Food and Beverage Sector

LEARNING OUTCOMES
• AT THE END OF THIS CHAPTER , YOU SHOULD BE ABLE
TO:
• 1. Trace the history of food and beverage industry
• 2. describe the different types of restaurant
• 3. explain the importance of franchising to the
restaurant industry
• 4. discuss the restaurant profitability and calculate food
cost percentage , gross profit and average guest check.
• 5. calculate the restaurant break even point.
• 6. explain the role of menu in restaurant success
• 7. differentiate airline catering from restaurant catering
• 8. discuss restaurant promotion

HISTORY OF FOOD AND BEVERAGE SERVICE
• In early history , there was much evidence
that certain groups of people are cooking
together with a big group and that the early
inns provided a crude menu.

In Roman Era:
• Some establishment are offering sausage, roast
meat, bread and a cup of wine.
• The forerunner of the modern restaurant that
provides hot food and drinks also develop in
Rome.
• Many of the early restaurant were in the cities
and near temples and government buildings.
• After the fall of Roman Empire , the manor and
castles provided foods for a large number of
people. The early inns provide bread and wine to
travelers.

In 1200 century:
• Public cook shop were open in London
which offered pre-cooked take out
foods.
• The royal families of Europe introduce
the cutleries, table linens , crystal
glasses, new foods such as turkey and
potato and the roadside tavern.

In 16th Century
• British inns and taverns began to serve one
meal a day at a fixed time and price at a
common table.
• The meal was known as ordinary and the
dining rooms are called ordinaries.
• The most famous ordinaries in London was the
Castle and Lloyd’s which was the meeting
place for merchants and ship owners.

In 17th Century
• The ordinaries became fashionable
clubs and gambling places as well as
the center of political activities .

In 18th Century
• The word “restaurant” was used
for a Paris dining rooms serving
light dishes.

In United States:
• Taverns and inns were very similar to those in
England.
• A famous tavern in New York was Fraunces Tavern.
• In 1834, the famous Delmonico’s was opened in
New York.
• 1990, several event that were significant to food
industry occurred.
• 1904, first hamburger was served at St.Louis World
Fair.
• The first root beer stand was founded by Roy Allen
and Frank Wright.

The Second World War (WWII)
• It brought many changes to American
Public. People became richer , the
automobile made them more mobile,
they shifted to suburban areas of cities.
In 1960’s fast food establishment
emerged.

At Present:
• Modern popular cuisine including
French Cuisine, Chinese. Mexican, and
Japanese have become common in
most cities.
• The role of Food and Beverage plays
in tourism may not be direct but
indirect attraction.

TYPESOFRESTAURANTS

FAMILY OR COMMERCIAL
RESTAURANTS
• Offers wide menus of “meat and
potato” selection with a price range
appeal to an average family income.
• They serve and wine and they have
liquor license
• The décor is bright . A combination
of counters , tables and booth is
common.
• Parking is necessary since
customers usually arrived by a car.
• It is normally located in residential
area and a highway.

COFFEE SHOPS • Characterized by a fast food
service
• Décor are simple but the prices
are relatively low.
• Usually located in front of office
building and in shopping malls.
• The rent is high.
• The staff are often minimally
trained.
• The peak period is during lunch
and coffee breaks
• Take out service may be offered.

CAFETERIAS • Usually located in shopping
centers and office buildings.
• It requires Self- Service with
limited menu of soup, entrées,
desserts, and beverage.
• It requires large preparation area
• The staffs are minimally trained
• Fast service is required

GOURMET RESTAURANTS
• Requires higher initial investments than
other types pf restaurants because it
requires expensive ambience and décor.
• Cater to those who want a higher standard
that willing to pay the price.
• High price because there is a higher
investment required.
• It has highly trained staffs
• Menu are carefully planned
• Location is very important
• Word-of-mouth advertising is the key to
success of this restaurant

ETHNIC RESTAURANTS • Feature the food for specific region or
country.
• The Décor is usually ethnic
• It must offer authentic cuisine of the
region or country they are featuring and
those who prepare food must be well
trained and knowledgeable.
• Price range from budget to high
• Beer , wine and liquor may or may not be
served.
• Location is variable
• Investment is high for staff training and
décor.

FAST-FOOD / QUICK SERVICE
RESTAURANTS
• Franchising is most common on this
type of restaurants
• Menu is limited at low prices
• Many customer patronize because
of affordable price
• It operates for long hours and 7 days
a week.
• No alcoholic beverage offers.
• This restaurants are pioneers in
establishing more efficient food
operating systems.

