Operational Cost Of F&B Industries In The Hospitality Sector

(1) Identify the social media networks used by postgraduate business students when they are considering undertaking international study;
(2) Identify the type of information students look for when using social media;
(3) Identify how social media is used at each step of the decision-making process;
(4) Explore differences in the above objectives based on the country of origin of students.

Research question and objectives

• How to deal with the increasing operational cost of the F&B industry in the hospitality sector?
• How to identify the major areas that drag the majority amount of financial expenditure in the food and beverage industries?
• How to provide recommendations (if any) in order to improve the lowering profit margins of the hospitality sectors?

The purpose of the paper is to see the different reasons that have led to the increase in the operational cost of the F&B industries and how it has led the profit margins of the hospitality sector to fall. The other aim of the paper will be to suggest some ways of solving this problem.

There has been a sharp increase in the operational cost of food and beverages in the past few years. As a result of which this is really becoming a very tough job for the facility managers in the different hospitality industries to maintain this high amount of expenditure which is involved in the operational aspect of food and beverage industry. This research paper is mainly attempting towards finding out different ways and means that would enable the F&B industries to cut down their level of expenditures. The food and beverage industries must use methods like standardized recopies, forecasting of menus etc in order to help them manage and lessen the operational costs and thus help the hospitality sectors to increase or balance their profit margins.

There has been a sharp increase in the operational cost of food and beverages in the past few years. As a result of which this is really becoming a very tough job for the facility managers in the different hospitality industries to maintain this high amount of expenditure which is involved in the operational aspect of food and beverage industry. As a result of which there is a huge amount of problem that is being faced by the staffs and the several other members involved in the entire food and beverage industries (Chen et al 2015). Being unable to work with this poor rate of profits, there are incidents of untimely and underpayment to the hotel and restaurant staffs, poor services and not only this, but there is also a sharp fall in the quality of the food and beverages that are being served in the restaurants and in the hospitality sectors as a whole. All these issues together pose a major threat t to the management problem in the hospitality sector (Hashim et al 2015).

The research will mainly aim at finding, testing and analyzing the different ways that can be used to control the operational costs that have increased in the past few years keeping in mind all the necessary research ethics (Legrand et al 2016).

Research Objectives

 The research objectives for this paper is mainly to

• To identify the  reasons that are responsible for the increase in the operational costs of the food and beverages in the last few years
• To identify the major areas that drag the majority amount of financial expenditure in the food and beverage industries
• To provide recommendations (if any) in order to improve the lowering profit margins of the hospitality sectors(Taneja et al 2014).

Looking particularly at the increase in the operational cost of the F&B industries and how it has led to the fall in the profit margins of the hospitality sector.

After the introduction, the literature review part will mainly deal with the three important topics of how the food and beverage industry generates revenue to the hospitality sector. What are the reasons that have led to the increase in the operational cost of the F&B industry and what can be the possible measures to deal with the problem. This paper will also talk about the kind of research methodology that can be used by the researchers to gather data about the problem.

Research Objectives

The hospitality sector is largely supported by the food and beverage industry. This is because every year a huge amount of revenue is generated by them. In the present day scenario, the needs and demand of the customers are changing. There is an increasing demand for different kinds of food and not only do the customers look for different kinds of food but they are also looking for a great amount of innovation in the ingredients that are present in the dishes. Apart from that, the customers in the present day scenario are in search for easy and better services that is they need several additional facilities like home delivery, take away services etc. all these increase public demands needs to be satisfied and in order to do so, there has to be an increased amount of workforce appointed in the food and beverage industries. So, there is a large amount of employment generation done by these food and beverage industries. A huge number of people get recruited in the bars and cafes. F&B services employ almost 800000 of the Australians that is roughly 7.4% of the total work force. Over the past few years, there has been a sufficient amount of increase in the number of cafes, pubs, bars and takeaway services as well which has recruited more than 558000 workers. As far as Australia is concerned, the largest number of café, restaurant and takeaway food services is located in Victoria. This has employed about 200 employees. Apart from this, there are reasons like, an increasing demand in the number of banquets and luxury hotels and it is a known fact that a good food and beverage service will automatically bring good business for the rooms.

