Cost Control and Financial Management in Food and Beverage Industry

This report analyzes the cost control and financial management practices used by the food and beverage industry. It includes an interview with a restaurant manager, discussing challenges faced and measures taken to reduce costs. The report covers front house and back house operations cost control, financial methods such as annual budget creation, demand-supply optimization, and cost decisions.

FOOD AND BEVRAGES

Table of Contents
Introduction......................................................................................................................................2
Analysis of Interview.......................................................................................................................2
Front House Operations Cost Control.........................................................................................3
Back House Operations Cost Control..........................................................................................3
Financial methods…………………………………………………………………………………4
Appendix…………………………………………………………………………………………..5
References…………………………………………………………………………………………6
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Introduction
The food and beverage industry is the one that changes quickly with the changes in taste and
preferences of modern society. The people nowadays are more into trying and getting attracted
towards the new things (Wagner, and Meyr, 2015). In their mission of getting an exciting life
style, the food and beverages company play a vital role to offer them best quality food. Be it a
small local café or be it a luxurious hotel, the food and beverage industry finds its way at every
place.
The main aim of the interview conducted with the manager was to get details regarding the cost
management and financial management practices used by the Food and beverage industry.
Further, the report also presents analysis of the details of interview to have a clear picture
towards cost control in the hotel industry.
Analysis of Interview
The Food and the beverages industry is the one which has a different role in the expansion of
economic opportunities as it is subject to human life as well as organizations profitability
(Weygandt, Kimmel and Kieso, 2015). This industry is intended to have a systematic functioning
and utilization of the available resources (Motherway, and Vargo, 2017). To get a more detailed
picture of the operations and cost control of this industry, an interview was conducted with an
aim to find out the different cost control used in front and back house operations. The interview
was with the manager of the medium level restaurant which is very popular in its area. While
having an interaction with the interviewee, he stated that recently there are number of
restaurants and cafes opening in their area and this, in turn, gives a rise in the competition within
them. Further, it was also noted that withan increase in competition, the restaurant is facing
various challenges and the manager has to deal with all these challenges which may also incur
some cost. The restaurant does not alone constitute the hotel, but the banquet hall and bars are
also a part of the food and beverage sector (Weygandt, Kimmel and Kieso, 2015). Generating
income and incurring cost on this and maintaining a balance in both, are the prior roles of the
manager.
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Front House Operations Cost Control
The Front house is a place where the customers are allowed, such as dining area, bar, banquet
hall, and the restrooms. All this is to be managed by the employees and staff, and the front house
management is responsible for doing all these activities. It includes customer services, hiring
employees, training staff and planning the promotional layout of the restaurants. Performing
activities such as maintaining the ambience of the dining room, making of attractive dishes
required equipment, utensils a high-quality cutlery incur a huge amount of capital (Dopson, and
Hayes, 2015). The interviewee addressed that all this have disturbed his budget and is making
the restaurant move towards loss. Further,, when asked, he stated that he would be taking several
measures to reduce the extra cost and keeping the things nominal. For this, he has adopted
various measures which are further discussed in the report below.
Back House Operations Cost Control
The term “Black House” means all the areas where the customers are not allowed to go and is
only entered and managed by the hotel employees and staff. This is all the behind the scene
operations which no one can see. This is the areas such as the place where the food is cooked,
prepared and plated before taking it to the customer table. The back office is intended to be the
important foundation of the food and beverage sector. Similarly, like the front office, the back
office also requires a high amount of capital which is invested in culinary, cookery sets and high
quality of food (Bryce, 2017). When the interviewee he stated that an additional cost is being put
on all this and that it is needed to be reduced. For this, the managers have acquired various
methods of financial management in the job.
Financial Methods
According to the interaction with the manager, it was found that there is a constant need for
using financial methods in the food and beverage sector. The manager states that as per the
changing demands of customers and changes in the industry they always have to come up with
something new and effective techniques.
3

Creation of the Annual Budget
The annual budget is the activity which offers a complete insight on the financial position of the
company and can even be used to calculate the financial status during any particular time of the
period (Dopson, and Hayes, 2016). The manager uses this method to estimate the budget in
advance so to have smooth functioning in the business.
Demand, Supply and Optimization of Revenues
The balancing of demand with the supply is a must for the successful running of the business,
and here in the food and beverage industry, there are constant changes in the demand of the
customers (Subramaniam, and Wareing, 2016). To fulfil the demands, the managers perform
market research in advance and then forecast the sale is taking place in future.
Decisions regarding the Cost
The manager has made it clear that the cost incurred on maintaining the restaurant should not
exceed 30% of all the income and revenues (Finkler, 2016). This is to maintain the profitability
level of the restaurant. Further the rest will also be used in paying to the employees and staff
working in the restaurant.
4

Appendix
Hello, there will be an interview conducting with you with an aim to identify the cost control
practices and financial method used by you in your restaurant.
Ques 1: So, for which of the enterprise do you have experience and knowledge in?
A: I manage and handle the front house operation of the BAC restaurant.
Q: Tell us about the challenges faced by the restaurant.
A: the main problem is the rise in the competition and changing demands of the customers. The
customer always gets attracted the new things and hence this, in turn,, becomes a challenge for
us to provide them what they desire. Another problem is investing and generation of funds for
various departments to have more revenues.
Q: Being a manager how are you capable of handling these problems?
A: managing everything from budget, to staff and employees is not an easy task at all. The food
and the beverage industry are classified in both front and back operations and have to estimates
the number of resources which has to be assigned to both of the operations. The job also includes
making a balance between the variable as well as the fixed cost and then evaluating the amount
of expense and income at the end.
Q: What are the things you are doing to reduce financial costs?
A: According to me, there are several ways which can be used to reduce the financial cost
incurred by the hotel.
Q: That better, it was wonderful interacting with you, looking forward that your methods prove
to be effective, useful and successful for your restaurant food and beverage sector.
A: Nice meeting you and thank you for having me here.
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References
Bryce, H.J., 2017. Financial and strategic management for nonprofit organizations. Walter de
Gruyter GmbH & Co KG.
Dopson, L.R. and Hayes, D.K., 2015. Food and beverage cost control. John Wiley & Sons.
Dopson, L.R. and Hayes, D.K., 2016. Managerial accounting for the hospitality industry. Wiley
Global Education.
Finkler, S.A., Smith, D.L., Calabrese, T.D. and Purtell, R.M., 2016. Financial management for
public, health, and not-for-profit organizations. CQ Press.
Motherway, N.J. and Vargo, J.J., 2017. Food and Beverages. Products Liability Practice Guide,
4.
Subramaniam, P. and Wareing, P. eds., 2016. The stability and shelf life of food. Woodhead
Publishing.
Wagner, M. and Meyr, H., 2015. Food and beverages. In Supply chain management and
advanced planning (pp. 391-407). Springer, Berlin, Heidelberg.
Weygandt, J.J., Kimmel, P.D. and Kieso, D.E., 2015. Financial & managerial accounting. John
Wiley & Sons.
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