Complied by Srinibas Jena HOD F&B service BSHMT UUC.

Page 1 of 3

2. Sales concepts:
a. Various sales concept
b. Uses of sales concept
Sales Concepts: the term SALES is used in a number of ways among professionals in the Food Service
Industry. It
will therefore be useful to define the term & its various uses in the industry.
In general, a SALE is the revenue resulting from a restaurateurs exchanging his products and
services
for value. The most commonly encountered uses of the term are the following:

1) Total Sales: is a term used to refer the total rupee volume of sales in any given time period, such as a week,

a month, or a year. For example, total rupee sales for Hotel ABC amounted to Rs, 658,000/- for the year ending
31st December 2006.

2) Total Sales: by Category: examples of total rupee sales by category are total food sales or total beverage

sales, referring to the total rupee volume of sales for all items in one category. By extension, we might see
such terms as total meat sales, or total seafood sales, referring to the total rupee volume of sales for all items
in those particular categories.

3) Sales Price: refers to the amount charged a customer for each unit sold. The unit may be one item an

appetiser or an entre or an entire meal, depending on how a restaurant prices its products (refer to types
of menu). The sum of all sales prices charged for all items sold in a given time period will be total rupee sales
for that time period.

4) Average Sale: this is sometime referred to as AVERAGE COVER is determined by total dollar sales by the
number of customers. For example, if total sales for a given day in a restaurant were Rs. 1258/- and restaurant
had served 183 customers, the average dollar sale would be Rs. 6.84.

The concept is sometimes expressed as the average check price, or average cover, all of which tend to
synonymous in our industry. The average sale is used by food service operators foe comparative purposes, to
identify trends in sales, and to make judgements about the comparative effectiveness of various
menus or menu listings, or
even of sales promotions.

5) Sales per Server: is the total rupee volume of sales for which a given server has been responsible I a given
time period, such as MEAL PERIOD, A DAY, or A WEEK. These figures are sometimes used by management to
make judgements about the comparative sales effectiveness of employees. It might be helpful to be able to
identify those servers responsible for the greatest and for the least rupee sales in a given period.

6) Average Sales Period: as per serving person is total rupee sales for an individual server divided by the

number of customers served by that individual because, unlike total sales per serving person, it eliminate
differences caused by the fact of different number of persons served. This too a figure used for a comparative
purposes, and it is usually considered a better indicator of the sales ability of a particular individual because,
unlike total sales per serving person, it eliminates differences caused by the fact of different number of
persons served.

7) Sales per Seat: sales per seat are the total rupee sales for a given time period divided by the number of
seats in the restaurant. The normal time period used is one year. This figure is used by chain operations in
order to compare sales results from one unit to another. In addition the NRA determines this average
nationally, so that individual operators may compare their results to those of other restaurants.

Non Monetary Sales Concept: All of the above sales concepts are related to dollar sales & will be
encountered
by those entering the F&B
industry. At the same time, there are a number of nonmonetary sales concepts and terms that should be understood.
1.

Quantity of Items Sold:

often expressed as number sold, refers to the particular number of steaks, or
shrimp cocktails, or any other menu item sold in a given time period. A restaurateur could use QIS number of
particular items sold help in forecasting likely sales, and such forecasts are useful for controlling
purchasing, production, controlling inventory and reconciling sales.

2.

Average Number of Covers: cover is a term used in Food & Beverage Industry to describe one diner,
regardless of the quantity of food a patron consumes at any meal time. The ANC is determined by dividing the
total number of customers or covers, for a given time period by another number. The following suggests
several possibilities.

3.

TotalCover s

a.

Covers per Hour

= No .of Hour of operation

b.

Covers per Day

c.

Covers per Server

TotalCover s
No .of Days of operation

TotalCover s

= No . of Servers

Seat Turnover:
most often called simply turnover or turns, refers to the number of seats occupied
during a given period, or the number of customers served during that period by number of seats available. For
example, if 150 persons served during that period dividing by number of seats available. For example, if 150
persons served luncheon in a dining room with 50 seats. Seat turnover would be calculated as 3.
Obviously meaning that an average each seat had been used THREE TIMES during that period. This may be
calculated for any given time period, but is most often determined per meal per day.

