Cost Control Report

SHOP3033 F&B COST CONTROL

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1.0 Background of the food establishment

The name of the restaurant is Singgah Rasa and situated besides the highway along the

road to Bukit Kayu Hitam. It is owned by Encik Rusdi Omar. It is start the operations in

January 2010 with a total cost of RM150, 000.00 by personal and from a loan of owner of

the Restaurant. Before this, the Restaurant is only an investment by an owner itself but

managed by the others. In January 2010, investor which is Encik Rusdi Omar has decided

to run and manage the Restaurant itself. From the name of Teratak Bangau Putih, now the

name of the restaurant is changed to Singgah Rasa Restaurant. It is fully operated by its

owner and starting their operation by January 2010 with 6 employee. The concept of the

Restaurant is family dining restaurant concept which is served 2 different kinds of food

which is a Malay food and Thai food. A Malay cuisine is start from 5.00 a.m to 5.00 p.m

while Thai cuisine is from 5.00 p.m to 5.00 a.m. It is operated 24 hours a day except on

the festive day. A restaurant also provide a Wi-Fi free for the customer to access in order

to be not as a place to eat but also a place for social-interact for having a meetings,

discussion and gathering.

2.0 Location

The location of the Restaurant is at Teratak Bangau Putih, Taman Teja 376, Jalan Bukit

Kayu Hitam, Changlun, Kedah Darul Aman. The reasons why an owner are chosen this

location is because there are many development nearby the place which is in Changlun

town and also is the main way from south to north way. Moreover, the location is

strategic because strategic because the shop can be seen easily and found and it is situated

nearby the highway. People who are using the highway will be stop there, as a centre for

getting relaxed and have a breath before starting their journey to their destination.

Although there are many competitors around the place but an owner believes that it is

good to compete with competitors because it can shown what is the strongest and

weaknesses in order to achieve their target market. As been mentioned by the owner,

only strongest and the best services will stay and customers are known what is the best

for them.


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3.0 Market

The target market of the restaurant is the people around the residential area in Taman

Teja and around Changlun, students of the higher learner institutions, and also a people

who are travelling by that road. According to an owner, people with a family is the most

common customer to the restaurant because they have an special menu especially for a

family because they are using a menu packages which including all types of food and it

will be easier for a family to choose what they want. Furthermore, they also target on

student of IPT’s around Changlun and Perlis because the price that they offered is the

lowest and standard prize and will be not burden the students for having meal there.

Meantime, there is not having any promotion yet due to sales and marketing promotion

but they are focusing on excellent servicing customer because they trust a word mouth to

mouth by a customer which is the best things to describe about their establishment to

their friends. However, according to an owner, they will make a promotion in future

because they want to open a new branch which will include a new dining concept and

style. Moreover, the market segmentation of the shop is quite reliable, plus the population

of people in Changlun is quite high and this can gear up the demand.


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4.0 List of food and beverage

The Singgah Rasa restaurant has offer customers 80 of variety menu and 27 varieties of

beverages. Customers can choose the foods and beverages that they want according to

their tastes. There are several of menus that they are offered to customers:

