25, a more common menu price. If this approach were followed with literally every menu item, the cost percent for operation for any period would be 40 percent, provided that the staff followed all established standards and standard procedures for purchasing, receiving, storing, issuing, and producing food. The food cost percent figure to use could be determined by subtracting profit, fixed cost, and labor cost, as percentages of sales, from 100 percent.

The second variation is slightly different. With portion costs known, a manager sets tentative menu prices and then forecasts sales volume for an upcoming period. Projected figures for total cost, total sales, and food cost percent may be determined by using the Menu Pre-Cost and Abstract illustrated and discussed in Chapter 11. If the projected cost percent is judged unsatisfactory, then portion costs, menu prices, and even the forecast itself can be adjusted until a realistic and satisfactory potential result is achieved.

If the forecast has been reasonably accurate and if the staff has observed the standards and standard procedures established for all phases of operation, the resulting cost percent for operation should conform to management’s plans.

Adding Contribution Margins to Portion Costs

The third approach, adding contribution margins to portion costs, is becoming more common in the industry. This approach requires that the foodservice operator determine the average contribution

margin required to cover costs other than food and to yield the desired level of profit at the expected level of sales volume. This average contribution margin is then added to the portion costs of menu items to determine their menu prices.

The use of this approach can be illustrated with figures abstracted from the statement of income for Julio’s, a very successful restaurant adjacent to the largest shopping mall in the region. The statement of income indicates the following for a period during which 30,000 customers were served.

Food sales                 $500,000

-Cost of sales            200,000

=Gross profit            $300,000

- All other costs         250,000

=Profit                       $ 50,000

If one divides the $500,000 food sales by the 30,000 customers, it is apparent that each customer in this example spent an average of $16.67. Dividing the $300,000 gross profit by the 30,000 customers, it is also apparent that each customer contributed an average of $10.00 to covering costs other than food and providing profit.

This method suggests that each menu item should be priced at $10.00 above portion cost, regardless of the item. For example, a steak with a portion cost of $8.00 would be priced at $18.00, and a pasta item costing $2.50 would be priced at $12.50. If this approach were followed and if sales volume matched or exceeded forecasts, the minimum acceptable dollar profit would be assured, provided that costs were kept strictly under control in all areas. In addition, many may consider this a more equitable pricing method. Assuming that there is no significant difference in the cost of producing menu items, each customer is bearing only his or her fair share of costs and profits.

SELLING PRODUCTS EFFECTIVELY:

Essentially, a restaurant has two principal means available for selling products effectively:

1. The menu

2. The sales techniques used by the staff

The menu

The menu is the primary sales tool in most restaurants. For this reason, one is inclined to turn to the menu to shed light on the numbers of sales of the various items offered. The items that are presented most favorably (featured on the menu, for example) typically outsell other items. Conversely, those that are least favorably presented tend not to sell as well as they might. Because menu items normally have differing costs, contribution margins, and cost percents, the foodservice operator has an opportunity to exercise some measure of control over cost percent and gross margin by preparing menus that achieve maximum sales volume. It is quite clear that one would want to maximize sales volume for those items deemed to be the most profitable.

The menu is such a key ingredient in efforts to maximize profits, anyone planning a career in foodservice should have a general knowledge of the most important elements in menu preparation:

1. Layout and design

2. Variety

3. Item arrangement and location

4. Descriptive language

5. Kitchen personnel and equipment

Layout and Design.

 It should be apparent that the entire physical menu (the paper, the color, the printing, and so on) should suit the character and style of the restaurant. One would not, after all, expect an elaborate menu printed in raised type on parchment stock in the average roadside diner, nor would one expect to see the menu of a high-priced and exclusive Continental restaurant printed poorly on the cheapest paper available. Appropriate menu layout and design for a restaurant is an essential factor in satisfying the clientele and achieving maximum revenue.

Variety.

For a menu to have maximum public appeal, it should offer a suitable variety of foods, preparation methods, and prices. Variety will satisfy the needs of a broad market and will help the restaurant operator capture the largest possible number of customers. Even in specialty restaurants and those offering ethnic foods, variety is important. After all, even the fast-food restaurant chains offer their customers choices.

