Th e most eff ective way in which foodservice operations can manage dining durat

Th e most eff ective way in which foodservice operations can manage dining duration is not by forcing a guest to limit her time at a table, which would obviously have detrimental eff ects, but by streamlining the effi ciency with which food is prepared and served. While a customer does not want to receive an entrée while she is still enjoying the starter course, she doesn ’t need to wait a long time between courses. Th e same is true of handling payment. During peak times, payment processing can take a substantial amount of time because servers are busy waiting on other guests. However, if the time spent in off ering the check and then collecting payment can be reduced, seat turnover can be increased. Break-even Analysis In discussing fi nancial management in Chapter 10, we illustrated the relationship between fi xed and variable expenses and revenue. Here, we introduce a quantitative method for examining this relationship, one that can aid in measuring the eff ectiveness of revenue-management strategies. Th e objective is to use break-even analysis (sometimes referred to as cost-volume-profi t analysis) to identify a break-even point (BEP) , which is the volume of sales at which revenue covers fi xed and variable costs but does not yet produce a profi t. Th e key assumptions underlying this calculation are that fi xed costs remain constant while variable costs change at a constant rate with sales. Moreover, the technique requires addressing costs with both fi xed and variable components accordingly. Th is same approach can be applied using total revenue, number of orders, or number of covers. Th e BEP is expressed as follows: B E P 5 Net income $ 0 5 R e v e n u e 2 Fixed costs 2 Variable costs Before we apply BEP, we should mention that variable costs, which as we discussed in Chap-ter 10 include food cost, and the portion of labor and direct operating expenses that vary in direct proportion, must be computed with reasonable accuracy. Recall, too, that we view total labor expenses and to a lesser extent (because a large percentage is variable) direct operating expenses as semivariable since they consist of both variable and fi xed components. Th us, we can use this information to calculate the contribution margin, which is the contribution to profi t resulting from revenue less variable expenses. A related calculation is the contribution rate , which is expressed as: Profi t 1 Fixed costs_________________ Total sales5 C o n t r i b u t i o n r a t e An alternative calculation is: Total sales 2 Variable costs______________________ Total sales5 C o n t r i b u t i o n r a t e Th e application of break-even analysis is apparent in the following example: Consider a fast-casual restaurant that has an average check of $10.00. Th e sales and costs are:Sales $1,500,000 100% Variable Costs $1,125,000 75% Fixed Costs $300,000 20% Profi t $75,000