Food

No Item (Mee/ K. Teow/ Bihun) Price

1 Mee/ K. Teow/ Bihun Goreng Rm4.00

2 Mee/ K. Teow/ Bihun Kuah Rm4.00

3 Mee/ K. Teow/ Bihun Hailam Rm4.00

4 Mee/ K. Teow/ Bihun Bandung Rm4.00

5 Mee/ K. Teow/ Bihun Rakna Rm4.00

6 Mee/ K. Teow/ Bihun Tom Yam Rm4.50

7 K.Teow Kerang Rm4.00

8 Char K.Teow Rm4.00

9 K.Teow Hongkong Rm5.00

10 K.Teow Udang Rm4.00

No Item (Masakan Panas) Price

1 Daging Masak Merah Rm4.00

2 Ayam Masak Merah Rm4.00

3 Ayam Masak Kunyit Rm4.00

4 Daging Masak Kunyit Rm4.00

5 Pak Pek Ayam Rm4.00

6 Pak Pek Daging Rm4.00

7 Pak Pek Udang Rm4.00

8 Pak Pek Sotong Rm4.00

No Item (Tom Yam) Price


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1 Tom Yam Ayam Rm4.50

2 Tom Yam Daging Rm4.50

3 Tom Yam Sotong Rm4.50

4 Tom Yam Udang Rm4.50

5 Tom Yam Ikan Rm4.50

6 Tom Yam Campur Rm4.50

No Item (Kerabu) Price

1 Kerabu Sotong Rm4.00

2 Kerabu Udang Rm4.00

3 Kerabu Perut Rm4.00

4 Kerabu Tauhu Rm4.00

5 Kerabu Ayam Rm4.00

6 Kerabu Daging Rm4.00

7 Kerabu Kaki Ayam Rm4.00

8 Kerabu Mempelam Rm4.00

9 Kerabu Maggi Rm4.00

No Item (Sayur) Price

1 Sayur Kangkung Belacan Rm 3.50

2 Sayur Kalian Ikan Masin Rm 3.50

3 Sayur Tauge Ikan Masin Rm 3.50

4 Sayur Goreng Rm 3.50

No Item (Telur) Price

1 Telur Mata Rm0.80

2 Telur Dadar Rm1.00

3 Telur Bungkus Rm3.50

4 Telur Bistik Rm3.50


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5 Telur Ikan Masin Goring Rm3.50

6 Sotong Goreng Tepung Rm4.00

7 Udang Goreng Tepung Rm4.00

No Item (Sup) Price

1 Sup Ayam Rm4.00

2 Sup Daging Rm4.00

3 Sup Tulang Rm5.00

4 Sup Campur Rm4.00

5 Sup Ekor Rm5.00

6 Sup Perut Rm5.00

7 Sup Sayur Rm4.00

No Item (Maggi) Price

1 Maggi Sup Rm4.00

2 Maggi Kuah Rm4.00

3 Maggi Goreng Rm4.00

4 Maggi Tom Yam Ayam Rm4.50

5 Maggi Tom Yam Daging Rm4.50

6 Maggi Tom Yam Udang Rm4.50

7 Maggi Tom Yam Sotong Rm4.50

8 Maggi Campur Rm4.50

No Item (Nasi) Price

1 Nasi Putih Rm1.00

2 Nasi Goreng Biasa Rm3.50

3 Nasi Goreng Ayam Rm4.00

4 Nasi Goreng Kerabu Rm4.00


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5 Nasi Goreng Ikan Masin Rm4.00

