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2. Sales concepts:a. Various sales concept

b. Uses of sales concept

Sales Concepts: the term SALES is used in a number of ways among professionals in the Food Service Industry. It will therefore be useful to define the term & its various uses in the industry.

In general, a SALE is the revenue resulting from a restaurateurs exchanging his products and services

for value. The most commonly encountered uses of the term are the following:01) Total Sales: is a term used to refer the total rupee volume of sales in any given time period, such as a week, a month, or a year. For example, total rupee sales for Hotel ABC amounted to Rs, 658,000/- for the year ending 31st December 2006.02) Total Sales: by Category: examples of total rupee sales by category are total food sales or total beverage sales, referring to the total rupee volume of sales for all items in one category. By extension, we might see such terms as total meat sales, or total seafood sales, referring to the total rupee volume of sales for all items in those particular categories.03) Sales Price: refers to the amount charged a customer for each unit sold. The unit may be one item an appetiser or an entre or an entire meal, depending on how a restaurant prices its products (refer to types of menu). The sum of all sales prices charged for all items sold in a given time period will be total rupee sales for that time period. 04) Average Sale: this is sometime referred to as AVERAGE COVER is determined by total dollar sales by the number of customers. For example, if total sales for a given day in a restaurant were Rs. 1258/- and restaurant had served 183 customers, the average dollar sale would be Rs. 6.84.The concept is sometimes expressed as the average check price, or average cover, all of which tend to synonymous in our industry. The average sale is used by food service operators foe comparative purposes, to identify trends in sales, and to make judgements about the comparative effectiveness of various menus or menu listings, or even of sales promotions.05) Sales per Server: is the total rupee volume of sales for which a given server has been responsible I a given time period, such as MEAL PERIOD, A DAY, or A WEEK. These figures are sometimes used by management to make judgements about the comparative sales effectiveness of employees. It might be helpful to be able to identify those servers responsible for the greatest and for the least rupee sales in a given period.06) Average Sales Period: as per serving person is total rupee sales for an individual server divided by the number of customers served by that individual because, unlike total sales per serving person, it eliminate differences caused by the fact of different number of persons served. This too a figure used for a comparative purposes, and it is usually considered a better indicator of the sales ability of a particular individual because, unlike total sales per serving person, it eliminates differences caused by the fact of different number of persons served.

07) Sales per Seat: sales per seat are the total rupee sales for a given time period divided by the number of seats in the restaurant. The normal time period used is one year. This figure is used by chain operations in order to compare sales results from one unit to another. In addition the NRA determines this average nationally, so that individual operators may compare their results to those of other restaurants.Non Monetary Sales Concept: All of the above sales concepts are related to dollar sales & will be encountered by those entering the F&B industry. At the same time, there are a number of non-monetary sales concepts and terms that should be understood.

1. Quantity of Items Sold: often expressed as number sold, refers to the particular number of steaks, or shrimp cocktails, or any other menu item sold in a given time period. A restaurateur could use QIS number of particular items sold help in forecasting likely sales, and such forecasts are useful for controlling purchasing, production, controlling inventory and reconciling sales.

2. Average Number of Covers: cover is a term used in Food & Beverage Industry to describe one diner, regardless of the quantity of food a patron consumes at any meal time. The ANC is determined by dividing the total number of customers or covers, for a given time period by another number. The following suggests several possibilities.a. Covers per Hour

=

b. Covers per Day

=

c. Covers per Server

=

3. Seat Turnover:most often called simply turnover or turns, refers to the number of seats occupied during a given period, or the number of customers served during that period by number of seats available. For example, if 150 persons served during that period dividing by number of seats available. For example, if 150 persons served luncheon in a dining room with 50 seats. Seat turnover would be calculated as 3. Obviously meaning that an average each seat had been used THREE TIMES during that period. This may be calculated for any given time period, but is most often determined per meal per day.Comparators for Food and Beverage Control

ComparatorFocusCommon Applications

Cost % ----------------------------------------------------------Relationship of cost & revenue -----------------------------Commercial Restaurants

Per capita cost -------------------------------------------------Relationship of cost and volume ---------------------------Institutional Catering

Commodity usage ---------------------------------------------Correct usage of each ingredient --------------------------Fast Food

Bottle Wine Sales

Retailing

High Cost items

Potential sales -------------------------------------------------Correct sale of each ingredient -----------------------------Bars

Retailing

4. Sales Mix: the term is used to describe the relative quantities sold of any menu item compared to other items in the same category. The relative quantities are normally percentage of total unit sales and always total 100%. For example, assume a menu with 5 entre items represented by letters A-B-C-D &-E. If the total sales for all entre items in a given time period were 8000 i.e.A-1000-12.5%

B-1200-15%

C-1800-22.5%

D-2400-30%

E-1600-20%

Of Total Unit Sales. That is the SM for this establishment, based on historical records.

This measures the relationship between the various components of the total sales of a unit, for example:

Sales mix

%

Coffee Shop sales

Food

20

Beverages

05

Restaurant Sales

Food

25

Beverages

15

Banqueting Sales

Food

20

Beverages

10

Cocktail Bar Sales

Beverages

05

5. Matching Costs with Sales: for the restaurateur to stay in business profitably, total sales must be greater than total costs. If the costs exceed sales for an extended period of time, the restaurateur will confront bankruptcy, or at the very least will have to put additional funds into the business to keep it going.

It is the job of the Cost Controller and manager to be continually aware of the costs of operating the business and to keep them below sales. Costs information is gathered in many operations daily and compared with sales info for that day to determine the ratio of the various types of costs to sales. These ratios are compared to the same ratios from previous, and judgements are made as to whether the ratios are satisfactory. If not, remedial steps are taken to bring costs down to the point at which the ratios are satisfactory. It is important that the comparative cost and sales information be from like periods.

An example of a restaurant operating a sales statement with the sales budget:

This periodYear to date

ActualBudgetActualBudget

%%%%

11,000 100 10,00010Net Sales 20,00010021,000100

5,500 50 4,00040 less cost of sales 11,200 56 8,400 40

------------------------------------ ------------------------------------

5,500 50 6,000 60Gross profit 8,800 44 12,600 60

2,750 25 2,000 20 less wages and staff costs 4,200 21 4,200 20

------------------------------------ ------------------------------------

2,750 25 4,000 40Net margin 4,600 23 8,400 40

less allocated expenses

550 5 500 5 maintenance 1,200 6 1,050 5

220 2 200 2 head office services 600 3 420 2

220 2 200 2 other 200 1 420 2

110 1 100 1 equipment 200 1 210

------------------------------------ -------------------- ---------------

1,100 10 1,000 10 2,200 11 2,100 10

------------------------------------ ------------------------------------

1,650 15 3,000 30Operating Profit 2,400 12 6,300 30

------------------------------------ (net profit) ------------------------------------

Note: Budgeted figures are used to compare with the actual operating results. It can be observed that low operating profit achieved is due almost entirely to the failure to achieve the budgeted gross profit on sales in spite of an increase in sales this period.

Customarily, comparisons are made for specific days of the week Monday last week, with Monday this week. For example comparisons sometimes are made of like weeks in TWO different months i.e. / for example / the last week of June compared with the 1st week in July. However, this information may not be valid if there is a normal seasonal fluctuation in business for those TWO months. Often last week and this week are compared, so that trends can be established.

In many establishments, cost and sales information is compared only periodically. However, it is obvious that remedial action will be more effective if the Cost and Sales information is current. Establishments that gather cost and sales information only Monthly, quarterly or annually are oftentimes unable to take remedial action, because the information is too old to shed light on current problems._1319114595.unknown

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