Restaurant Cost Control and Management

  • Uncategorized

RestaurantCost Control and Management

ExecutiveSummary

Operatinga restaurant is one of the trickiest businesses since without propermanagement it is possible to have unnecessary costs that can lead toreduced profits. Thus, in running a restaurant, it is critical toengage in different ways of controlling costs in order to ensure thathigh gains are realized. In most cases, it is feasible to have themanagement ordering unnecessary ingredients, or not putting itemsthat are fast moving in the menu. This can be a serious problem to arestaurant because it can result in increased costs since there wouldbe unnecessary spending. Nowadays, the use of technology has beenappreciated due to the numerous benefits that it possesses, includinghelping businesses mitigate operating costs and improving efficiency(Butler,2015).This has increased the need for businesses to turn to the applicationof technology in an attempt to increase their competitive advantagein the area of operation. For instance, changing to the use ofelectronic records instead of relying on paperwork has helpedbusinesses to minimize the number of errors that humans can make asthey fill papers (Butler,2015).Also, the use of accounting and inventory control software has madeit possible for restaurants to manage their inventory in a better wayand avoid unnecessary spending. The purpose of this report is todiscuss the solution that MoonStar Seafood Buffet Restaurant canapply in order to be in a position to control and manage itsoperating costs in order to increase its profitability.

Itwas discovered that the restaurant is poor in budgeting for itsinventories and relies on manual records for its operations, andfails to track its inventories on a daily basis. The project will behelpful to the business because it will propose the solution that therestaurant can use in eradicating the issue of increased cost due topoor inventory techniques. Besides, the project will be beneficial tothe company because it will assist it in increasing its gains as aresult of reduced spending in unnecessary inventory costs. Thebusiness will minimize human errors that usually emerge through thewide use of paperwork, thus augment its profitability and increasetransparency. In coming up with the solution to the problem facingthe business, I carried out a survey that involved investigating whatother restaurants within the Daly City use in making sure that theykeep their costs down. After carrying out the survey, I compared themethods used by MoonStar and the ones I had investigated and foundout that it was possible for the company to improve its performancethrough using the solutions investigated. During the survey, data wascollected through holding interviews with managers of the companiesin the Daly City.

Fromthe findings, it was discovered that most of the restaurants keep atrack of their inventory on a daily basis, and this was critical inensuring that only the required inventory is bought daily. Thefindings also indicated that the restaurants did not prefer manualrecords in tracking the movement of inventory, but used bothelectronic and manual in order to establish whether the two matched.However, there were other restaurants that purely relied on theelectronic tracking and ignored manual. The use of food costing washighly employed by the restaurants and involved the utilization ofaccounting and inventory control software. From the information thatwas researched, it was concluded that the use of accounting andinventory control application was important in controlling unwantedbudgeting, which is vital in the management of operating costs. Inaddition, it was noted that the use of social media was utilized byall the restaurants that were surveyed in an attempt to reduce theirmarketing cost. I recommend that MoonStar should consider usinginventory control software in its operations in order to mitigatecosts. The restaurant should also use electronic monitoring devicesin tracking the movement of its inventory to avoid wastage.Furthermore, I recommend the restaurant to apply social media in itsmarketing and this will help it minimize its operating costs.

SectionI: Introduction/Background

Everybusiness has an objective of realizing high profits in order to be ina position to continue its operations. This being the case, it isalways critical for any company to engage in measures that reduceoperating costs. When running a restaurant business, taking controlof operating costs is viewed as critical because it can help inmitigating unnecessary budgets and increasing the profitability ofthe business. In most cases, restaurants have engaged in various waysof controlling and managing costs in an attempt to increase theirprofitability. One of the measures used is through cutting back costsby the utilization of social media as a marketing tool (Ton,2014).Instead of spending huge sums of resources in marketing a restaurant,these businesses have adopted the social media platforms in reachingout to the customers. This has enabled them to cut their operatingcosts because the platforms can be used for free. For instance, someare involved in the use of Twitter and Facebook in communicating withtheir clients, when making reservations or even letting theircustomers understand their services. Thus, taking advantage of thesocial media platforms has enabled businesses to have reducedoperating outlays. Another aspect that is being used by restaurantsto control their operating costs is conducting daily inventories(Ton,2014).Carrying out daily inventories has been considered critical since itassists in keeping track of what is available on a daily basis. Thiscan ensure that employees do not have opportunities of taking itemssecretly which belong to a restaurant. Besides, cutting back ondeliveries has also been considered an important measure in ensuringthat there is reduced operating cost on the side of business.Furthermore, the use of software that has the ability to manage theinventories of a restaurant is a crucial aspect that aids in keepingthe costs down since any unnecessary inventories and budgets areavoided (Fitzgibbon, 2016). Cost control is a critical issue toMoonStar because it will assist the business to enhance its profitsand revenues, which is significant to the growth and success of therestaurant. Most companies are headed towards the objective ofdecreasing their operating costs in order to increase their gains,and MoonStar should not be left behind. In case the issue of managingcosts is not addressed, the company is likely to minimize the profitsthat it should earn from its operations, which may hinder potentialgrowth. Thus, there is a need for MoonStar to attend to the problembecause the issue may hinder the restaurant from attaining itsobjectives.