Appearance of foods is of great importance. The number of combinations of foods that may appear together on plates is vast, and some are more interesting and attractive than others. The possibilities for providing pleasant and appropriate contrasts in color, contour, and texture are always in the mind of the experienced menu writer.

Item Arrangement and Location.

 One of the most significant menu-making principles involves the physical arrangement of items on the menu. Items on the menu seen first by customers tend to be ordered more frequently than those seen later. It is generally agreed that a person’s eyes are first focused on the center of a menu. And unless that person’s attention is otherwise directed, items listed first and at the top of a list are seen first and make the greatest impression. It stands to reason that those items will sell in the greatest quantities, or at least will sell in greater quantities than if they were placed at the bottom of the list.

Another way of bringing customers’ attention to a particular menu item is to feature it in larger type than the items surrounding it. Sometimes a different typeface can have the same effect. In some cases, not only is the type different, but the item is given its own featured spot on the menu. In addition, many restaurants use color pictures, drawings or photographs, of some menu items to capture attention and to build sales volume for the pictured items.

The significant point is that the items management wishes to sell in the greatest quantities should be the featured items. These may be those items in greatest supply in the kitchen on a particular day, those with the most favorable cost-to-sales ratios, or those that provide the greatest contribution margins. In some instances, the featured items are those whose sale would most greatly enhance the restaurant’s reputation and thus help build sales volume. Many operators place items with greatest contribution margins in the most prominent places on the menu and relegate those with lesser contribution margins to less conspicuous spots. On such menus, high-cost, high-price items will be more prominent, often appearing first on a list of entre´es. Other operators may feature items that require extensive preparation and cannot be used up as leftovers. On  sumenus, less perishable a` la carte items, such as steaks cut

and cooked to order, will be far less prominent.

Descriptive Language.

The dining experience begins well before customers taste the food they have ordered. It may begin with the first impression of the food operation, when the restaurant is first described by a friend, when potential customers read a review or an advertisement, or when they first enter the premises. The physical appearance of the establishment and its staff and the attitude of the staff toward

Customers will make or reinforce an initial impression, or change it.

The menu itself and the language used to describe menu items may make a good impression and induce customer orders. The descriptions of foods may make the customer hungry and may help to increase the number of sales to a level that might otherwise have been impossible. On the other hand, a menu that describes available items poorly may actually decrease sales. A food and beverage operator can exercise great influence over the amount of the average check by using written descriptions that make menu items sound interesting.

Kitchen Personnel and Equipment.

 Over the years, there have been many horrible examples of foodservice operators adding various items to their menus that were completely beyond the culinary skills of the kitchen staff. There have been instances of foodservice consultants creating menus with items requiring higher levels of culinary skill than were available in the local labor market. And everyone knows of at least one case in which a specific chef, who was preparing menu items that were perfect delights to a restaurant’s customers, quit and left behind a staff that was unable to prepare the items satisfactorily.

Anyone writing a menu should have a clear, unbiased view of the culinary abilities of present staff and should be entirely realistic about the possibility of replacing any staff member with another of equal skill. At the same time, the menu writer should be aware not only of the equipment needed to prepare the foods on the menu, but also of the kinds of equipment available in the kitchen and its general condition. Before including a dish requiring precise oven temperatures to prepare, for example, one should be sure that oven thermostats are in proper working order. And before deciding to include French fries with every order, one should be sure of having adequate staff and equipment to prepare the needed quantity.

Sales technique:

The second means for selling products effectively is to develop appropriate sales techniques to be used by servers, who are, after all, a restaurant’s sales force.

The customer’s decision to order an item (or not to order it) is influenced by the server. Because of the important role that servers play in influencing customers’ selections, restaurant managers are usually interested in developing appropriate sales techniques for their servers and in providing some basic sales training.

In many restaurants, managers hold daily meetings with servers just before opening time. Managers often use this time to go over the day’s menu with servers to be sure they can describe each item to any customer, naming the principal ingredients and identifying the preparation method. The time can also be used to go over new menu items, to enumerate the specials of the day, and to identify any dishes that servers are expected to make special efforts to sell.