-Cont of Fastfood
• A well trained staff is required for the
franchise fast food operation in which
the franchisor sets standard of service
and quality must be maintained at all
times.
• They are using disposable items that save
dishwashing cost.

DELI SHOPS • It provides delicatessen food service
combining traditional delicatessen
cold meats and cheese with take out
sandwiches , salads and similar items.
• It has limited seating capacity.
• Usually located near the office
buildings and shopping areas open
from 9:00am – 5:00pm or 9:00pm.
• Capital investment is low.
• It is low-labor cost because 1 or 2
owners employees are involve.

BUFFET RESTAURANTS
• Establish in completely self-
serve basis.
• The food is usually “eat-all-
you can” hot and cold food
for a reasonable price .
• Food preparation and
service staff are kept to a
minimum.

TRANSPORTATION
RESTAURANTS
• Restaurants found along in bus
transportation routes.
• Caters tour groups like bus tour
groups.
• Quite profitable if the market is
maintained
• Require special cafeteria of
buffet type facilities to cater
groups to serve them quickly
during their journey.

FRANCHISING

• Franchised restaurant is the major component
of Food Service Industry especially in fast-food
sectors.
• Franchises is beneficial to franchisees because
they provide operational, training, layout,
design assistance, location assistance, the
identification of brand supported by regional,
national and international advertising and
promotions.
• Franchised restaurants can easily get financing
from lending institutions than independents.

• In early days of Franchising , the common practice was to
sell individual franchise right for single restaurant.
• At present , a regional franchise allow franchisee to
develop multiple outlets within specific geographical
areas. The area could be a city , province or a major part
of the country.
• Example: Wendy’s: United give Canadian country the
territorial rights to all of Canada for Wendy’s restaurant
operations.

RESTAURANT PROFITABILITY

FOOD COST PERCENTAGE
• Often use to measure a restaurant marketing
success. It is determine by dividing the food cost for a
period ( a day, a week, a month) by the sales of that
period and then multiplying it by 100.

Example: If the cost of food for the month is
Ᵽ40.000 and the sales is Ᵽ100.000 the food cost
would be:
Ᵽ40,000
Ᵽ100,000
× 100 = 40%
Many restaurants operators strive for a 40% food cost to
make the restaurant more profitable.

GROSS PROFIT
• Is the selling price of an item less its food cost

In this table , it is better to sell item 1 rather than item 2.
Item 1 has a higher cost percentage and a highest gross
profit; hence; a contribution to net profit than item 2.
For each of item 1 sold 50% food cost , there is Ᵽ 4 gross
profit compared with Ᵽ 3 with item 2.
ITEM COST PRICE SELLING PRICE COST PERCENTAGE GROSS PROFIT
1 Ᵽ 4 Ᵽ 8 50% Ᵽ 4
2 Ᵽ 1 Ᵽ 4 25% Ᵽ 3

LABOR COST
• Controlled by expressing them as a
percentage of sales on daily , weekly or
monthly basis and comparing the actual cost
with the standard desired.
• Instead of treating labor cost as a separate
from food cost , many successful restaurant
look at this two as combined cost .

• For an instance, they set a standard of 75% above in
which food cost plus the labor cost must not
increase. As long as the operation maintains the
combine cost below this level, the restaurant will be
profitable.

In large restaurants , the organization of the labor force is important
to labor cost control. The food service structure is illustrated in the
figure below.

Average Guest Check
• Another profitability measure used in
the restaurant is the average guest
spending or average guest check.
Average guest spending is calculated by
dividing the total revenue received for
a particular period ( a day, week,
month or a year by the total number of
guest served during the period.

Formula with Example:
•
𝑡𝑜𝑡𝑎𝑙 𝑟𝑒𝑣𝑒𝑛𝑢𝑒 𝑟𝑒𝑐𝑒𝑖𝑣𝑒𝑑
𝑡𝑜𝑡𝑎𝑙 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑡ℎ𝑒 𝑔𝑢𝑒𝑠𝑡 𝑠𝑒𝑟𝑣𝑒𝑑
= 𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑔𝑢𝑒𝑠𝑡 𝑐ℎ𝑒𝑐𝑘
Ᵽ 3,610
350
= Ᵽ 10.31

THE BREAKEVEN POINT
A point which make the business neither a profit or
loss.
Formula for BEP:
𝑓𝑖𝑥𝑒𝑑 𝑐𝑜𝑠𝑡
𝑐𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 𝑚𝑎𝑟𝑔𝑖𝑛

