Unit 5 Assignment on Food and Beverages Operation Management

Introduction

The food and beverage industry is emerging in a big way. The major challenge in the food and beverage industry operations today is the continuous need to improve the quality of the food, beverage or for that matter even the service that is being offered. Through a better understanding of the customer need, availability of well educated and trained individuals, professionalism in increasing with each passing day in this industry. The main point of differentiation has now become the quality of service being offered. At the same time an excellent ambience, clean surroundings and a welcoming staff cannot just make up for the issues, if any, in the product. Quality should be a concern in the production process as well with proper adherence to all the manufacturing protocols like fixed recopies, SOPs, standard equipments etc. (Rama, R. 1996).

The given food and beverages operation management assignment basically covers all the aspects right from planning, implementation to evaluation of an event in hospitality. This includes the study of the practical aspects related to the production and services of food and beverage. It also covers the process of planning and developing a recipe and different facets of menu design.  Evaluation of financial controls including purchase, costing and selling of products and services has also been included. The analysis of the importance of financing and staffing for different outlets has also been explained. The assignment, therefore gives an insight into the basic skills that a hospitality manager needs to have in order to operate efficiently and effectively.

Task 1

The basic function of the food and beverage industry basically includes serving food and beverages to the customers to satisfy their needs and Food Production is one of the major parts of the food and beverage industry.  Food Production includes different methods of preparing, cooking and serving foods to the customer with the minimum possible utilization of resources, yet maintaining the quality.

1.1

Efficient food production can be achieved by following a methodical and logical approach like the equipments to be used should always be in ready to use mode, electrical equipments should be used only when in need, storing all ingredients close to the working area and following a systematic approach like items which take more time should be prepared first (Soman, Van Donk & Gaalman, 2004). The key considerations in food production and food and beverage service systems are:

• The quality of raw materials should be maintained at all times.
• Care should be taken to maintain proper hygiene of the food.
• The food should be stored properly.
• Best possible efforts should be made to minimize wastage.
• Planning should be done so as to ensure sufficient preparation time for each item.
• The standard regulations should be followed by the employees at all times.
• Proper temperatures should be maintained while cooking.

The basic points of difference of the methods of production are:

• Difference in the point of location of the production of food.
• The total time taken from preparation of food to service on the tables.
• Number of staff members required for the entire process.
• The levels of hygiene and control measures to be maintained.
• The total quantity of food to be produced.

The different methods of food production are:

           Conventional/Cook Fresh Food Production Method:

This is the most commonly used method of food production in the kitchens. It is based on the just in time management philosophy. The basic steps involved are:

• Goods go into the kitchen
• Refrigeration by freezing or dry store is done
• Preparation of the food takes place
• Order taken from customer
• Cooking is done by baking, blanching, boiling, frying, grilling, steaming, stewing
• Food served to the customer.

The main advantages and disadvantages of this system are:

Advantages	Disadvantages
Less storage space required for frozen or chilled items. Less amount of capital investment is required. The taste, smell, flavor of the food maybe better. The food is more adaptable to human preferences. There is complete control over food and production quality. If required, the menu maybe altered.	The entire is staff is required when the food is to be cooked with specialty to cook food with fresh ingredients A lot of space with a well equipped kitchen is required. There is a need to hold hot foods and also the hold time needs to be minimized to retain the nutrition and prevent the growth of bacteria. A lot of space is required for storage of all the ingredients.

Cook-Chill Method: Cook-Freeze method is a simple and controlled system of food preparation. This has been designed to provide more flexibility in food service. It involves the full cooking of food which is then followed by rapid chilling and storage at controlled temperatures and reheating before consumption, (Light & Walker 1990). 

The main advantages and disadvantages of this system are:

Advantages	Disadvantages
Labor costs can be reduced Helps to even out the peak work periods Prevents burns injuries Allows better presentation of food. Reduces wastage of food. Food quality can be controlled Menu can be altered	The quality of food deteriorates with time and shelf life of food is only five days. Double efforts have to be done. Forecasting and inventory of food needs to be done. The capital cost of investment is high as facilities of reheating, chilling and storage required.

