Budgeting Practices of Two Major Restaurants: A Comparative Analysis

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Budgets and Financial plans
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Table of Contents
Introduction....................................................................................................................................3
Part A:.............................................................................................................................................4
Restaurant 1:..................................................................................................................................4
Restaurant 2:..................................................................................................................................7
Part 2:.............................................................................................................................................9
1):.....................................................................................................................................................9
2):...................................................................................................................................................11
Conclusion....................................................................................................................................14
References.....................................................................................................................................15
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Introduction
This report is based on the comparison of two major restaurants and going to be prepared to
evaluate and investigate the budgeting practices of both restaurants. Budgets are a very crucial
part of business management activities because business strategies are planned and executed on
the basis of budgeted figures. During the assessment of this report, income budget of the food-
kings restaurant and Peter-porn restaurant will be prepared so that relevant information about the
financial terms of the restaurant business can be delivered. Different sources of financial
information will also be evaluated in this report that is available to gather information about
business costs.
3

Part A:
Restaurant 1:
Peter-porn restaurant
1):
Average Cheque of this restaurant is expected to be $ 58.29 for considered week. A descriptive
image of estimation is provided below:
Days Average
customers Sale Average Money
Spent
Monday 50 3000 60
Tuesday 60 3300 55
Wednesday 70 3500 50
Thursday 60 3180 53
Friday 55 2750 50
Saturday 80 5200 65
Sunday 100 7500 75
Average Cheque 58.29
There are numerous factors which make a significant impact on the average Cheque amount in
the restaurant industry. Margin-policy of the restaurant, type of services, Targeted customer base,
available items are some most vital factors which make a significant impact on the value of
average Cheque. For the calculation of average Cheque, per day sales figures and average
spending per customers are considered. Value of Average Cheque is higher than the average
spending of Friday, Thursday and Tuesday because the average spending of customers shows a
significant increment at weekends.
2):
Average cover for the week:
Days
Expected
number of
customers
Money spend
on Food Breakfast Lunch Dinner
Monday 50 37 7 12 18
Tuesday 60 42 8 14 20
4

Wednesday 70 33 6 11 16
Thursday 60 30 5 11 14
Friday 55 39 9 12 18
Saturday 80 29 4 9 16
Sunday 100 34 6 10 18
Points:
 The expense for the breakfast remains lower because of customer demands for the cost-friendly,
light, healthy and tasty food solutions.
 Cost of lunch at a restaurant is higher than breakfast because there is a large number of
customers who demand a wider variety of dishes. Similarly, Restaurant is also offering a
different type of dishes to complete the food requirements of customers.
 Above calculations are stating that the cost of dinner higher than lunch and breakfast. Generally,
customers come with family and friends for dinner so they like to order a different type of dishes
and desserts. As each persona has different food requirements, spending on dinner remains high.
3):
Days Average
customers Sale
Average
Money
Spent
Money
on Food
Average
Money on
Alcohol
Average Non-
Alcohol
Monday 50 3000 60 37 15 8
Tuesday 60 3300 55 42 9 4
Wednesda
y 70 3500 50 33 8 9
Thursday 60 3180 53 30 15 8
Friday 55 2750 50 39 7 4
Saturday 80 5200 65 29 19 17
Sunday 100 7500 75 34 18 23
4):
Income budget is prepared under the budgetary control system to estimate the incomes that are
expected to be received from different resources. Organizations that are receiving incomes from
diversified resources, prepare income budget to correctly evaluate the possible incomes from
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different sources so that effective strategy can be made for the maximization of incomes and
removal of each problematic factor (Jane, 2017).
Income budget
Particulars Income From
Food
Income
From
Alcohol
Income From
Non-Alcohol Total income
Average revenue per
day (a) 34.86 13 10.43 58.29
Average days in
month (b) 30 30 30
Average Number of
customers (c) 67 67 67
Total (a) * (b) * (c) 70062.86 26130 20964.30 117157.16
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Restaurant 2:
Food-kings restaurant and hotels
1):
Days Average
customers Sale
Average
Money
Spending
Monday 70 4550 65
Tuesday 75 4350 58
Wednesday 65 3640 56
Thursday 55 3245 59
Friday 48 2736 57
Saturday 90 5760 64
Sunday 99 7029 71
Average Cheque per customer 61.43
Average Cheque is a term that is widely utilized in the restaurant sector to indicate the per unit
revenue from customers. As per the calculations, Average Cheque for the restaurant will be
61.43. Profit policy of the restaurant makes a significant impact on the value of Average Cheque.
Calculation of AC is made on the basis of previous sales figures and per unit spending made by
customers in the recent period. It is considerable that the value of average-Cheque is lower than
per unit spending on Saturday and Sunday. This difference is expected because a large number of
customers visits to the restaurant at weekends. Similarly, spending on Alcoholic items increases
significantly at weekends.
