PRINCIPLES OF FOOD, BEVERAGE, AND LABOR COST CONTROLS

THE COST-TO-SALES RATIO: COST PERCENT � 27
3 0 . 0 % � 100 � 0 . 3
$ 3.60 � 0.3 � $ 12.00
Suppose this banquet manager is dealing with a group willing to spend
$15.00 per person for a banquet, and the same given 30.0 percent cost percent
is to apply. Calculation of the maximum permissible cost per person is
facilitated by rearranging the formula once again:
Sales �
Cost % ( expressed as a decimal ) � Cost
So the cost per person can be calculated as $4.50:
3 0 . 0 % � 100 � 0.3
$ 15.00 � 0.3 � $ 4.50
In summary, the cost percent formula can be written and used in any one of
three possible forms:
C o s t � Sales � Cost %
Cost � Cost % ( expressed as a decimal ) � Sales
Sales � Cost % ( expressed as a decimal ) � Cost
The foregoing discussion has assumed that food and beverage costs are
relatively stable over time and that one can readily predict future costs
accurately. Unfortunately, that is not normally the case. However, it is often
necessary to quote prices for functions to be held some months in the future.
To do so with some reasonable degree of accuracy, one should consider both
seasonal fluctuations in costs and inflation rates. For example, the price of
most shellfish is highest in New England during the winter months when
the catch is smallest, and this fact should be taken into account when quoting
prices in July for a function to be held in January. Moreover, in times of
inflation, various food costs increase at various rates. These can frequently
be anticipated by management from published information and should be
taken into account when quoting future sales prices. An example is the
case of an establishment quoting a banquet price for a date six months in
the future when the current rate of inflation is 5 percent on an annual basis.
If the current food cost for one item is calculated to be $4.00, the manager
may be reasonably sure that the cost will be somewhat higher in six months.