Cook Freeze Method: This method includes full cooking of food, then chilling rapidly and storing in controlled room temperatures followed by reheating while consumption. The freezing methods can be by liquid nitrogen or blast freezing (Greathouse & Gregoire, 1988). The cook freeze method of cooking includes-Good in, Preparation and Cooking, Blast Freezing, Blast Thawing, Re-heating and Serving.

Advantages	Disadvantages
It reduces wastage. It makes the food easier to deliver and handle. It reduces the costs of labor. It evens out the peaks for production. It ensures a long storage life. Blast chiller may be used for even smaller quantities.	It is not suitable for types of food items. Deterioration of food might take place. There is more investment as freezer and storage space is required. There is also decreased efficiency because of double handling

Sous-vide Method: Sous-vide is also known as vacuum cooking. In this method, food is prepared by submerging the ingredients in a water bath which is temperature controlled. The ingredients are often closed in a vacuum sealed bag (Rhodehamel, 1992).

The advantages and disadvantages are:

Advantages	Disadvantages
It helps to retain freshness of food. The juices of the food are retained a in the pouch while reheating. Stock rotation is easy as pouches are labeled separately. There is no risk of cross contamination Wastage of food is less. Presence of chef at all times is not mandatory.	The capital investment is more The food is not as fresh as the conventional method. Customization as per customer requirement cannot be done. It cannot be adopted to all food items.

The production system to be adopted depends on a number of factors like:

• Availability of raw materials and Availability of staff
• Number of meals to be prepared
• The equipments at hand and finances at disposal
• Knowledge of the equipments.

The methods which are gaining popularity these days are the cook-chill method and the cook-freeze method and hence are the preferred methods.

1.2

Menu is the list of food items offered to the consumers. Menu development is the process of listing down the available option of food and it requires a lot of intelligence and knowledge. The various factors that need to be considered while planning a menu are:

• Consumer food habits: Menu should be based on a local survey which includes the food habits of the customers based on their taste, liking and religious beliefs.
• Budget: Before deciding on the menu, the manager ought to know the money at hand that he has for investment. He should have a fair idea of the investment made and the money that can be retrieved in a day as per expected sales.
• Time in hand: Time is money for the customer. Hence, the menu may be selected in a way that, that the recopies are not very time consuming and are available quickly. Also the chef should apply time saving techniques to ensure that the food is delivered quickly.
• Demographic profile of the customers: It is important for the manager to know the age, sex, occupation, income status of the consumers before deciding on the menu. For e.g. if the customers are majorly teen agers, the things which are a must be on the menu are fast food items like burgers, pizzas etc.
• Environmental Conditions and Season: The choices on the menu would also depend on the environment conditions and the seasons. For e.g. in summers there ought to be cool drinks on the menu like cool splash drinks whereas the menu in winters should have dishes which are best when served hot.
• Availability of food materials: The menu and recipes should be planned keeping in consideration the raw materials available according to the season and the area.
• Equipments Needs: The need for the equipments in dishes like pizzas etc need to be considered before including them in the menu.
• Availability of Space: The size of food production area, storage area and the service needs to be taken into consideration before deciding the menu. A small space of production cannot accommodate a complex menu as there will be a lot of confusion and there are chances of cross contamination.
• Availability of Skilled Chef: The menu should not be just written well, it must be executed well. There is no fun adding fancy items in the menu, if skilled chefs are not available to make it. This will only lead to customer complaints.
• Special Menus: The manager should be ready with special menus and offers for occasions like birthdays, kitty parties and marriages as the needs for such type of special events are different.
• Type of business: The menu of an establishment would also depend on the kind of business, e.g. a coffee shop, a school canteen, a five star restaurant; all these will have different kind of menus.
• Service Method: The type of menu would also depend on the service method e.g. buffet or ala-carte or self service will have different menus.
• Competitor Survey: It is very important to have sufficient information and knowledge of the competitors while making a menu. Needless to mention, it needs to be updated regularly and accordingly changes made in the menu (Shneiderman, 1986).