2):
Days
Expected
number of
customers
Money
spend on
Food
Breakfast Lunch Dinner
Monday 70 39 7.8 12.09 19.11
Tuesday 75 34.8 6.96 10.79 17.05
Wednesday 65 33.6 6.72 10.42 16.46
Thursday 55 35.4 7.08 10.97 17.35
Friday 48 34.2 6.84 10.60 16.76
Saturday 90 38.4 7.68 11.90 18.82
Sunday 99 42.6 8.52 13.21 20.87
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 From the recent sales trends, it is identified that 60% part of the total expenditure will be made
for the food costs. Similarly, 16% of spending will be made for the Alcohol items and 24%
expenditure will be made for the Non-alcoholic items.
 Study of food items is indicating that 20% part of food revenue is related to breakfast services.
Approx. 31% part of food revenue will be generated by the lunch services. It is expected that
49% part of Total food incomes will be generated by the dinner services.
 A major part of the customer base of this hotel is covered by the families who want a safe and
clean environment for the family gathering so a major part of food revenues (Approx. 49%) is
expected to be received from dinner services.
 This restaurant is not engaged in outdoor catering services.
3):
Days Average
customers Sale
Average
Money
Spent
Money on
Food
Average
Money on
Alcohol
Average
Non-
Alcohol
Monday 70 4550 65 39 15.6 10.4
Tuesday 75 4350 58 34.8 13.92 9.28
Wednesda
y 65 3640 56 33.6 13.44 8.96
Thursday 55 3245 59 35.4 14.16 9.44
Friday 48 2736 57 34.2 13.68 9.12
Saturday 90 5760 64 38.4 15.36 10.24
Sunday 99 7029 71 42.6 17.04 11.36
4):
Income budget:
It can be explained as the estimated statement which presents expected values of revenues from
different sources. An income budget contains detailed information about all revenues that are
expected to be received from different resources. This statement contains information only about
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the incomes and presents an elucidated and classified view of expected income-flows (Rwroge,
2019). In the provided case, the restaurant is selling food items, Alcoholic items and non-
alcoholic items.
Income budget
Particulars
income From
Food
income From
Alcohol
income From non-
Alcohol
Total
income
Average revenue per day
(a) 36.86 14.74 9.83 61.43
Average days in month
(b) 30 30 30
Average Number of
customers (c) 71.71 71.71 71.71
Total (a) * (b) * (c) 79290.77 31716 21144.21
132151.2
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Part 2:
1):
An restaurant may receive income from diversified resources like food services, room services,
catering, bar and sell of other beverages. In the case of selected restaurants, both restaurants are
engaged in the delivery of similar services so incomes sources of both restaurants are the same.
Implementation of Budgeting practices in the restaurant sector is highly complex and different
from other sectors. For instance, detailed information about the expected incomes from different
sources is required to create an income budget of restaurants and the same demands for the
elucidated analysis and time-consumption.
From part A, Both restaurants are generating incomes from the sale of food, alcohol and Non-
alcohol items. To gather information about these income sources, the following data sources
were utilized:
Income from food sales:
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Both restaurants are providing food services and, dedicated to improving market base by offering
delicious and quality-oriented breakfast, lunch and dinner services. Both restaurants are popular
among families as well as other customers due to efficient and quality based services. To gather
the information about the incomes from food sales, receipts generated at the counter, cash book
and chef's issue-list has been utilized. Actually, Issue-list of chef indicates the food orders that
were delivered from the kitchen. Bills created by the POS system at counter inform about the
bills issued to customers and the cash register presents the list of payments made by the
customers. Through the comparison of these three data resources, incomes from food sales can
be investigated correctly and managers can be called for the answer to the deficiency.
