The hotel food and beverage department accounts under the hospitality standard: what goes in each one

At the hotel’s monthly meeting the food and beverage director presents one profit and the controller presents another, and both come from the same tickets. The difference is almost never arithmetic: it is about which account each item landed in. The hospitality accounting standard exists so that argument never happens, because it defines line by line what is department revenue, what is cost, what is payroll and what is expense, and also what does not belong to it even though it passes through the restaurant.

Why food and beverage has its own statement

Under the uniform hospitality standard, which the industry knows as USALI, every department that generates revenue has its own schedule: rooms, food and beverage, and the other operated departments. Each schedule ends in a departmental profit, which is what that department leaves after its direct costs and before the expenses it shares with the whole hotel. If you have never read what it is and why it helps even a small property, there is a full article on the subject (What USALI is and why it pays off even with twenty rooms).

The food and beverage departmental profit is the figure the area director is judged on, which is why what goes in and what stays out matters so much. Charge the kitchen’s electricity to it and you punish the director for something they do not control. Leave out the comp the general manager authorized and you reward them for something they did not sell. The schedule has four blocks and each one has clear rules.

Block one: revenue

Department revenue is split into three main lines, and all three are reported net: without tax, without tips, and with discounts and comps already deducted.

Food revenue

Everything edible sold at any revenue center: restaurant, coffee shop, room service, pool bar, banquets and minibar, in its food portion. It includes the breakfast bundled into the rate, valued with the allocation rule the hotel has defined, because that breakfast was produced in your kitchen and its cost sits in your inventory.

Beverage revenue

Everything that is drunk: alcohol, soft drinks, coffee, bottled water, juices. The split between food and beverage is not cosmetic: each has its own cost of sales and its own percentage, and an experienced controller looks at the two separately because a bar that charges well can hide a kitchen that does not.

Other department revenue

• Function room rental for events, when the food and beverage department bills it.
• Mandatory service charges the hotel retains, as opposed to the voluntary tip that belongs to the server.
• Cover charges, corkage, audiovisual equipment rental at banquets and any charge tied to an event.
• Miscellaneous department revenue: menu items sold to go, gift cards redeemed at the restaurant.

Discounts, comps and allowances are deducted from gross revenue to reach net revenue. On the schedule they appear as a negative line; they do not disappear. That detail is what lets the controller know how much the restaurant sold and how much it decided not to charge, as explained in the guide to the shift close by revenue center (A guide to the shift close by revenue center in a hotel).

Block two: cost of sales

Cost of sales is what the ingredients of what you sold cost you, and it is calculated separately for food and for beverage. The formula is the same in both cases: opening inventory, plus purchases for the period, minus closing inventory. That gives you consumption. But consumption is not yet cost of sales.

From consumption you subtract the outflows that were not sales: staff meals, which under the standard are transferred to payroll-related expenses; comps to guests by management decision, which are transferred to the corresponding expense; and transfers to other departments, such as the water placed in the rooms. What remains is the cost of what was actually sold, and that is the number divided by revenue to obtain the cost percentage.

• Cost of food: kitchen consumption minus staff meals, comps and transfers. Compared against food revenue.
• Cost of beverage: bar consumption minus comps and transfers. Compared against beverage revenue.
• Cost of other revenue: what it cost to produce the other revenue, if applicable, such as equipment rented for an event.

Net revenue minus cost of sales is the department’s gross profit. It is not profit yet: the people are missing and so is everything else.

Block three: payroll and related

Department payroll is the pay of everyone who works in it: cooks, prep staff, stewards, servers, captains, restaurant cashiers, the area manager and the chef. It is split into salaries and wages, bonuses and incentives, and related costs: employer contributions, benefits, staff meals (the ones taken out of cost of sales), uniforms when the standard treats them as a benefit, and training.

Two things cause confusion. First: the voluntary tip is neither payroll nor revenue; it is the server’s money that the hotel merely administers. The mandatory service charge the hotel distributes to staff does go through payroll as a distributed payment. Second: the maintenance technician who fixes the stove is not food and beverage payroll even if they spend the day in the kitchen; they are maintenance payroll, which is an undistributed department.

Block four: other department expenses

Here goes everything the department spends directly to run and that is neither ingredients nor people. The standard’s list is long; these are the lines a hotel restaurant uses almost always.