6 Nasi Goreng Pattaya Rm5.50

7 Nasi Goreng Pak Prik Rm4.00

8 Nasi Goreng Cina Rm4.00

9 Nasi Goreng Kampong Rm4.00

10 Nasi Goreng Usa Rm5.50

11 Nasi Goreng Daging Merah Rm5.50

12 Nasi Goreng Ayam Merah Rm5.50

13 Nasi Goreng Udang Merah Rm5.50

14 Nasi Goreng Sotong Merah Rm5.50

15 Nasi Goreng Special Rm5.50

16 Nasi Putih Ayam Merah Rm5.50

17 Nasi Putih Daging Merah Rm5.50

18 Nasi Putih Udang Merah Rm4.00

19 Nasi Putih Sotong Merah Rm4.00

20 Nasi Ayam Biasa Rm4.00

21 Nasi Ayam Special Rm5.00

BEVERAGES

No Item Hot Cold

1 Barli Rm1.00 Rm1.20

2 Bandung - Rm1.30

3 Horlick Rm1.50 Rm1.70

4 Horlick O Rm1.30 Rm1.50

5 Kopi Rm1.00 Rm1.20

6 Kopi O Rm1.00 Rm1.20

7 Limau Rm1.00 Rm1.20

8 Milo Rm1.50 Rm1.70


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9 Milo O Rm1.30 Rm1.50

10 Nescafe Rm1.50 Rm1.70

11 Nescafe O Rm1.30 Rm1.50

12 Neslo Rm1.70 Rm2.00

13 Neslo O Rm1.50 Rm1.70

14 Sirap Rm1.00 Rm1.20

15 Sirap Limau Rm1.20 Rm1.40

16 Sunquick Rm1.30 Rm1.50

17 Teh Rm1.20 Rm1.40

18 The Tarik Rm1.50 -

19 The O Rm1.00 Rm1.20

20 The O Limau Rm1.20 Rm1.40

21 The Halia O Rm1.30 Rm1.50

22 The Halia Susu Rm1.50 Rm1.70

23 Kopi Manggis - Rm2.50

24 Cappuccino - Rm2.50

25 Kopi Susu Kambing - Rm3.50

26 Jus Buah - Rm3.00

27 Ice Cream - Rm2.50

PACKAGES

No Package Price

1 For two people.

Menu:

Ikan Kembung

Rm38.00


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Tom Yam Udang/ Sotong

Paprik Daging

Kailan Ikan Masin

Nasi 2 pinggan

Minuman 2 Gelas ( Sunquick/ Teh O Ais)

2 For four people:

Menu:

Ikan Siakap

Tom Yam Udang/ Ayam

Daging Pak Pek

Kangkung Belacan

Telur Dadar

Nasi

Minuman (Bandung/ Oren)

Rm53.00

3 For four people

Menu:

Ikan Siakap

Tom Yam (Udang/ Ayam)

Daging/ Ayam Kunyit

Telur Bungkus

Kangkung Belacan

Nasi

Minuman

Rm70.00

5.0 COST OF RUNNING THE OPERATION

According to the owner, he has spend around RM150 000 as a start- up cost to running

their business. He has spent the money to establish the restaurant by using the money for


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restaurant decoration, buying equipment, furniture, and rental; hire a staff, utilities and

miscellaneous expenses.

Every month the owner has spend around RM16000 to make their business become

smooth. He has around RM 9000 to pay their worker salary. The Singgah Rasa restaurant

has hires seven permanent worker and two part time workers. They will hire part time

worker when situation is needed such as during peak seasons. The owner also pays

RM2000 for a shop rental in every month, RM1100 for the utilities and another RM3900

for their daily material. The total expanses to running a business is not constant and its

change according into number of customer have come to the restaurant and price of

material.

6.0 The Daily Sales and Profits

There are two trends regarding the sales. For weekdays, Singgahrasa Restaurant usually

able to get sales in ranges RM 700 – RM 800 per day. During weekend, the sales of the

restaurant typically can reached RM 1000 – RM 1200. This pattern shows that the

restaurant can get better customer in number in weekend. Customers who come together

with family members are likely to come on weekend. The other factor may be weekend is

the only time when most housewives want to rest and do not want to involve much in

household chores including cooking. So, the whole family are going to enjoy outside

meal.

Knowing the guests pattern gives an advantage as the owner can project sales and built

strategies to attract more customer. In order to increase daily sales, the owner should

know what sells in an operation and how much an item can give desired profit. Sales

analysis is a mean that enable the owner to compare sales, production and workforce

performance to establish standard. In sales analysis, it is crucial to identify contribution

margin of items rather than too focus on the cost of ingredient. Contribution margin is

defined as dollar amount that remains after variable cost has been subtracted from the

sales amount. Having a high contribution margin is suggested for this restaurant as it is a

fine dining restaurant and have not so high seat turnover. The other ways to increase sales

that can be applied in Singgahrasa Restaurant is identify popularity of items. Things get


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worse if the owner keep retain a menu item that has not been sold for last five months

especially for the one which is expensive to produce. There are exceptions for two cases,

first is if the menu item can contribute high contribution margin and it is a menu for

balance such as low-fat menu and low-calories menu. In addition, monitoring guest

counts (covers) allow the owner to forecast sales, production and labor utilization. The

seat turnover can be examined so that the owner can make use of the record to design the

production works and assigning job to workers. There is a skill called ‘suggestive selling’

which the server of this restaurant should use while taking the order. The worker, if

possible can ask the guest to try special menu offers in the restaurant so that this lead to

increasing in number of product consumed.