1.3

In order to select a food production and food and beverage service system it is important to understand cost and staffing requirements of the systems. The same have been explained:

• Conventional system: In this system the food is always cooked fresh. Therefore, the cost is less as it does not require special freezers or driers. However the staffing need is high since the food has to be all cooked fresh and cooking food with fresh material requires better skill.
• Cook-chill system: This includes cooking of food, following by freezing and then reheating before consumption. The staffing requirements in this system are less, as the food is cooked all once and then reheating at the time is use does not require many people. However the costs are high as proper equipments are required.
• Cook-freeze system: In this method the staffing requirement is less but the capital investment is more as freezers and a huge storage space is required. This system uses blast freezing and blast thawing for which special equipment is required.
• Sous-vide system: In this system the costs are high; however, the presence of chef is not mandatory at all times.

1.4

The suitability of the different systems to the given situation may be justified as:

• Conventional system: This system gives completes access to the food selection and food quality with control over the basic properties of food like taste, color, smell etc. However the space requirement for cooking and storing is above normal. Also there is a need to have faculty of specialized cooks at all times in the kitchen.
• Cook-chill system: The food is made easier to deliver and handle with minimum wastage, long shelf life and reduced cost of labor.  But this system cannot be adapted for all types of food items and also the basic investment cost is big.
• Cook-freeze system: Though the shelf life is more, labor costs are less and wastage is minimal, this system is not suitable for all product types as the costs of investment are also high and also there are chances of degradation of the product.
• Sous-vide system: The vacuum system helps to keep the food fresh and juicy with minimum chances of wastage and cross contamination. However, the investment is more and the method does not give much scope for customization

Task 2

2.1

Profitability maybe improved in the food and beverage industry by ensuring an efficient purchasing, devising cost control strategies and proper stock management. The main financial statements which may be used to control and manage the finances are:

• Income Statements
• Balance Sheets
• Cash Flow Statements
• Operating Budgets

Income statement: It is also known as the profit and loss statement. This gives a detailed listing of revenue and expenses over the accounting period. The basic formula for the income statement is: Revenue – Expenses + Gains - Losses = Income

Hence income statement can help to find out the income of the business

There are three main sections of the Profit and Loss statement:

• Gross profit section which includes sales, cost of sales, and gross profit
• Operating expense which includes operating expenses and operating income
• Non operating expense which refer to Interest and income taxes 

Balance Sheet: The balance sheet shows the company’s assets and liabilities. The Shareholder’s equity is calculated as: The Balance sheets are prepared for shareholders or loan officers. This helps to show the financial health of the business.

Assets – Liabilities = Net worth

Cash flow: Cash flow is the comparison of cash on hand to bills due in the near future. Accounts payable is the money due to the business and accounts receivable in the money the business owes others.

Operating budgets: Operating Budget forecast expenses a business must incur to achieve targeted sales revenues. These are basically income statements prepared for a future date. Sales refer to the company’s revenue. The prime costs are food and labor expenses, many restaurants like to keep their prime costs between 60-69 percent of sales. The fixed costs or overheads are .the same no matter how many customers are served. The variable costs change depending on the number of customers served. The conversion costs include direct labor plus business overheads. Then there are some common costs which are shared costs that cannot be easily assigned.  In addition to this there are certain other business management tools like production reports, menu engineering, make or buy decisions, inventory control etc.

2.2

In order to maintain the profitability of the business, it is important to understand the various elements involved in the costing of a dish or a recipe. The example of costing of a date cake has been explained in the table below:

Primary Ingredients
Product Name		Quantity (Kg)	Cost                (per each unit)	Total Cost
Dates		2	$10.00	$20.00
Wheat		4	$2.00	$8.00
(Primary Ingredients Costs) Total:				$28.00
Secondary Ingredients
Product Name		Quantity	Cost	Total Cost
		In Oz	Per Lb/Pt
Milk		3	$5.00	$0.94
Sugar		20	$2.00	$2.50
Oil		10	$1.00	$0.63
Cocoa Powder		15	$2.00	$1.88
Baking Powder		10	$2.00	$1.25
Sweet Soda		10	$2.00	$1.25
				$0.00
(Secondary Ingredients Costs) Total:				$8.44
Utility and Preparation Costs
Name				Total Cost
Preparation				$2.00
Gas				$0.12
Electricity				$0.11
Water				$0.10
(Utility and Preparation Costs) Total:				$2.33
Total Cost:				$38.77

The costs included are the cost of raw materials-primary and secondary and the preparation costs. This helps us in finding the selling price and profits.

