Operations Management ~ Intro

Instructor – Will Bohmann

New England Culinary Institute

AOS Culinary Arts

Mod 4

Instructor & Student Intros

Briefly:

Intro Any experiences with Financial Analysis What do you hope to get out of this class

Class Overview

We’ll focus on the business concepts, information, and attitudes that are relevant for new culinary professionals entering the food service industry. The key to success, as a culinary professional, is to maximize your business expertise.

This course will enhance your capacity to envision, anticipate and orchestrate what will happen in business through the study of the income statement.

Expectations for the Class

Be on time! Casual attire for class is acceptable. Be prepared for “respectful engagement.” Ask questions… if you are wondering,

someone else is too.

Industry Overview

Serving Our Nation

Industry Highlights

High annual revenue Largest Employer Growth Food Dollar

Industry Highlights

High annual revenue Largest Employer Growth Food Dollar

$566 Billion Dollars

The Final Project

You are planning an 80 seat restaurant. It may be located in Burlington or Montpelier You are open for dinner only. You are open 7 days a week. 2 Parts:

Portfolio – Written evidence Presentation – Oral evidence

The Final Project - Portfolio Review

Concept Paper What kind of restaurant will it be? Who is my customer/guest

Menu Requirements 3 appetizers 5 entrees 3 desserts 5 beverages

Cost Recipes Recipes to include:

Plate costs and sub-recipes

The Final Project - Portfolio Review

Menu Surveys At least 25 people Each person must select one app, one entrée,

one dessert and one beverage Staffing Guidelines

Busy, Average & Slow Shifts Scatter plots – Menu Engineering Income Statement A ten minute Power Point Presentation

The Final Project - Portfolio Review

Things that will help you Exceed Standards: Draw a floor plan Incorporate images that represent your concept

(ie. Logo, décor, etc.) Use special paper that would be representative of

your concept Print all, or part of your presentation in color Include a separate menu in cover Be creative in the design of the portfolio

The Final Project - Presentation Review

10 Minute oral presentation

Power Point 10 slide minimum

Concept Summary Target Market review Menu overview Costing summary Staffing summary Labor costs

Survey summary Menu engineering Income Statement

Prime costs review Profit or (Loss) review

Include extras! Photos of décor Animation Floor Plan Graphs

Basic Financial Terms & Concepts

Vocabulary

Formulas

The Income Statement

Income Statement = Profit & Loss = P&L This is a snap shot of how the business is

performing financially. It can be generated any time, but usually is

done monthly and rolled up into one annual statement.

It includes: revenue, expenses and profit

Parts of the Income Statement – Sales & COGS

Income Statement

SalesFood $ 590,000

Beverage $ 130,000

Total $ 720,000

Cost of Goods (COGS)

Food $ 199,003

Beverage $ 33,054

Total $ 232,057

Gross Profit $ 487,943

Sales, or revenue, appear at the top of the income statement.

For a restaurant there are two general revenue centers: food and beverage. (sometimes retail)

Directly below the sales, appear the Cost of Goods Sold (COGS).

These are also broken down for food and beverage.

Below this is Gross Profit – the total sales minus the COGS (Sales – COGS = Gross Profit)

Gross profit is sometimes called Gross Revenue

Parts of the Income Statement – Operating Expenses

Labor ExpenseFixed Payroll $ 79,854

Variable Payroll $ 132,000

Total Payroll $ 211,854

Taxes & Benefits $ 38,115

Total Labor $ 249,969

Other ExpensesControllable Expenses $ 102,000Fixed Expenses $ 92,000

Total Other Expenses $ 194,000

Profit or (Loss) $ 43,974

The second largest operating expense is: Labor Expense.

It appears separately just below the COGS

Operating expenses are broken down into two categories:

Controllables - FluctuatingFixed – Occupancy costs

Profit or (Loss) is the last line on the income statement.

Income StatementSales %

Food $ 590,000

Beverage $ 130,000

Total $ 720,000

Cost of GoodsFood $ 199,003

Beverage $ 33,054

Total COGS $ 232,057

Gross Profit $ 487,943

Labor ExpenseFixed Payroll $ 79,854

Variable Payroll $ 132,000

Total Payroll $ 211,854

Taxes & Benefits $ 38,115

Total Labor $ 249,969

Other ExpensesControllable Expenses $ 102,000Fixed Expenses $ 92,000

Total Other Expenses $ 194,000

Net Income $ 43,974

Part / Whole = %or

Cost / Sales = Cost %******

What is the % for each?

Formulas

Part / Whole = %

Cost / Sales = Cost %

-OR-

Basic Financial Terms & Concepts

Imagine a $1 bill.

Every penny that goes into that dollar is a percentage point.

So, when we say 30% food cost, we are talking about 30 pennies in a dollar.

Vocabulary

Dollars [$] versus Percents [%] $ give meaning to the numbers

How much $ you have to pay the bills & how much profit you made. How do you know if it was good enough? You had a profit of $43,974 for the month. What does it mean?

% gives numbers meaning Part (Expenses & Profit) ÷ Whole (Revenue).

Budgeted 10% profit and made 5%. What does that mean?

Income StatementSales

Food $ 590,000 81.9%

Beverage $ 130,000 18.1%

Total $ 720,000 100.0%

Cost of GoodsFood $ 199,003 33.7%

Beverage $ 33,054 25.4%

Total COGS $ 232,057 32.2%

Gross Profit $ 487,943 67.8%

Labor ExpenseFixed Payroll $ 79,854 11.1%

Variable Payroll $ 132,000 18.3%

Total Payroll $ 211,854 29.4%

Taxes & Benefits $ 38,115 5.3%

Total Labor $ 249,969 34.7%

Other ExpensesControllable Expenses $ 102,000 14.2%Fixed Expenses $ 92,000 12.8%

Total Other Expenses $ 194,000 26.9%

Net Income $ 43,974 6.1%

We budgeted a 10% Profit.How did we do?

…More Vocabulary

Revenue Income or Sales

NOT PROFIT !

Expenses Money spent on operating our business

Profit “Bottom Line” Money leftover after bills are paid

The Bottom Line

The Bottom Line is the last line of the Income Statement.

It is referred to as Net Profit. The process of revenue going through the

lines of the Income Statement (expenses) is called Flow Through.

• Read 7 P’s of marketing• First draft of your concept

• Bring rough draft to next class

HOMEWORK