7.0 How the operator set the prices for the menu items.

Encik Rusdi, the owner said that he do apply moderate price for food item sold in the

restaurant. The price is slightly higher if to be compared to cafeterias inside UUM as the

restaurant was not subsidized by any party. Encik Rusdi runs the restaurant by investing

his own money as the capital. Thus, he need to do the pricing accordingly by considering

all the expenses cost that involved throughout the operation. However, he stated that he

only try to get small profit and that one will be used to cover the overhead cost. Overhead

cost can be defined as a group of expenses that are necessary to the continued functioning

of the business, but do not generally get profit. The main overhead costs involved in this

operation are the electricity which is around RM 800 and the water expenses which is

around RM 300. He added that the menu price seems to be reasonable for the target

market which comprises of average income persons and postgraduate students who

usually are foreign student. The menu price will be fixed for about 2-3 years perhaps

depending on the market price of the raw materials and other sources in production

activity. Lastly, he also said that pricing is important as menu price is difficult to change

once it has been printed out and using such tape and correction liquid is not a proper way

to change the menu price.

Price act as in indicator of how guest perceives the product quality and the quality of the

operation. It must be thoroughly evaluated before it is applied to a menu and the owner


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should be aware of unexpected expenses. Pre-costing the menu is one way to help in

before setting reasonable price for food items. Although this step is time-consuming and

long-range planning, it is worth enough for the investment. The aspects covered

analyzing the cost of ingredient, labor and additional cost for presentation and

construction (if any).

7.1 Setting the price

The most common technique used by the restaurant operator is using ‘volume of

profits’ which the objective is to get profit. Long term profit is being considered

and this is the way the owner of Singgahrasa Restaurant pricing the menu item.

Next is competition. This method using competition as the basis of the pricing

but, it is dangerous. Establish price exceed the competitor’s price lead the

customer to switch to the competitor conversely. Lastly, prestige pricing. This

method is design for quality, assurance and exclusiveness especially for large

cities and expensive resort areas.

8.0 The factors affecting selling prices

Cost is the main factor that affect in this restaurant selling prices. The cost is including

cost of raw materials and cost of labor. Location of the restaurant is in small town which

is Pekan Changlun.so, the raw materials are hard to find and it is costly to the owner.

Besides that, the owner of the restaurant needs to consider about the others cost such as

transportation cost because he go and take the raw materials by himself. Because of that,

the food and beverages served in the restaurant are little bit expensive than other.

Besides the raw materials factor, labor cost also factors that affecting the selling prices.

The owner of the restaurant needs to consider about salary of the workers. Even the

workers are not many but it is still need cost. The restaurant has one chef and several

assistant such as waiter and steward. The workers are needed to pay every month

according to their job. And it is permanent salary.


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The second factor that affecting selling prices is income of the restaurant. The net income

usually is not permanent because it is depend on the selling of the month. If there are

fewer customers in a month, so the income also decreases. When the income is not

encouraging, the owner will increase the prices of the food and beverages. However, that

is usually happening rarely because the owner does not want to lose his customer. The

prices only have been change about 6 month to 1 year. The burden from this is fall to the

workers. The workers need to work overtime and it will make the turnover is high in this

restaurant. Usually are not enough workers. So, the owner will take the part time worker.

9.0 The food and beverages control process being implemented

The restaurant using the basic process in implemented their food and beverages process.

Firstly are purchasing and receiving process. The owner of the restaurant do this process

by himself which is he go and take the raw materials at the supplier shop and the supplier

no need to come to his restaurant to send the raw materials. The owner will take the list

of the raw materials only from the chef.

Only the chef who knows what good is purchased on the next day. The suppliers of that

restaurant are Ramesh retail stores for the dry raw materials such as onions, rice, and

chilli. Frozen is the supplier that supplies wet raw materials such as chicken, fish, and

vegetables. The both of the supplier also in Changlun.Raw materials will be issuing

everyday according to customer needs. If the food are not finished on that day, they will

throw away and never served it again. It is because they want to care because they want

to maintain the quality and also reputation of restaurant.