There are many reasons that have cropped up in the recent years that are responsible for adding to the sharp growth in the operational cost of food and beverages. One of the most important and unavoidable reason responsible for the increase in the price of food and beverages is the increasing population and the consequent increase in the demand of food and beverage products. Due to the sharp increase both in the qualitative and the quantitative aspects of the food and beverage products, there has been a sharp increase in the price of the input materials as a large and varied number of raw materials are to be procured. Increased demand also means bringing in newer and costlier methods of production. This also creates a sharp rise in the process of production (Jensen and Ronit 2015). Some of the other reasons that are responsible for the sharp increase in the operational cost of the food and beverage industries are as follows-

Over the past few years, there has also been a sharp rise in the price of preparing a dish that is the food cost. This is the resultant factor of the cost of input factors or the raw materials that are required in the production of certain dishes. The raw materials include grains, spices, oil, meat, fish, dairy, vegetables etc. As a result of this sharp price rise, the hospitality sector is finding it difficult to purchase such a huge quantity of raw materials and the other ingredients as a result of which there is a direct impact on the food quality. The standards of the food are decreasing and this is greatly being resented by the consumers. (Ogunyemi et al 2016).

Research Boundaries

Beverage cost refers to the cost of the beverages served in the bars and the restaurants like alcohols, mock tails, cocktails, juices, tea, coffee and several other such related products.Labor Cost is a major area that draws a good amount of money thus increasing the operational costs of the food and beverages in the hospitality sectors. Labor staffs are needed everywhere, at each and every level of the food and beverage industries. They form the very indispensible part of the food and beverage industries. Be a restaurant, a bar, a club or any other food outlets, labor is needed everywhere. They are needed for the running and managing of the entire restaurant or any other food outlets (Stocks 2013). A good amount of money is also incurred in the payments that have to be made to these restaurant staffs (Grekova et al 2014). But owing to the sharp increase in the operational cost of the food and beverage industries, the hospitality sector has to appoint a huge number of employees and a huge amount of money is needed for paying all the stuffs and this is making it difficult for the hospitality sector to bear such huge expenses.

As the population, the demand and the standards of living of people are increasing, there is naturally an increase in the expectations of people as well. In order to standout to this expectation standards of the customers, a separate and huge amount of money is also incurred on additional aspects like store outlets, additional benefits like free internet access etc., and as it is a known fact that customer satisfaction is the key to success for today’s industries. The hospitality sector is no exception (Ogunyemi et al 2016). But in the present day scenario, the hospitality sector is finding it very difficult to cope up with all these expenditures, and hence, more and more customers are having a huge distaste on the hospitality industries. Not only this, the hotels are also finding it difficult to maintain a good food and beverage room service which is reducing their goodwill, thus lowering their profit margins (Taneja et al 2014).

The restaurants can maintain monthly stocks or weekly stocks. Counting and checking stock frequently helps to minimize the excess usage or the wastage of materials. It also helps to understand properly the losses, spillages, or thefts or any other such problems that needs to be checked.

There must a large number of vendors so that there are always a good number of alternatives available and if there is misunderstanding or disputes with one, then the restaurants can easily shift onto the other vendors. This also makes the business very flexible.

There must be the implementation of a system called receiving controls that is, whenever the purchased materials are received at the food outlets, there must a thorough check on the weight, quantity and the quality of the input products.

Implications

This paper will mainly aim at finding out the different means by which the hospitality sector can deal with the increasing operational cost of the food and beverage industry

Report Outline

Operating cost-This is the operating expenditure or the ongoing cost for running a production or a business. This includes a sum total of all sorts of expenditures that are responsible for the increase in the cost of food and beverages (Chen et al 2015).

 Accounting and economic costs-This cost includes all the costs that are required by a company to run the production of a commodity like fuels, power, lights, transportation etc that are required in the production of all sorts of food and beverages. The raw materials need to be carried to and from the source to the desired locations; the kitchen always has to run in a proper and well kept condition (Taneja et al 2014).

Production cost

This is usually divided into total fixed cost and total variable cost; total fixed cost is the cost that is incurred by the company for running the fixed costs like salaries of the staffs, rent and the interest payments etc and the variable cost is the cost that includes the costs of power, fuel, labor etc.

In this research outline, the researchers will select the right research analysis method that can be used for collecting the data about the problems and also select the right sampling methods.The methods that can be  used for dealing with these research objectives  must be  quantitative in nature as it needs a large scale analysis on the numerical and statistical data of the past records of the different sources that have been responsible for the sharp increase in the rate of the operations and managing of the food and beverage industries that have ultimately led to the increase in the maintenance costs thus leading to a reduction in the profit margins of the hospitality industries (Chen et al 2015).