SectionII: Statement of the Problem/ Research Project

Whileworking as an intern at MoonStar, I was involved in different dutiesthat involved assisting the supervisor in resolving issues facingclients, planning events, confirmation of the needs of customers,monitoring inventory, as well as calculating the revenue and cost ofthe restaurant. As I was carrying out these responsibilities in therestaurant, I came across several issues, but the major problem wasthat the costs of the restaurants were increasing while its gainswere either stagnating or decreasing. This being the case, it wasnecessary to find out how the company could be assisted in ensuringthat its costs are controlled. Since this was a major issue affectingthe company, I had to first investigate the possible causes of therising operating costs encountered by the restaurant. This was thebasis of this project. The problem was worth my attention becausesolving it would make me well-equipped to dealing with such an issue,in the future, when I will be operating my own restaurant. Besides,by tackling the issue, I will demonstrate that I have the capacity ofapplying what I have learned in class into a real-world workingsituation. The problem of having increasing operating costs while theprofits decrease or stagnate is a popular problem in business and canbe caused by various aspects. For example, the issue can emerge ininstances where there is a lack of transparency and accountability inhandling the budget of an organization. Also, the problem may beexperienced in an organization where there is a failure of propercost accounting techniques. Economic downturns may play a part too incontributing to the problem. So, this is a problem that is not uniqueto MoonStar Restaurant only but can be encountered by differentbusinesses. The research findings will be important in providing someof the measures that MoonStar can utilize in resolving the issue ofincreasing operating cost and stagnating or decreasing profits.

SectionIII: Methodology

Incoming up with the solution to the problem facing the business, Icarried out a survey that involved investigating what otherrestaurants within the Daly City use in making sure that they keeptheir costs down. After carrying out the survey, I compared themethods used by MoonStar and the ones I had investigated and foundout that it was possible for the company to improve its performancethrough using the solutions investigated. During the survey, data wascollected through holding interviews with managers of the companiesin the area. In carrying out the survey, the data was obtained byinterviewing managers of ten restaurants in the Daly City. Theinterviews were critical in obtaining the options that the managersused in ensuring that they controlled costs in their restaurants. Thereason why I chose to interview the managers and not other employeesis because of the knowledge that managers usually possess in regardsto the issues that touch on the operations of a business. Prior tointerviewing the managers, I first obtained their consent and bookeddifferent dates for interviews. Since the time for the project waslimited, I saw it important to survey only ten managers. Thefollowing interview questions were used in guiding the survey

InterviewQuestions

  • Hallo Sir/Madam?

  • In regards to cost management and control, what measures are your firm using?

  • Do you use one or a combination of measures?

  • Which alternative do you feel has worked for your company?

  • Would you recommend the measure(s) to other firms? Why?

  • What other alternatives would you recommend to your firm or another company that wants to control cost? Why is this the case?

  • Do you use any accounting and inventory software? Which one do you use?

  • How often do you keep track of the inventory?

SectionIV: Findings

Fromthe findings, it was discovered that most of the restaurants (8/10)keep a track of their inventory on a daily basis, and this wascritical in ensuring that only the required inventory is boughtdaily. The findings also indicated that the restaurants did notprefer manual records in tracking the movement of inventory, but usedboth electronic and manual in order to establish whether the twomatched. However, there were other restaurants (6/10) that purelyrelied on the electronic tracking and ignored manual. The use of foodcosting was highly employed by the restaurants and involved theutilization of accounting and inventory control software. Seven outof ten restaurants were found to use accounting and inventorysoftware. In addition, all of nine of the restaurants indicated thatthey were using social media platforms to perform their marketing.