Income from sale of Alcoholic items:
Both restaurants are operating bars and serving alcoholic items also. From the analysis, it is
outlined that bills are created through the automated POS system and bar manager is responsible
to create bills and received payments. Payment can be made at the POS counter of a bar or
prepaid bar coins can be purchased from the restaurant counter. To gather the information about
the incomes from bar operations, data has been obtained from the POS point of the bar, POS
system of the restaurant, bank statement of restaurant and cash register. From the POS system of
the bar, information regarding the sales made at the bar has been evaluated. From the analysis of
the POS system of the restaurant, data regarding the sales of bar coins has been gathered.
Analysis of bank statement has been made to verify the online payments and cash registered has
been investigated to gather information about cash receipts.
Income from sale of Non-Alcoholic items:
Some non-alcoholic items are also served by both restaurants at the bar. As Automated billing
system is working in both restaurants, bills issued at Bar-POS unit, cash register, bank statement
and bar-coin issued at restaurant-POS unit has been adopted as an information resource. For
instance, a bank statement can be utilized to verify the online payments that were made by the
customers at bar-POS or restaurant-POS. The cash register has been utilized to evaluate the total
cash that was received from customers during the considered period. Customers can purchase
prepaid Bar-coins from restaurant POS counter and information regarding the sale of bar-coins
can be gathered through the investigation of the restaurant POS unit.
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2):
A restaurant may incur different type of expenses as per the operational size and type of services.
Rent, wages, food purchases, insurance costs are some examples of common costs that can be
occurred with a restaurant organization. To correctly evaluate the appropriateness of each
expense, several data sources are available in business and an explanatory image of such
documents is provided below:
Rent:
Rent of premises, warehouse, stores and more is one of the most common expenses of restaurant
entities. To gather information about the rent expenses, lease document can be utilized as a
trusted document. As rent cost is not highly variable, past budget reports can be utilized to verify
the recent rent costs. If rent has been paid in cash, payment can be verified through the
investigation of the cash register. If payment of rent has been made through Cheque or other
online modes, the amount can be verified through the analysis of bank statements. Receipt issued
by the landlord is another source of information to check the rent payments.
Wages and Salaries:
Wages and salaries include the payments that are made by the restaurant to regular employees,
part-time workers and other irregular wages. If accounting software is utilized by the restaurant,
information regarding the payment of wages and salaries can be obtained from such a system
(Banks, 2019). For instance, Peter-porn restaurant is utilizing MYOB software for accounting
and can be utilized as data sources to gather information regarding the expenses of wages. Bank
statement of the restaurant is another data resource to identify and verify the number of wages
and salaries.
Licenses:
A restaurant is liable to take a different type of licenses to continue the operations. For example,
the Bar license is necessary to operate a bar and serve alcoholic items. Information regarding the
cost of licenses can be gathered from the MYOB software that is adopted by the Peter-Porn
Restaurant (Canstarblue, 2019). General and legal managers of restaurants are responsible to
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ensure that all required licenses are taken by the restaurant. Information regarding the cost of
these licenses can be gathered through communication with general managers. Acceptance letters
issued by the compliance offices are other sources to gather information about the license
expenses.
Maintenance and repairs:
Information regarding the repairing costs can be gathered through the accounting books of the
maintenance department. Receipts issued by the maintenance department, confirmation letter
issued by the departmental managers are the primary source of information. For instance,
maintenance cost paid for the repairing of kitchen equipment can be verified through the bills of
the maintenance department and acceptance letter of kitchen manager. Similarly, maintenance
cost paid for warehouse improvement can be verified through the warehouse manager’s
acceptance letter.
Assets purchases:
Restaurants can purchase a different type of capital and non-capital assets as per the
requirements. Costs of purchase of these assets can be verified through the investigation of
accounting software and bank account. Seller’s bill and authorization letter of general manager
are other sources of information (Banks, 2019). For instance, Food-kings restaurant can purchase
furniture to improve sitting arrangements and information regarding the furniture cost can be
gathered from the vendor bill, purchase manager’s quotation and Quick book accounting system.
Food purchases:
Books of the purchasing department, approval letter of head chef and accounting system are the
main resources of information to know about food purchases. Order copy issued by the
purchasing manager, bills received from vendors, books of store manager can be investigated to
verify the food purchases. A bank account can be investigated to confirm the payment made to
suppliers.
Beverage purchases:
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