It is also important to understand the profit and loss statement of an establishment. The profit and lost statement of a hospitality event has been given below:

Profit and Loss Statement
	Amount (Rs.)
Sales Revenue
Registrations of the Attendees	900,000
Sales and Proceeds from Stuff at Conference	700,000
Total Sales Revenue  [J]	1,600,000
Cost of Sales
Raw Material Cost	150,000
Packaging and Printing	100,000
Total Cost of Sales  [K]	250,000
Gross Profit  [L=J-K]	1,350,000
Operating Expenses
Sales and Marketing
Advertising	20,000
Direct marketing	30,000
Total Sales and Marketing Expenses  [M]	50,000
General and Administrative Expenses
Wages and salaries	20,000
Outside services	20,000
Supplies	100,000
Meals and entertainment	300,000
Rent	200,000
Telephone	50,000
Utilities	10,000
Total General and Administrative Expenses  [O]	700,000
Total Operating Expenses  [P=M+N+O]	750,000
Income from Operations  [Q=L-P]	600,000
Income from Collections and Tips	10,000
Taxes
Income taxes	100,000
Real estate taxes	50,000
Total Taxes  [S]	150,000
Net Profit  [T=Q+R-S]	460,000

2.3

The standard operating procedure for the product control in the food and beverage industry includes various processes like- Purchasing, Receiving, Storing, Issuing, Pre-Preparation, Preparation and Service. The purchasing process includes identifying the material to be purchased along with its quantity and specifications. The product specifications in the standard format include use of product, test procedures any other special requirements if any. The purchase process in the food and beverage industry may be illustrated as:

• Step 1: To find out what are the materials required to meet the demands of the business.
• Step 2: To check the current stock status and place the order for whatever material is short i.e. deciding the purchase quantity.
• Step 3: Select the supplier after rate comparison and raise the purchase order stating the descriptions of the items to be procured.
• Step 3: Place the order for the goods as per the purchase order.

The steps to be kept in mind before making a purchase are:

• It is very important to develop a liaising with the suppliers as well as the department managers in order to have a relation of mutual trust and comfort before starting up with the business.
• The purchase manager should make sure that he has taken quotations from more than one source of suppliers. This is especially important in the cases of purchase of high value items.
• It is the duty of the purchase department to send the orders and maintain proper records of the same.
• Conducting Market surveys on the prices of food items is also a part of the purchase process.

The purchase process may be controlled by following the below steps:

• Create Product Specifications: This includes the standard of product required, exact requirement and the supplier.
• Selecting suppliers: It is important to be sure of the reputation, consistency and competency of the supplier while making the selection. It is also important to take note of the terms and conditions for payment.
• Competitive Check: The prices of the competitors should be checked on a regular basis.
• Study Cost Variations: Changes in the cost may occur due to variations in the season, business environment changes or because of the quantities ordered.

Hence it is important to keep note on the various control measures as mentioned above while making any purchase process in the food or the beverage segment (Riley, 2005).

References

Rama, R. (1996). Empirical study on sources of innovation in international food and beverage industry. Agribusiness, 12(2), 123-134.
Soman, C. A., Van Donk, D. P., & Gaalman, G. (2004). Combined make-to-order and make-to-stock in a food production system. International Journal of Production Economics, 90(2), 223-235.
Light, N., & Walker, A. (1990). Cook-chill catering: technology and management. Springer.
Greathouse, K. R., & Gregoire, M. B. (1988). Variables related to selection of conventional, cook-chill, and cook-freeze systems. Journal of the American Dietetic
Association, 88(4), 476.
Rhodehamel, E. J. (1992). FDA's concerns with sous vide processing. Food Technology, 46.
Shneiderman, B. (1986). Designing menu selection systems. Journal of the American Society for information science, 37(2), 57-70.