Complied by Srinibas Jena HOD F&B service BSHMT UUC. Page 2 of 3

Comparator
Cost
%
---------------------------------------------------------Per
capita
cost
------------------------------------------------Commodity
usage
---------------------------------------------

Comparators for Food and Beverage Control

Focus
Relationship
of
cost
&
revenue
----------------------------Relationship
of
cost
and
volume
--------------------------Correct
usage
of
each
ingredient
--------------------------

Potential
-------------------------------------------------

Correct
sale
of
-----------------------------

4.

A
B
C
D
E

sales

each

ingredient

Common Applications
Commercial Restaurants
Institutional Catering
Fast Food
Bottle Wine Sales
Retailing
High Cost items
Bars
Retailing

Sales Mix: the term is used to describe the relative quantities sold of any menu item compared to other items
in the same category. The relative quantities are normally percentage of total unit sales and always total
100%. For example, assume a menu with 5 entre items represented by letters A-B-C-D &-E. If the total sales
for all entre items in a given time period were 8000 i.e.

1000
1200
1800
2400
1600

12.5%
15%
22.5%
30%
20%

Of Total Unit Sales. That is the SM for this

establishment, based on historical records.

This measures the relationship between the various components of the total sales
of a unit, for example:
Sales mix
%
Coffee Shop sales
Food
20
Beverages
05
Restaurant Sales
Food
25
Beverages
15
Banqueting Sales
Food
20
Beverages
10
Cocktail Bar Sales
Beverages
05

5.

Matching Costs with Sales: for the restaurateur to stay in business profitably, total sales must be greater
than total costs. If the costs exceed sales for an extended period of time, the restaurateur will confront
bankruptcy, or at the very least will have to put additional funds into the business to keep it going.
It is the job of the Cost Controller and manager to be continually aware of the costs of operating the business
and to keep
them below sales. Costs information is gathered in many operations daily and compared with
sales info for that day to
determine the ratio of the various types of costs to sales. These ratios are compared to
the same ratios from previous, and judgements are made as to whether the ratios are satisfactory. If not, remedial
steps are taken to bring costs down to the point at which the ratios are satisfactory. It is important that the
comparative cost and sales information be from like periods.
An example of a restaurant operating a sales statement with the sales budget:
This period
Actual

Year to date
Budget

Actual

11,000
5,500

%
100
50

10,000
4,000

%
10
40

-------------

------

-------------

----

50
25

6,000
2,000

------

-------------

2,750

25

4,000

40

550
220

5
2

500
200

5
2

5,500
2,750
-------------

60
20

Net Sales
less cost of sales

20,000
11,200
-------------

Gross profit
less wages and staff costs

----

8,800
4,200
-------------

Net margin
less allocated expenses
maintenance
head office services

4,600
1,200
600

Budget
%
100
56

21,000
8,400

%
100
40

-------

-----------

-----

44
21

12,600
4,200

60
20

-------

-----------

-----

8,400

40

23
6
3

1,050
42

5
2

42

0
220

200

other

200

1
0

110

100

------

-------------

10

1,000

------

-------------

15

3,000

equipment

200

21
0

-------------

1,100

----

-------------

10

2,200

-------

----------

11

2,10

-----

10

0
-------------

1,650

----

30

-------------

Operating Profit

2,400

-------

-----------

12

6,30

-----

30

0
----------------------------------------------------------------(net profit)
Note: Budgeted figures are used to compare with the actual operating results. It can be observed that low operating profit achieved is due almost entirely to the failure to achieve
the budgeted gross profit on sales in spite of an increase in sales this period.

Customarily, comparisons are made for specific days of the week Monday last week, with Monday this week.
For example comparisons sometimes are made of like weeks in TWO different months i.e. / for example / the last
week of June compared with the 1st week in July. However, this information may not be valid if there is a normal
seasonal fluctuation in business for those TWO months. Often last week and this week are compared, so that trends
can be established.

Complied by Srinibas Jena HOD F&B service BSHMT UUC. Page 3 of 3

In many establishments, cost and sales information is compared only periodically. However, it is obvious that
remedial action will be more effective if the Cost and Sales information is current. Establishments that gather
cost and sales information only Monthly, quarterly or annually are oftentimes unable to take remedial action, because
the information is too old to shed light on current problems.