Info for completing this assignment. Do NOT fill in the blanks on the resources below. Create a professional report that you would present to a board of directors. Research a format that would be appropriate. Also state how you would change any of the elements in the report to improve your food service operation.
Read the resource, research other resources and use the statistics given below to create a Profit and Loss report.
Show how you got the calculations in your report. You must show the formula and how you got the answer for a grade.
Profit and Loss Statement Definition
While there are several ways to measure the success of a food service business and the most tangible way is with a profit and loss statement. Also known as a P&L statement, this financial tool reflects your sales and costs during a specified period of time.
Calculating the profitability of most food service establishments comes down to basic fundamental business components: increasing sales or margins (revenue) and reducing costs or expenses. Statistics show that 50% of new restaurants go out of business by year 5 because they fail to make a profit.
A food service profit and loss statement is a monetary statement that lists the sales, costs, and expenses of your food service organization in a set period of time. A financial statement allows you to analyze the financial progress of the food service operation.
A P&L statement usually includes the following 2 main sections:
Section 1: A breakdown of your sales
Section 2: Costs
The costs section usually includes the following information:
• Cost of goods sold (COGS)
• Labor Costs
• Operating Costs
P&L statement also enables you to calculate food cost percentage, gross profit, and net profit or loss. These metrics can be calculated from your sales, COGS, and costs, and they allow you to fully understand your financial state.
Profit and loss statements can be used weekly, monthly, or yearly. Weekly statements are recommended so you can keep track of what is most profitable or costly to your establishment each week. This allows you to quickly make changes, such as implementing strategies to lower food costs. Many food service organizations will also use monthly and yearly restaurant profit and loss statements to show overall progress.
Section 1: Sales
In this section, you should list out all of the items that contribute to your total sales. This will include the products from all of your revenue streams and how much money each specific item has brought in.
Section 2: Costs
There three main expenditures to include: cost of goods sold, labor cost and operating expenses which is usually listed as separate line items on the P&L statement.
• Cost of Goods Sold
The cost of goods sold (COGS), or cost of usage, refers to the cost to your restaurant of the food and beverages sold to your customers in a given time period. You can list out each individual item using an inventory system. Calculate the cost of each product, and add them up to get your total COGS.
• Labor Cost
From your management to your cashiers, salaries and hourly wages for all employees make up your restaurant labor cost. The key element to controlling labor cost is to understand how many employees you need to provide consistent and effective service without scheduling too many people. The most important element to balance, that will help control your labor cost, is to figure out exactly how many employees you need each week in order to provide effective service without over scheduling. Depending on how busy you are, every food service operation needs cooks, servers, and sanitation. Labor costs can be improved with knowledge of a required resource allocation to demand, over-time prevention and continuous improvements in productivity – employee, or physical components of the business, e.g., labor saving equipment,
• Operating Costs
Operating expenses include everything involved in your daily operations, such as supplies, repairs, and marketing. Occupancy expenses include overhead costs and everything related to occupying a space, such as rent, insurance, utilities, taxes, and waste removal. Some of these expenditures, like waste removal, may be fixed, whereas others, such as your gas bill, and electricity may vary each month.
Controllable Expenses: You can think of miscellaneous costs as any daily expense that is necessary for a food service business such as the restocking of uniforms, cleaning supplies, napkins, paper cups, replacing glassware etc. You also can also include advertising here. Some expenses will obviously vary depending on the type of establishment you run. As an example, when comparing a 5-star restaurant to a fast food chain, the 5-star restaurant will invest in more fancy chinaware and the fast food chain will purchase more disposable cups. Prime Cost : The prime cost is the sum of a food, beverage and labor costs. We are not doing beverage costs or benefits for our assignment.
More below
Some food service will consider this their profitability benchmark number on their P&L statement. Because the prime cost bundles the two largest cost categories, it represents a key indicator into whether the company will be profitable in the next reporting period. Prime cost is also a direct reflection as to how management is controlling food, beverage and labor costs on a daily basis throughout the reporting period. A successful food service organization will keep its prime cost at 65% or lower.
See how to calculate the cost of goods sold, food cost percentage, total gross profit, and net profit BELOW (I will submit an image)
SHOW HOW YOU CALCULATED YOUR NUMBERS-
You must show the formula and how you calculated it for credit for this assignment.
Also do some outside research about profitability in hospital food service, acceptable goals.
