Measures of Profit in the Food and Beverage Sector

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Burger King London

Burger King London is located at Westfield and is one of the global chains of the Burger King Chain stores in London. Burger King London offers a variety of food products. An example of such delicacies includes flame-grilled burgers, salads, burgers, and desserts. Others include both fried and grilled chicken. It is important to note that Burger King London also deals in cakes, ice creams, and coffee. The burger King London is predominantly a restaurant and most of its key performance measurements emulate those of a restaurant.

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With respect to the wide variety of products that the business deals with, it is important to implement operational tools that measure the performance of the business. Therefore, two measures of profit performance will include the sales per head and the total labor costs.

Sales per head

This is a major performance measurement for profit for any food and beverage business (Guilding 2012, p. 26). Burger King London requires this measurement tool to evaluate the profit of the day, weekly, monthly or yearly. The most practical manner to use this performance measurement tool is to apply it during different durations of business hours, for instance, for sales per head’s calculation during lunch and dinner. This performance measurement aims at helping the restaurant keep track of its customers, new customer trends, and customer needs.

The sales per head performance measurement on profit is calculated by dividing the total sales made during a certain period of time by the number of customers reported (Bragg 2011, p. 76). For example, if the total sales by lunchtime are $4500 and the customers that have visited the restaurant amounts to 100 then the total sales per head would be;

=$4500/100

The above sales per head would be $45 per customer.

Basically, the formula for sales per head or customer is as follows (Bragg 2011, p.76);

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Sales per head= totals sales in dollars/ number of customers.

The sales per head profit performance measurement is essential to understanding the prospective customers. The restaurant requires monitoring of the trend of the customers during specific business hours. In addition, this makes the business managers more vigilant on new customers who have the potential to become prospective customers. Therefore, the business is able to use other incentives within the business to make sure that such customers are maintained. In most cases, the use of discounts can be most appropriate in maintaining customers. This is deemed to ensure that sales volumes increase with an increase of customers.

It is also important to note that sales per head can be significant in understanding the effectiveness of the internal mechanisms that drive sales. For example, the sales per head are a factor in understanding the effectiveness of customer service in the restaurant. This will prompt the management to assess the competency of the restaurant’s employees in handling customers since this has an impact on the business’s bottom line. Eventually, the management will also assess the impact that other departments within the business are making on sales per head. For example, if the quality of burgers becomes a concern, the sales per head will automatically decrease. This will negatively affect the business profits. Ultimately, the sales per head pass out as a major tool in evaluating profit as well as the performance of the business from a departmental dimension.

The sales per head are also significant in evaluating the productivity of the employees or some business operations in relation to sales made within a day, month, or year. This means that sales per head would lead to a shift of operations, products to be sold, and the number of employees to report at specific times, hours or days.

Total labor costs

Total labor costs are a challenge to the profitability of a restaurant. Therefore, it is important to keep a check on labor costs that are constantly incurred. Example of such costs includes salaries, wages, bonuses, and suppliers’ debts. Other significant labor costs are the insurance and employee benefit costs. It is in the interest of the restaurant to ensure that such costs are maintained at minimal levels.

The total labor cost is sometimes considered as the total amount of money paid out to them directly employed employees of a business. This is done within a specific period of time. The total labor costs also include overhead accrued from payments made as wages (Oliver 2000, p.167). In order, for a business to plan and budget its operations, it is important to do a projection of profit margins. This is made possible through the calculation of total labor costs in relation to actual labor costs within a specific duration of time.

A typical formula for calculating total labor cost is a summation of all the total costs mentioned above. This should be the cost of an employee in relation to the percentage of labor an employee offers to the company. An example of the formula is below (Dopson and Hayes 2010, p.301);

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Total labor cost= wages+ benefits+ social security and disability+ taxes+ cost of services+ cost of equipment and materials

The significance of total labor cost in Burger King London is significant in determining the cost of labor required at specific times of the day or month. In general, this will have an impact on the profitability of the business. When the management relieves a section of the employees when there is less work, the business reduces its total cost of labor. This can be critical, especially in eliminating some non-value-adding services during some hours of the day. During slower periods or seasons, the business should be operating with only a few employees on duty.

An increase in total labor costs negatively affects the profitability of a business. Moreover, total labor costs projection can be significant in planning, budgeting, and projecting the profitability of a business within a specific time frame. In this respect, total labor cost can be attributed as an important planning technique in ensuring that business management is able to keep track of a business’s performance.

In conclusion, both total labor costs and sales per head profit performance measurement are essential in any food and beverage business (Dittmer and Keefe 2008, p.496). The performance measurements are integral in ensuring that the maintenance of business profitability is at its optimal levels. These performance measurements are able to keep a business on track and maintain its goals. This can be achieved through the management of operations within the business through performance measurement. From the performance measurements, it is important that the reduction of costs and streamlining of operations increase profitability.

References

Bragg, SM 2011, Obtaining debt financing, John Wiley & Sons, New Jersey.

Dittmer, PR and Keefe, JD 2008, Principles of food, beverage and labor cost controls, John Wiley & Sons, New Jersey.

Dopson, LR and Hayes, DK 2010, Food and beverage cost control, John Wiley & Sons, New Jersey.

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Guilding, C 2012, Accounting essentials for hospitality managers, Routledge, Thousand Oaks.

Oliver, L 2000, The cost management toolbox: The manager’s guide to controlling costs and boosting profits, AMACOM Div American Mgmt Assn, New York.

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