In restaurants that hold daily meetings with servers and train personnel to use standard sales techniques, management normally engages in some sort of periodic review and evaluation of staff performance. Performance can be assessed in a number of ways. A common method is to determine gross sales per employee or average sale per employee for a given period (a week, for example). Servers with performance levels significantly lower than those of their colleagues may need some coaching or additional training.

Controlling Revenue

There are many possibilities for errors to occur in the recording of sales. Some are accidental; others are not. Sales may be incorrectly recorded; incorrect prices may be charged; checks may be lost, stolen, or simply not used at all; sales that have been correctly recorded may not always bring revenue to an establishment because of the actions of dishonest employees or customers. Although these are but a few of the many possibilities, they serve to suggest the need for establishing some control over revenue.

The specifics required to achieve the necessary level of control are the following:

1. Documenting food sales

2. Using numbered checks

3. Checking and verifying food sales

4. Recording revenue

A great many systems and procedures for controlling food sales are presently in use in the industry. The larger the organization, the more complex these are likely to be. Sometimes the standard procedures used to control revenues in one restaurant appear to differ markedly from those used by another.

Documenting Food Sales:

One of the most basic steps in food sales control is to require that each menu item ordered be recorded in some way. The traditional method for attending to this has been to require that servers record guests’ menu selections and the menu prices of those selections on paper forms called guest checks or sales checks. Guest checks, used almost universally in the past and still very common today, are used to:

1. Help servers remember the specifics of guests’ orders

2. Give itemized bills to guests

3. Maintain written records of portion sales to add to a sales history

4. Prove the accuracy of cashiers’ work

5. Verify the accuracy of prices charged

6. Provide the records required for tax purposes

Using Numbered Checks:

Those still using guest checks purchase them from printers or stationers. When placing orders, they are careful to specify that the checks be serially numbered. In fact, many take care to specify the first number to be printed on the first check in the new order. This is normally the next number in a long sequence and is determined by looking at the number on the last check from the previous order

Essentially, there are two kinds of numbered guest checks: padded and unpadded..

Padded

Some operators buy sequentially numbered guest checks in pads of 25, 50, or some other amount. The first check may be numbered 0001, followed by 0002, and so on through the last in thepad, 0025. One pad of checks is assigned to a single server, who will be held accountable for all the checks in that pad. Padded checks are more common in restaurants that are somewhat less formal, where seat turnover tends to be higher and servers tend to use greater numbers of checks in any one day.

Unpadded

Other operators buy sequentially numbered checks unpadded. These checks are assigned to servers one at a time, so that a server is held accountable only for the specific check assigned to him or her. Unpadded checks are more common in restaurants where the style of service is more formal, where seat turnover tends to be lower, and a server will tend to use fewer checks during a shift.

Whether padded or unpadded, numbered checks make it possible to assign responsibility for specific checks to particular employees. In most cases, this is done by requiring personnel to sign for checks. Servers are typically required to sign for a pad of checks before a serving period and to return it at the end, recording the serial numbers of the checks used. Figure 12.2 illustrates a sheet from one type of signature book used for this purpose.

server signature book

Servers signature book

cashiers record of cheques

 see the image

Cashiers records of cheques distributed to servers

Essentially, foodservice managers are concerned with two additional aspects of hand-prepared guest checks:

1. Legibility. If guest checks provide the raw data that must be summarized before being added to a sales history, then it is obviously important that management be able to read the guest checks. For this purpose, illegibility is likely to mean inaccuracy.

2. Accuracy. Busy servers can make errors. Incorrect prices may be charged for menu selections, and incorrect selections can be written on checks. Errors of this nature are normally accidental; sometimes they are purposeful. For example, a price of $19.95 may be written for a sirloin steak that is listed at $29.95 on the menu. Or the $29.95 steak order may be written on the check as a chopped steak with

a menu price of $14.95.

Checking and Verifying Food Sales: see the image

Menu Analysis

this topic has been discussed in menu engineering