Question

about HRM57 cost control

1. What actions can managers take to improve the menu by managing items identified as plowhorses?puzzles? stars? dogs?

2. What are the basic procedures necessary to develop a budget plan?

3. What are the advantages and disadvantages of top-down and bottom-up budgeting in multi-unit properties? Which would you prefer if you were a unit manager? Why?

Answer 1

1. What actions can managers take to improve the menu by managing items identified as plowhorses?puzzles? stars? dogs?

• Star (high profit, high popularity): dishes that people love and that make you money.
• Plow horse (low profit, high popularity): dishes that people love and that you break even on — but make up in volume.
• Dog (low profit, low popularity): dishes that do not get ordered and that cost you a lot of money to prepare.
• Puzzle (high profit, low popularity): Dishes that do not get ordered, but that would make you money if they did.

Dump the dogs. Now.

Maybe it’s your chef’s favorite. Maybe it’s yours. It could even be promoted as the signature dish for your restaurant. But if no one orders it, it’s still a dog on your menu, taking up space instead of something that customers actually will order. That’s costing you money, every single day.

Because the profit potential is too low, dogs are not even worth attempting to tweak into something better. However emotional it may be to part ways, the responsible thing to do — and the thing that will actually affect your prime costs, is just to simply dump these dishes and replace them with something that has more profit and/or popularity potential.

Add variety to the plow horses.

Plow horses could easily be stars just waiting to be discovered. You’ve already jumped the first hurdle – customers want to order these dishes. Now is the time to experiment and see what can kick them up to the next level.

Increase prices moderately on stars.

Stars are often menu items that will get ordered — because of their uniqueness or high quality — even at a higher price. If you are the only restaurant in town offering Oysters on the Half Shell, and that dish is a star for you, odds are guests will pay just a little bit more. There’s no reason to gouge your customers, but likewise, there’s no reason to undermine your own prep time, COGS, and presentation with a bargain price on a highly sought-after dish.

Eliminate one-trick ponies.

Any dish that features an ingredient requiring a special, one-of-a-kind purchase for your kitchen should go — unless it pays for itself three times over. If that dish is indeed a star, then start devising one or two more dishes that could highlight the ingredient. The economies of scale in ordering should make your star even more profitable. Best case scenario: maybe you’ll end up with three star dishes!

Rearrange your menu.

Believe it or not, the physical size of your menu has a huge impact on costs, in more ways than one. Obviously, if your menu is enormous, the likelihood of dishes that don’t get ordered — or don’t get ordered as much as they should — ramps up. That just increases your inventory costs and potentially your waste budget.

Tweak your puzzles.

There’s some reason why these items don’t get ordered. Figure it out. They are taking up space on your menu that you can’t afford, costing you money EVERY SINGLE DAY.

• Is it because they’re off-brand? Dump them for a variation on a star.
• Is it because they’re just not marketed correctly? Rewrite them on the menu. Use descriptive words to entice the senses, like “wood-fired,” “heirloom,” or “freshly made.”
• Is it because they don’t have enough allure? You may have room to add a premium ingredient or two and remain profitable. Your puzzle could be a star in the making with just a simple tweak.
• Is it because they’re just a little bit off? Consider using a limited time offer to promote the dish but with a few tweaks here and there. See if the adjusted LTO dish has enough popularity to make it a star!

No matter what the mix of stars, plow horses, dogs, and puzzles on your menu, it’s important to always be thinking about ways to make your menu — and your business overall — more profitable, cutting restaurant costs while maintaining the level of quality your customers associate with your brand.

2. What are the basic procedures necessary to develop a budget plan?

Follow these steps to put a solid budget plan into action.

• Calculate expenses. Your first order of business is finding out exactly how much you're spending each month.
• Determine your income. ...
• Set savings and debt payoff goals. ...
• Record spending and track progress. ...
• Be realistic.

3. What are the advantages and disadvantages of top-down and bottom-up budgeting in multi-unit properties?

Top-down budgeting.

In budgeting, a top-down approach involves the senior management team developing a high-level budget for the entire organization. Once these budgets are created, amounts are allocated to individual departments, and those departments must then take those numbers and build their own corresponding budgets within the confines of the executive-level-created budget.

Advantages:

With top-down budgeting, only the executive team is involved and thus lower management does not have to take time to prepare the budget. This can represent significant time-savings for those who are more involved in the day-to-day rather than the overall strategy for the organization.

Disadvantages:

With the top-down approach, those creating the budget may not be involved with the day-to-day and as a result may not be aware of some of the specific expenses required. This may result in problems for departments looking for resources that just don’t fit into the top-down budget.

Bottom-up budgeting.

With a bottom-up approach, the process starts in the individual departments where managers create a budget and then send it upwards for approval. That budget is either approved, revised or sent back for modifications, and a master budget is created from the various departmental creations.

Advantages:

Usually the outcomes of this approach are increased ownership of the budget, more information since employees familiar with each department are creating the budget, and increased understanding, communication and commitment on behalf of managers because they are directly involved in the process.

Disadvantages:

Typically, the bottom-up approach will result in higher spending targets compared to the top-down approach, and thus a reconciliation process will be required in order to produce an organization-wide budget in which all the parts add up correctly. Also, sometimes bottom-up budgeting can result in budgets which are not in-line with corporate objectives if managers focus too much on department, rather than organization, concerns.

Which would you prefer if you were a unit manager? why?

I prefer bottom-up budgeting,

Because, Usually the outcomes of this approach are increased ownership of the budget, more information since employees familiar with each department are creating the budget, and increased understanding, communication and commitment on behalf of managers because they are directly involved in the process.