HE-210
Evaluating Food Service Establishments...Key Check Points
Statistical and Ratio Analysis 9
by Robert D. Buchanan, Restaurant,
Hotel and Institutional Management Specialist
The manager of a food service establishment and/or the manager and his superior need to take the time to make an overall analysis to determine the results that the organization is actually obtaining. This should be done several times a year. The evaluation should determine how well the food service operation is doing and where improvements should be made. Then some priorities, objectives, methods, and deadlines for improvements can be established.

This is one of a series of pamphlets describing how a person can fairly comprehensively, yet in less than a day, provide an overall evaluation of a food service operation. The key items, or food service conditions, to evaluate under each major category are described. Taken together, the key indicators of general conditions measure the degrees of efficiency (minimal costs) and effectiveness (optimal organizational satisfaction). A major category that has a deficient key indicator should be investigated further, and corrective adjustment should be considered and/or made where appropriate. A discussion of facts by management with the operating personnel is perhaps most needed to develop mutual understanding of the problems. Attainable performance objectives should be jointly established and reviewed at a later date.

If all key indicators are satisfactory in a major category, other aspects of that category are probably being handled with similar care. If all of the key indicators are high, but the profit is not adequate, then it will be necessary to examine the operation for inefficient purchasing and receiving practices, improper menu pricing, inaccurate records or financial statements, inventory method and method of computing the value, production waste, plate waste, security and pilferage, and so forth.
These operational analysis is guidelines may be used by the manager of a single food service establishment for self-analysis, or by the unit manager’s supervisor.
1	Management Planning, Organizing, and Controlling (HE-202)
2	Personnel (HE-203)
3	Purchasing (HE-204)
4	Receiving, Storage, Issuing, Inventory (HE-205)
5	Food Preparation (HE-206)
6	Food Presentation and Service (HE-207)
7	Maintenance of Building and Equipment (HE-208)
8	Sanitation and Housekeeping (HE-209)
9	Statistical and Ratio Analysis (this publication)
10	Consumer Satisfaction (HE-211)
9. Statistical and Ratio Analysis

Successful food service management requires a number of technical skills. Purchasing food and supplies demands technical skill. Preparing and merchandising food demands another technical skill. There is another technical skill that plays a big part in how well the business does — and sometimes, whether one even stays in business — and that is financial skill. It is a “think skill” — one that helps management understand the financial apparatus of the business; and on the practical side, one that helps management interpret what Balance Sheets and Income Statements say about the business.
Dun and Bradstreet studies show that incompetence, mismanagement, and lopsided business experience are the underlying causes for most food service failures. It is safe to assume, in these failure cases, that the side most often lopped off is financial control. Without control, a business will “run away” from management. Eventually it will crash or simply fizzle out of existence. These are the most common on-the-surface causes of failures in the food service industry:

■	Not enough sales.
■	High operating costs.
■	Poor credit and collection policy.
■	Too many fixed assets.
■	Too much wrong inventory.
Cooperative Extension Service • Purdue University • West Lafayette, Indiana