• China, glassware, silver and linen: replacements during the period, not the initial purchase, which is capitalized.
• Laundry and dry cleaning of linen and uniforms, whether done by a third party or charged internally.
• Cleaning and operating supplies: detergents, paper, disposables, small kitchen items.
• Menus, printing and stationery for the restaurant.
• Music, entertainment and decoration for the dining room and for events.
• Licenses and permits for the revenue center, including liquor licenses.
• Department contract services: kitchen pest control, hood maintenance, knife sharpening.
• Kitchen fuel when metered separately, equipment rental, dues and subscriptions, and reservations.
• Department systems expense when the hotel decides to assign the point of sale to the area, according to its policy.

Gross profit minus payroll and other expenses is the food and beverage departmental profit. It is the figure compared month against month and against the same month last year, and the one the area director has to be able to explain line by line.

What does not belong in the department even if it passes through the restaurant

Half of the arguments between the food and beverage director and the controller are about expenses someone put on the schedule that do not belong there. The standard takes them out on purpose so that departmental profit measures what the department controls.

An honest nuance: the standard leaves some decisions to hotel policy, such as where the point of sale system goes or how the included breakfast is valued. What matters is not finding the perfect line but choosing one, writing it down and not changing it every month.

An illustrative example, line by line

The figures below are invented to show how the schedule is built and how the percentages are read. They are not data from any hotel or from the industry. It is one month of the food and beverage department at a hotel with a restaurant, a bar and room service.

Read it the way a controller does. Cost of food is 32 % of its own revenue and cost of beverage 25 %; each is judged against its own line, never against the total. Payroll takes 30 cents of every unit sold and is the department’s largest expense, above cost of sales. And the departmental profit, 135,000, is what food and beverage contributes to the hotel before electricity, maintenance, marketing and rent.

If next month revenue stays at 450,000 and profit drops to 120,000, the schedule tells you in which block the 15,000 was lost: whether cost of food rose to 35 %, whether one more cook was hired or whether china replacement spiked. Without the schedule you only know you earned less.

What the point of sale must deliver

The schedule does not fill itself: the controller builds it with what the restaurant system provides, and if the system provides a sales total and nothing else, the controller guesses. These are the minimum data the hotel restaurant’s point of sale has to produce every night so the schedule fills in without manual reclassification.

1. Every menu item classified as food, beverage or other revenue from the catalog, so revenue comes out separated without anyone splitting it afterwards.
2. Every sale with its revenue center: restaurant, bar, coffee shop, room service, banquets, so revenue can be seen by center.
3. Tax and tip separated from the sale on the ticket itself, never added and subtracted later.
4. Discounts and comps with a reason, so the controller knows which ones reduce revenue and which ones are transferred to expense.
5. Room charges tied to the guest folio, so that revenue stays in food and beverage even though the money comes in through the front desk.
6. Staff meals recorded at cost, so they leave cost of sales and enter payroll-related expenses.

When the point of sale delivers those six pieces of data, the schedule is a report, not an end-of-month project. The reports page (Reports) shows what the revenue lines look like already separated, and the page for the controller (Controller) what the system exports to cross-check against inventory and payroll.

What to do this week

1. Review the point of sale catalog and mark every item as food, beverage or other. Unclassified items are revenue that today gets split by eye.
2. Confirm that tax and tip come out separated on the daily sales report. If they arrive added together, net revenue is wrong from the source.
3. Write on one page the hotel’s policy for included breakfast, staff meals and comps, and share it with the chef and the controller.
4. Pull out of last month’s schedule any energy, maintenance, card or marketing expense that slipped in, and reclassify it.
5. Calculate cost of food and cost of beverage separately, each against its own revenue, and compare them with the same month last year.
6. Ask the restaurant system for revenue by revenue center for the last month. If it cannot provide it, you already know what is missing.

Inn Restaurant classifies every item as food, beverage or other revenue from the catalog, separates tax and tip on the ticket, records discounts with a reason and ties the room charge to the folio, so the department schedule under the hospitality standard comes out of the system and not out of a spreadsheet. If you want to see how it is built with your hotel’s data, the fifteen minute demo is booked on the contact page (contact).