Fromthe research, there were different strategic alternatives availablethat could be used in resolving the issue facing the restaurant. Oneof the available options that MoonStar can utilize entails the use ofaccounting and inventory control software. For instance, MoonStar mayopt to use FoodCo software, which has the ability to maintain aninventory database that is comprehensive. Through using an accountingand inventory software, the restaurant will be in a position to trackits inventory on a daily basis. Such a move will help theorganization to be capable of reducing any inventory wastes, whichwill have the impact of reducing the costs wasted in purchasingunnecessary inventories. A second alternative that is available toMoonStar is the use of social media platforms in its marketinginitiatives. This will save on resources utilized in the area ofmarketing, which will end up mitigating the total operating cost usedby the restaurant. Another option is the use of electronic monitoringdevices in tracking the movement of its inventory to avoid wastage.

Thebest alternative for the business is to use a combination of socialmedia platforms for its marketing and utilizing accounting andinventory control software. This is because using a combination ofthe two options will have a large impact of reducing the operatingcost of the restaurant.

SectionV: Conclusion

Fromthe research, it can be concluded that the use of accounting andinventory control application was important in controlling unwantedbudgeting, which is seen as vital in the management of operatingcosts. When running a restaurant business, taking control ofoperating costs is viewed as critical because it can help inmitigating unnecessary budgets and increasing the profitability ofthe business. It is possible to have unnecessary costs that can leadto reduced profits. Thus, in running a restaurant, it is critical toengage in different ways of controlling costs in order to ensure thathigh gains are realized. In most cases, it is feasible to have themanagement ordering unnecessary ingredients, or not putting itemsthat are fast moving in the menu. There are various ways thatrestaurants have engaged in controlling and managing costs in orderto increase their profitability. One such aspect is through cuttingback operating costs by the application of social media as amarketing tool. Instead of spending huge sums of resources inmarketing a restaurant, social media platforms can be used inreaching out to the customers. Another aspect that can be utilized tomitigate operating costs is conducting daily inventories. Carryingout daily inventories is critical since it helps in keeping track ofthe stock that is available on a daily basis. This can ensure thatemployees do not have chances of taking stocks secretly. Besides,cutting back on deliveries can also be considered an important aspectin ensuring that there is reduced operating cost on the side ofbusiness. Furthermore, the use of software that has the ability tomanage the inventories of a restaurant is a crucial aspect that aidsin keeping the costs down since any unnecessary inventories andbudgets are avoided. The major problem facing MoonStar was that thecosts of the restaurant were increasing while its gains were eitherstagnating or decreasing. The issue originated from poor control ofthe entity’s daily inventories and use of expensive marketingstrategies. Besides, it was discovered that the restaurant is poor inbudgeting for its inventories and relies on manual records for itsoperations. Thus, since this is the origin of its problems, thesolution for the company lies in the source. Therefore, the solutionthat the company needs to apply falls in the area of its inventoryand marketing.

SectionVI: Recommendations

Althoughthere are different alternatives that the restaurant can adopt inorder to eradicate its problem, the options that the entity shouldtake needs to revolve around the source of the problem. This beingthe case, I recommend that the restaurant should use a combination oftwo alternatives in order to address the issue. I recommend thatMoonStar should consider using inventory control software in itsoperations in order to mitigate costs. Specifically, the restaurantMoonStar may opt to use FoodCo software, which has the ability tomaintain an inventory database that is comprehensive. Through usingthe accounting and cost control software, the restaurant will be in aposition to manage its inventories on a daily basis a move that willaid in mitigating the operating cost. Besides, the use of accountingand inventory control software will assist in avoiding wastage sinceit will be easy to track the movement of inventories and theirassociated budget. The second alternative that I recommend to therestaurant is the application of social media platforms in itsmarketing operations. This will save on resources utilized in thearea of marketing, which will end up mitigating the total operatingcost used by the restaurant. For instance, in case the restaurantmakes the option of using Twitter in its marketing plan, it will notpay for the services since they will not be charged. Such a move willhelp the restaurant save resources, which will have the effect ofincreasing its gains and mitigating the operation expenses.Therefore, the two options will be critical in resolving the issue ofincreased operating costs.

References

Butler,M. (2015). 6 tips to reduce costs and build a healthy savings foryour restaurant. Retrieved fromhttps://www.fastcasual.com/articles/6-tips-to-reduce-restaurant-costs/

Fitzgibbon,B. (2016). 6Ways to Cut Costs For Your Bar or Restaurant.Retrieved fromhttps://getturnstyle.com/restaurant-marketing/6-ways-to-cut-costs-for-your-bar-or-restaurant/

Ton,Z. (2014). Thegood jobs strategy: How the smartest companies invest in employees tolower costs and boost profits.Boston: New Harvest, Houghton Mifflin Harcourt.