After purchasing and receiving process, the next process are storing and issuing. After

got raw materials from the supplier, the chef will store it into two different freezersin the

kitchen which are for dry and wet materials. The two types of the materials should be

separated because to avoid the damage of the materials. The two freezers are on chef

responsibility. Only him will store and issuing the raw materials.He is also the person

responsible if an item is to be purchased. The portion size of the food and beverages is


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depends on the chef. There are no standardize recipe that given by the owner. Thechef

just portions it by himself and he knew the appropriate and normal amount of the food.

The pre-preparation and portioning of the food and beverages also be done by chef.

10.0 How food wastage can be avoided

In Singgah Rasa restaurant usually there are no food wastage occurred because usually

his employee already have ability to forecast how much they need to prepare each the

menu have been ordered. For example in morning shift ,Kak Sah the cooks will separated

early which ingredient used to morning shift for preparing ‘Nasi Campur’ and for the

night shift which is for ala carte. But ,if there are still have leftover for example the

perishable item, they will distributed to among their employee himself or the people who

live at Taman Teja and non perishable item they will kept according the due

date .However there are certain guidelines to avoid wastage from happen:

Make a proper detailed menu ingredient and buy only based on the needs.

Record the item that already purchased and storage it properly according to the item

Plan an easy menu. The more items you make, the more likely leftovers will get thrown

out. From that you will save on cooking gas, water and electricity too.

Turn your refrigerator to the coldest setting in advance of cooking. Put cooked foods

away while they are still hot, to protect them from spoiling. Don’t forget to switch the

refrigerator setting back once the food has chilled.

Stagger cooking so that your refrigerator can cool food efficiently

Return leftovers to the refrigerator quickly. Save food containers with covers for storing

leftovers.

Share extra food with neighbors and friends.

11.0 Cash handling procedures

The cash handling procedure focuses on preventing the mishandling or loss of cash, and

situations where charges of cash mishandling can be raised against staff. It is intended

that the procedure will ensure consistency of cash handling practices. From our interview


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with the owner, he usually gives responsible to one or two cashier who is trusted to

handling the cash. If there have not enough cashiers, he own will take care of the cash.

Because of the restaurant have two shifted which is 5.00 p.m.-5.00 a.m and 5.00 a.m-5.00

p.m he will collect twice everyday to prevent theft. Meanwhile, in order to safety, the

restaurant has provided CCTV at the cashier counter as step for safety if there any theft

happens. In fronts of the restaurant it have one counter for customer pay the bill .they

only use payment by cash only and provide food booking for large of people. But they

not have cash machines or software for example Point of Sales as the establishment still

on process development. So it is suggested that Singgah Rasa restaurant should provide

the facilities. As recommendation there are certain guidelines to storage of cash which

includes:

During business hours all cash should be securely stored in a locked cash register, cash

drawer, or similar, with access restricted to authorized cash handling staff.

For staff security, during business hours the amount of cash securely stored in a locked

cash register, cash drawer, or similar, should be monitored. Where necessary cash should

be transferred into a safe or similar for secure storage.

Outside of business hours, all cash should be securely stored in a safe or similar, away

from where cash is typically handled.

Do not stored cash in an obvious place, such as in a locked cash tin on the cashier

counter.

If customer need receipt it should be issued to the customer by the cash collection point

immediately upon receipt of cash.

A carbon copy of the receipt should be retained and filed by the cash collection point.

It is concluded that the restaurant should provide a systematic way in order to improve the safety

while handling cash to any unnecessary things happens for example theft or fraud occurred

which can lead to problem for the business.

12.0 How Information Regarding Costs and Sales Are Recorded and Used In the

Operations


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Information about everyday’s business transactions is essential as it record the sales made

by the restaurant and can be reference for future use. The history for sales transaction is

needed in order the restaurant to compare current sales and previous sales so that the

restaurant knows how well their restaurant is. From the sales history, the owner of the

restaurant can identify the cause of problem that might occur during certain period of

time. This is important so that the owner of the restaurant can develop certain strategy or

procedure that could help the restaurant to improve their performance in the future.