Fixed cost
• Are those cost that remain the same
regardless of the volume of the business.
Examples are the salaries , interest,
depreciation, insurance rent and the like.
Contribution Margin
• Average check less variable cost

Example: if a restaurant has an annual fixed cost of Ᵽ 125,000
and an average guest spending of
Ᵽ 10.00 and variable cost such as food, labor, and other is 75%
of revenue or Ᵽ 7.50% guest served its breakeven points is:
Ᵽ 125,000
Ᵽ 2.50
꓿ Ᵽ50,000
The Contribution Margin is average check less variable
cost or Ᵽ 2.50 less Ᵽ 7.50
The breakeven number of customers is Ᵽ50,000

The proof is:
• Total revenue: Ᵽ50,000 x Ᵽ 10 = Ᵽ500,000
• Variable cost: Ᵽ50,000 x Ᵽ7.50=Ᵽ375,000
• Fixed cost: Ᵽ125,000
• Profit or Loss: 0

MENU

Menu
• Basic planning documents for a successful
restaurant.
• It contains what is the restaurant could offer
, range of offerings, as well as the selling
prices.
• The menu must portray the size and the
theme of the restaurant.
• Menu design, printing, size and color is
important.

Menu
• Determine the equipment needed and the
investment required.
• The more extensive the menu, the more varied
the needed equipment will be.
• Menu also identify the labor cost of the
restaurant. It can help determine the number
of staff required and the cost of training for
food preparation ad service.
• Menu estimates the cost of the uniforms ,
purchases, storage and space and the actual
food cost.

Menu samples:

AIRLINE CATERING
• Airline companies spend billions of dollars
every year for food purchases. The average
cost per airline passenger is between 1 dollar
and 7 dollar depending on the length of the
for shorter journey. The amount is less for
shorter trips, since passenger maybe offered
only a non-alcoholic beverage and a light
snack. For longer trips in which two or three
meals maybe offered including free alcoholic
beverages, the amount is higher. Around 3 to
4% of an airlines total cost is spent on food.

FOOD QUALITY
• The main problem of the several airline companies
is to cook the meal on the ground and serve it
several hours later in extraordinary dry cabin
atmosphere , seven miles high, to different group
of people with different food preferences and
whose main function is to travel than to eat.
• In 1992, airline passenger served a sandwich and a
coffee from a vacuum flask on the light from
London to Paris.

LOGISTICS
• To produce hot meals , the airline company have to
prepare specification for recipes , ingredients,
cooking method and temperature and labor for each
flight.
• Preliminary meals counts are usually prepared from
24 to 72 hours ahead so that food supplies can be
both.
• Menus must be carefully selected for each flight to
avoid serving the same meal on a passenger on two
succeeding segments of a trip.
• Trays , serving utensils and supplies must be in the
kitchen when the meal is prepared.

FLIGHT KITCHEN
• The First airline kitchen was opened in late
1930’s near Washington DC in Hoover Field
Airport by a gentleman named Marriott.
• Marriott had a restaurant near the airport . He
noticed that passengers would go to his
restaurant to eat before the flight because
there is no meals were serve in the airplane.
He approached Eastern Air Transport , known
as the Eastern Airlines , and offer prepared
lunch boxes for Eastern’s passengers. Eastern
agree so the first flight kitchen is establish.

• At present, Marriott In-Flite Services has
approximately 100 kitchen around the world
which caters 150 airlines and serve 100
million meals per year.
• Some airline companies have their own flight
kitchen while the other contract with other
airline companies that are equipped with own
kitchen.
• Most of the airline companies turn over their
catering services to outside caterers because
airline kitchen are not large and efficient.

DIFFERENCE BETWEEN AIRLINE CATERING AND
RESTAURANT CATERING
• Airline Catering is different from restaurant catering
because in the latter , the chefs can makes last
adjustments. For example the steak might be prepared by
a flight kitchen to be accompanied by the sauce and side
dishes to be serve 2 hours later and to be kept hot. If the
flight was delay the quality of the food is lessen.
• In airline catering the logistics are very complex but
airlines exerts great efforts to serve good meals to a
passenger.

RESTAURANT PROMOTION:
• THE FOLLOWING LISTED BELOW ARE THE WAYS
TO PROMOTE A RESTAURANT:
• putting their contact numbers in yellow pages,
• used local radio and television station.
• Ads in a newspaper/s
• Airline inflight magazines
• Consumer travel magazines
• Travel publications
• Hotel Concierge ( for recommendation)
• Word of Mouth