Variable costs in foodservice

Primary tabs

You are viewing a wiki page. You are welcome to edit.

Twitter icon
Facebook icon
Google icon
LinkedIn icon

Total variable costs change based on the number of customers patronizing a foodservice establishment. As the number of customers increases, the total variable costs for that restaurant also increase. Conversely, if the number of customers decreases, the total variable costs decrease. However, over the short term, the variable cost per customer will not change. This means that for each customer who patronizes the establishment, total variable costs will increase by the same amount, on average. Examples of variable costs include food, beverages, and some labor costs, as well as some costs of supplies used in food production and service areas.

In larger operations, variable costs may not be as linearly correlated with guest volume as is the case in smaller restaurants. This is due to rebate programs and other economies of scale that allow larger volume operators to reduce variable costs increasingly with guest patronage. This has ramifications for pricing strategies and break even analysis. It is also important in budgeting and places even more importance on the accuracy of related forecasts.

Reference

Reynolds, D. (2008). Foodservice Management Fundamentals. Hoboken, (NJ): Wiley & Sons.

Categories: 

Add new comment