Catering Chapter 11 Controlling
Most effective way to earn profit correct answers Understand why/how money is lost
2 components used in controlling correct answers 1. Financial tools
2. Predetermined standards
Prime costs correct answers Internal costs such as direct food and labor costs
associated with producing food
5 different used of control correct answers 1. Establish SOP's
2. Establishment & timely implementation of predetermined objectives
3. Process to integrate each function into an achievable plan
4. Protects assets (money, food, beverages, equipment)
5. Efficient utilization of assets to produce a profitable product
3 things important for control correct answers 1+2. Timely and relevant info to make
decisions (menu/prices) and to create standards and SOP's (HACCP)
3. Monitor events and compare performance against standards
Cash flow correct answers Series of payments made to caterer for services
Formal Payment Policies correct answers Monitor cash flow into an organization
5 structured payment schedule advantages correct answers 1. Ensures prompt
payment for services
2. Guarantees positive, stead cash flow
3. Eliminates stress from worrying about payments
4. Helps ensure business's success
5. Customer must agree before hiring the caterer
3 basic pricing formula methods correct answers 1. Cost based
2. Client based
3. Competitive based
Cost based pricing correct answers Calculate actual cost of event then add a
predetermined markup to arrive at a client's cost
Expense variables for an event correct answers menu, service, market demands, time
of year...
Overhead costs correct answers costs of operating a business regardless of type or
number of functions executed (indirect labor, utilities, materials, insurance...)
Client based pricing correct answers Uses client's perception of function's value as the
foundation for setting price (ex. valet parking and linen service)
, Competitive based pricing correct answers Bases client cost on comparative prices
charged by others in the market.
*Uses market conditions and competitive jockeying
Market skimming pricing correct answers Setting very high prices to skim off profits from
the market
When is market skimming good? correct answers When there is a specialization to offer
clients
Market penetration pricing correct answers Penetrating a new market; offers low prices
to a high volume
Cons of market skimming and penetration correct answers May attract competition
What is the first factor affecting costs? correct answers Menus and standardized recipe
cost sheets
Examples of event expenses correct answers Workers needed
Hours worked
Food selection
Rentals
Table items
How and when to handle equipment
Examples of hidden costs correct answers Increased insurance and labor expense
Loss due to exaggerated quotes and estimates
Why is it important to build relationships with Professional Service Companies? correct
answers They may return a percentage of their client costs to you for referring them to a
client. This is an easy income addition
Primary and secondary forms of purchasing: correct answers DSR (Distributive Sales
Rep)
Backup suppliers
Collusion correct answers Illegal agreements with a supplier, usually in the form of
kickbacks
Code of Ethics correct answers Formal statement written and communicated to each
employee and stakeholder. Guides individual and organizational behavior
Why is membership in professional associations like the NRA beneficial? correct
answers They meet to discuss experiences, clientele issues, market problems, and
creative solutions
Most effective way to earn profit correct answers Understand why/how money is lost
2 components used in controlling correct answers 1. Financial tools
2. Predetermined standards
Prime costs correct answers Internal costs such as direct food and labor costs
associated with producing food
5 different used of control correct answers 1. Establish SOP's
2. Establishment & timely implementation of predetermined objectives
3. Process to integrate each function into an achievable plan
4. Protects assets (money, food, beverages, equipment)
5. Efficient utilization of assets to produce a profitable product
3 things important for control correct answers 1+2. Timely and relevant info to make
decisions (menu/prices) and to create standards and SOP's (HACCP)
3. Monitor events and compare performance against standards
Cash flow correct answers Series of payments made to caterer for services
Formal Payment Policies correct answers Monitor cash flow into an organization
5 structured payment schedule advantages correct answers 1. Ensures prompt
payment for services
2. Guarantees positive, stead cash flow
3. Eliminates stress from worrying about payments
4. Helps ensure business's success
5. Customer must agree before hiring the caterer
3 basic pricing formula methods correct answers 1. Cost based
2. Client based
3. Competitive based
Cost based pricing correct answers Calculate actual cost of event then add a
predetermined markup to arrive at a client's cost
Expense variables for an event correct answers menu, service, market demands, time
of year...
Overhead costs correct answers costs of operating a business regardless of type or
number of functions executed (indirect labor, utilities, materials, insurance...)
Client based pricing correct answers Uses client's perception of function's value as the
foundation for setting price (ex. valet parking and linen service)
, Competitive based pricing correct answers Bases client cost on comparative prices
charged by others in the market.
*Uses market conditions and competitive jockeying
Market skimming pricing correct answers Setting very high prices to skim off profits from
the market
When is market skimming good? correct answers When there is a specialization to offer
clients
Market penetration pricing correct answers Penetrating a new market; offers low prices
to a high volume
Cons of market skimming and penetration correct answers May attract competition
What is the first factor affecting costs? correct answers Menus and standardized recipe
cost sheets
Examples of event expenses correct answers Workers needed
Hours worked
Food selection
Rentals
Table items
How and when to handle equipment
Examples of hidden costs correct answers Increased insurance and labor expense
Loss due to exaggerated quotes and estimates
Why is it important to build relationships with Professional Service Companies? correct
answers They may return a percentage of their client costs to you for referring them to a
client. This is an easy income addition
Primary and secondary forms of purchasing: correct answers DSR (Distributive Sales
Rep)
Backup suppliers
Collusion correct answers Illegal agreements with a supplier, usually in the form of
kickbacks
Code of Ethics correct answers Formal statement written and communicated to each
employee and stakeholder. Guides individual and organizational behavior
Why is membership in professional associations like the NRA beneficial? correct
answers They meet to discuss experiences, clientele issues, market problems, and
creative solutions