Singgah Rasa Restaurant does not have specific systems that allow them to systematically

save their sales history. The restaurant only saves their sales transaction history such as

receipt and invoice into the files for them to keep track of their businesses. The owner of

Singgah Rasa Restaurant concern more on the sales of the restaurant and do not take

much concern on costs of food produced by the restaurant. To calculate their profits, both

costs and sales history are needed but the owner does not have the specific procedures to

ensure smooth operation of the businesses. The menu offered to the customers is prepared

according to the chefs experiences and need. The owner trust their workers and are

willing to buy the items that is about to out of stock. The item that is wanted to purchase

also comes from the chefs and they prepare the list so that the owner can order it from the

suppliers.

In other word, Singgah Rasa Restaurant does not have enough systems or systematically

procedures to maintain their business operations. They might have some systems that are

enough for them to run the business, but investing for good system for the operation will

give benefit for the restaurant in the future. They also do not have standardized recipes

that allows the management to track down necessary problem might occur during

business operations. Standardized recipes and procedures will make the management

easier to handle the operation in huge volume. If they want to expand their business,

these are some of the early steps that they should think about.

13.0 Problems Faced By the Establishments Regarding Food Cost Control and Pricing

To control the cost of the operation, the establishments need to have some procedures in

order to make sure the procedures produced are being followed accordingly. Standard


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operation manual should be distributed to the workers so that they can follow the

instructions given by the management. Pricing technique need to be identified to ensure

the owner gain the expected profits. There are many techniques in pricing the owner of

the establishment can choose that can suit their operation goals’. The management can

choose whether to use subjective pricing methods which are reasonable price method,

highest pricing method, leader pricing method and intuitive pricing method or objective

pricing methods which is product cost percentage method, product contribution margin

method and the combination of both methods.

In the case of Singgah Rasa restaurant, they faced minor problems as they do not have

standard operations procedures in controlling cost and pricing their menu. The

management does not control the purchasing of raw ingredients as they received the list

from the chefs and they will buy it for them to cook. They rely on their workers to

determine what is needed for the operation to stay in the business. They sometimes

exceed the usual spent for certain period and it is might results from over purchasing,

spoilage pilferage and misused of the items in the storage.

Singgah Rasa restaurant can be said used reasonable pricing method and survey the price

from the competitor around them to pricing their menu. They look for the market

segment being served by them so that the customers will not having a thought that the

price offered by them is expensive. So, they do not having problem with the price offered

by them as their price is quite similar to the competitor that serve similar products.

Overall, Singgah Rasa restaurant does not encounter in many problems regarding

controlling cost control and pricing their menu as they need a standard operation

procedures or a manual so that the cost and the profits meet their expectations.

Lastly, the owner does facing high rate turnover of his worker because there is only

several workers that can bare with the long hour works at the restaurant. Some worker

only come to work for not more than three months and then quit from the job with or

without telling the owner. As the result, sometimes the business operation needs to close

earlier from the actual time because the workforce is not enough.

14.0 Recommendations on how the establishment could increase sales and profitability.


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First of all, it is recommended that the owner should put a little bit effort in promotion.

The need to advertise is crucial as this restaurant is still a newcomer. Many restaurant

owners that stop advertising had shown a drop in their sales. Advertising must clearly

state the location, phone number, business hour and type of food, also the restaurant’s

background and photo if possible.

Second, for the menu, it is proposed to describe a little bit about each type of menu in the

menu list to attract the customer and the most important to let the customer know the

special ingredient that have been put in preparing the menu.

Thirdly, the owner should makes the restaurant more appeared more attractive for

instance, stressing on the ambiance like the painting, the decoration and having pipe-in

music so that more customer will come to experience the service and increased the daily

profit.

15.0 References

Agnes L. DeFranco, Pender B.M Noriega, Cost Control in the Hospitality Industry,

published by Prentice-Hall, Inc. (page 91-113)


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Christopher Egerton-Thomas, How to Open & Run a Successful Restaurant, Second

Edition, published by John Wiley & Sons, Inc. (page 129-142)

16. 0 Appendix

Singgah Rasa Restaurant


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Interview Session with the owner and the workers

The layout of the restaurant


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The storage room


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Documents

Cost Control Report