The methods that can be  used for dealing with these research objectives  must be  quantitative in nature as it needs a large scale analysis on the numerical and statistical data of the past records of the different sources that have been responsible for the sharp increase in the rate of the operations and managing of the food and beverage industries that have ultimately led to the increase in the maintenance costs thus leading to a reduction in the profit margins of the hospitality industries (Chen et al 2015).

 As the research objective is mainly about analyzing and detecting the various sources or ways  that have led to the gradual increase in the operational costs of the food and beverage industry, using of numbers, charts, graphs and other statistical data will help in knowing the different reasons that are responsible like

• The total amount of increase in the number of labors appointed in all the foods and restaurants
• The increase in the total number of visitors that or customers in the food and beverage outlets that have increased over the past few years
• The expenses that have increased over the past few years in order to purchase and install new kitchen equipments.
• Apart from this, it will also help to determine the rate of increase in the amount of expenses that are to be incurred in order to buy all the input materials that are needed for the preparation of different dishes.

For the research method, the methods chosen were the descriptive and then explanatory methods. Exploratory method was not suitable here because exploratory method is one that is used only to explore some new things or to undertake some new ideas but as far as the subject of this research is concerned, initially the researchers will be using the descriptive methods which will enable them to gain a detailed idea about the knowledge of the existing scenario that is, what exactly has led to the increase in the operational costs of the food and beverage industries and how this has led to the sharp fall in the profit margins of the hospitality sector.

Revenue generated from food and beverages in hospitality industry

After gaining a detailed information about the existing problems and challenges in the food and beverage industry, the researchers might use the method of explanatory research design which will enable them to find out and formulate several new methods and ideas that will help to understand the cause of the sharp increase in the operational costs of the food and beverages and thus be able to find out several suggestions and recommendations for the food and beverage industries that will help to reduce the increasing operational costs and thus contribute towards the increase in the profit margins of the hospitality industries.

The different sampling methods that can be used for this research activity are simple random sampling method and stratified sampling method. This simple sampling method will enable the researchers to see the needs and demands of the population as a whole that has slowly increased their demands of food and beverages both in respect of quality and quantity and in order to satisfy this demand, the food and beverage industries had to increase their expenses on the operation and maintenance involved in the food and beverage industries. A survey and interview process will also be done along with the staffs of the restaurants and several other food and beverage outlets. The researchers will also collect data by using both the primary and the secondary data methods in order to get the necessary information required.

It is now a known fact that there has been sufficient amount of increase in the operational costs of food and beverage industry. This is mainly due to several reasons like increase in the needs and demands of the customers, increased price of the ingredients etc. Apart from this, there is a large amount of expenses that the hospitality sector has to incur in order to pay the salaries to a large workforce. All these reasons are directly affecting the standards of food that is being served in the different food and beverage outlets. This has resulted into a loss of goodwill as well as the profit margins. This problem can be solved by using different methods like accounting system, controlling the stocks and inventories, using standardized recopies and menu forecasting methods etc.

Conclusion

There are some recommendations or suggestions that the researchers have been able to find out and give to the food and beverage industries for keeping a control over their operational costs, they are-

Menu Item Forecasting-This method can be very helpful for the restaurant stuffs in order to check how much of a certain dish is actually in demand and then prepare. Apart from this, they can also use the method of standardized recipes which contains a detailed information of the different processes that are involved in the preparation of every item, that is they give a detailed information about exact what measurement of ingredients are to be used for each and every item, which thus helps in checking the excess amount expenditure that might unnecessarily increase the expenses of the food and beverage industries.

Impacts of increasing cost of food and beverages on customers and hospitality industry

Thus, it can be concluded from this paper that in the past few years there have been several reasons that has led to the increase of the operational costs of the food and beverage industries. This in turn in affecting the profit margins of the hospitality industries but this research has however helped the food and beverage industries to find out several means, with which they can deal with the problems of abnormally high operational and maintenance costs . This can manage the different sources that incur the excess amount of expenditure. The food and beverage industries must use methods like standardized recopies, forecasting of menus etc in order to help them manage and lessen the operational costs and thus help the hospitality sectors to increase or balance their profit margins.

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