Foodservice Management:
Principles and Practices, 12th ed.
Chapter 17
Financial Management
Key Concepts
◼ Financial management is an important
management function and requires
knowledge of fundamental accounting
techniques.
◼ Careful record keeping is essential for
monitoring day-to-day financial data and to
serve as the foundation of financial
statements.
◼ The Income Statement is a summary of
financial information for a defined accounting
period.
Foodservice Management: Principles and Practices, 12e © 2012, 2009, 2005 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.
June Payne-Palacio and Monica Theis 2
Key Concepts
◼ The Balance Sheet provides information about the
value of a business and how well its assets have
been used to meet the financial goals of the
operation.
◼ Ratio analysis is widely used in the foodservice
industry. Various ratios are useful for comparing
present performance to a previous time period; to
another company’s performance; to industry
averages; and/or to budgeted figures.
◼ Many factors affect menu pricing, and all must be
considered in order to assign financially viable menu
prices.
Foodservice Management: Principles and Practices, 12e © 2012, 2009, 2005 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.
June Payne-Palacio and Monica Theis 3
Key Concepts
◼ A budget is a financial plan developed
to help achieve future goals.
◼ Several different types of budgets are
used in organizations, including the
operating, cash, and capital budgets.
Foodservice Management: Principles and Practices, 12e © 2012, 2009, 2005 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.
June Payne-Palacio and Monica Theis 4
Introduction
▪ Cost-effectiveness is essential if operations
are to be successful, especially with today’s
economy and competitive market.
▪ Every person responsible for the financial
management must know, day by day, what
transactions have taken place and how they
compare with established goals.
Foodservice Management: Principles and Practices, 12e © 2012, 2009, 2005 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.
June Payne-Palacio and Monica Theis 5
Financial Planning
▪ Budget: a budget is a forecast of future
needs.
• Volume indicators
• Cost
• Value of a budget
▪ Advantages
▪ Disadvantages
Foodservice Management: Principles and Practices, 12e © 2012, 2009, 2005 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.
June Payne-Palacio and Monica Theis 6
Financial Planning
▪ Budgets: types of budgets
• Master budgets
• Operating budgets
▪ Fiscal year
• Cash budgets
• Capitol budgets
▪ Fixed
▪ Flexible
▪ Zero-based
Foodservice Management: Principles and Practices, 12e © 2012, 2009, 2005 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.
June Payne-Palacio and Monica Theis 7
Financial Planning
▪ Steps in budget planning
• Evaluation phase
• Preparation or planning phase
• Justification phase
• Implementation or execution phase
• Control phase
Foodservice Management: Principles and Practices, 12e © 2012, 2009, 2005 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.
June Payne-Palacio and Monica Theis 8
Financial Operations: A System of
Records and Reports
▪ Records for control
• Purchasing and receiving records
• Storage and storeroom records
• Food production
• Service records
Foodservice Management: Principles and Practices, 12e © 2012, 2009, 2005 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.
June Payne-Palacio and Monica Theis 9
Census Record-Keeping Form
Figure 17.2 Census record-keeping form, which is adaptable to commercial foodservice. The
“To Date” figures are cumulative for the month.
Foodservice Management: Principles and Practices, 12e © 2012, 2009, 2005 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.
June Payne-Palacio and Monica Theis 10
Meal Census Summary Sheet
Figure 17.3 Meal count summary sheet suitable for health care facilities.
Foodservice Management: Principles and Practices, 12e © 2012, 2009, 2005 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.
June Payne-Palacio and Monica Theis 11
Catering Agreement Form
Figure 17.3 Meal count summary sheet suitable for health care facilities.
Foodservice Management: Principles and Practices, 12e © 2012, 2009, 2005 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.
June Payne-Palacio and Monica Theis 12
Financial Operations: A System of
Records and Reports
▪ Records for control continued
• Income and expense records
• Sales and cash receipts
▪ Larger organizations use cash registers of
varying degrees of sophistication including
electronic point-of-sale (POS) computer
terminals.
Foodservice Management: Principles and Practices, 12e © 2012, 2009, 2005 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.
June Payne-Palacio and Monica Theis 13
Financial Accountability
▪ Reports
• Daily food-cost report: a report is prepared
from four records.
▪ Cast receipts of total income from sales day
▪ Census records of number of people served
▪ Storeroom issues records
▪ Invoices for perishable foods
Foodservice Management: Principles and Practices, 12e © 2012, 2009, 2005 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.
June Payne-Palacio and Monica Theis 14
Financial Accountability
▪ Reports continued
• Profit and loss statement
▪ A summary comparison in dollars and cents of the
income, including all expenses of the department.
• Annual reports
▪ A resume of the activities and accomplishments of the
year just completed.
▪ It should be an interpretation of the facts and figures.
Foodservice Management: Principles and Practices, 12e © 2012, 2009, 2005 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.
June Payne-Palacio and Monica Theis 15
Financial Accountability
▪ Factors affecting cost control: evaluation of
operations
• Food costs
• Menus
▪ Menu planning is the first and most important step in the
control of food costs.
• Recipe costing and establishment of selling price
▪ Markup and markup factor
Foodservice Management: Principles and Practices, 12e © 2012, 2009, 2005 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.
June Payne-Palacio and Monica Theis 16
Financial Accountability
▪ Factors affecting cost control:
evaluation of operations
• Recipe costing and establishment of selling
price continued
▪ Demand-oriented pricing
▪ Prime-cost pricing
▪ Break-even point (BEP): equals Fixed
costs/(Selling price-Variable costs)
Foodservice Management: Principles and Practices, 12e © 2012, 2009, 2005 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.
June Payne-Palacio and Monica Theis 17
Financial Accountability
▪ Factors affecting cost control:
evaluation of operations
• Purchasing
• Receiving
• Storage and storeroom control
• Food production: preparation, cooking, and
leftovers control
Foodservice Management: Principles and Practices, 12e © 2012, 2009, 2005 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.
June Payne-Palacio and Monica Theis 18
Financial Accountability
▪ Factors affecting cost control:
evaluation of operations
• Portion size and serving wastes
• Employees’ meals
• Labor cost control
• Type of foodservice system
• Type and extent of services offered
Foodservice Management: Principles and Practices, 12e © 2012, 2009, 2005 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.
June Payne-Palacio and Monica Theis 19
Financial Accountability
▪ Factors affecting cost control:
evaluation of operations
• Hours of service
• Physical plant: size and equipment
arrangement
• Menu and form of food purchased
• Personnel policies and productivity
• Supervision
Foodservice Management: Principles and Practices, 12e © 2012, 2009, 2005 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.
June Payne-Palacio and Monica Theis 20
Financial Accountability
▪ Factors affecting cost control:
evaluation of operations
• Operating and other expenses
• Maintenance and repair
• Breakage
• Supplies
• Energy and utility costs
Foodservice Management: Principles and Practices, 12e © 2012, 2009, 2005 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.
June Payne-Palacio and Monica Theis 21
Summary
▪ A basic understanding of accounting and
financial management concepts is necessary
to analyze the financial performance of the
foodservice department.
▪ The foodservice manager must know the day-
to-day transactions and operational activities
that take place in order to compare them
with established goals.
Foodservice Management: Principles and Practices, 12e © 2012, 2009, 2005 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.
June Payne-Palacio and Monica Theis 22