Description
Case study attached below! As well as the income statement!!!ONLY Analyze question 4 base on the case study !!! 4. Analyze both quantitatively and qualitatively the decision to implement a new cash register.Expected deliverables:- A PowerPoint slide deck – An Excel workbook file with the financial calculations
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Heather Kolakowski ‘00
Lecturer
Food and Beverage Management
249 B Statler Hall
Ithaca, NY 14853
[email protected]
CASE STUDY: CENTRE FOOD HALL AT TC3 CORTLAND COMMUNITY COLLEGE
On the morning of Oct 28, 2018, Amy Schira, associate director of Hospitality Managed Services (HMS)
at TC3 Cortland Community College, hung up the phone after a conversation with one of the Exotic Wok
representatives. Mrs. Schira had compiled the cost data she received from the representative and was
now ready to review two opportunities to improve the profitability of Centre Food Hall, the largest
generator of food sales on the Cortland Campus.
Centre Food Hall had grown, largely because of the increasing student population. In February 2018, two
cash registers were added to improve the service at checkout counters. Despite increasing the number
of cash registers to seven in total to serve students, two at Burger One and five serving the remaining
three restaurants, long waiting lines persisted. Consumers did not like waiting in line and often avoided
line-ups because of time constraints. She estimated that the line-up made her lose additional customers
which reduces her profit margin. To increase the bottom line of next year’s (2019) P&L, she needs to
find a way to attract more customers. Furthermore, greater demand is projected by Fall 2020 with new
dorms being constructed, increasing the student population by 5%. As such, to capture actual and
potential new demand, she needs to find a solution that will be implemented early January 2019.
Burger One expansion proposal
One potential solution to the line-up problem was to improve the operations where the line-ups were
longest, i.e., at Burger One. Contributing to the problem was also the location of Burger One. Large lineups, especially during examination periods, crowded the entrance to Centre Food Hall and discouraged
some students from purchasing food from this location.
Although the area occupied by Centre Food Hall belonged to TC3, the space surrounding Centre Food
Hall was controlled by Union Student Center and was subject to monthly rental charges levied at $30 per
square foot of space, much higher than the current rental charges (charged by Cortland Community
College) for Centre Food Hall at $5 per square foot. Working within the space currently occupied by
Centre Food Hall would allow HMS to avoid these additional rental charges.
Schira believed that adding a third cash register to Burger One would improve the flow of customers and
free up the entrance to Centre Food Hall; luckily, no major improvements were needed, except an
increase of $1,000 to the actual repair and maintenance cost and $3,000 in depreciation per year for the
next 3 years. The only additional costs to operate the third cash register would be the direct costs of
food associated with the extra sales, the salary and benefits of one more cashier, paper supply costs of
1.2% of sales and the usual 4% branded royalties. Schira believed the remaining expenses would not
change, due to being relatively fixed in nature. Schira also believed the new cash register could increase
Burger One sales by 21% in 2019.
Case inspired from Hospitality Services – The University of Western Ontario – All copyrights reserved to Marie Ozanne
Page | 1
Heather Kolakowski ‘00
Lecturer
Food and Beverage Management
249 B Statler Hall
Ithaca, NY 14853
[email protected]
New Food Counter proposal
The second possible solution was to increase the offerings around Centre Food Hall to spread the
demand and reduce the long lines. Exotic Wok is a new fast casual chain specializing in wok-prepared
meals made with fresh vegetables, noodles, and a choice of proteins. Ingredients are precooked and the
wok is fully customizable and made to order. It gained popularity among Millennials and Gen Z due to
the ease in customizing the meal and the fresh vegetables. The wok is served in bowls made of recycled
wood fibers which offers a nice, upgraded look. Thanks to these bowls, customers often share their food
bowls on Instagram and many new customers have heard about this new fast casual chain that way.
Schira believed Exotic Wok would be a popular choice among students because of its recent growth and
the variety of options offered; however, strict rules pertaining to promotion and restaurant layout are
enforced on Exotic Wok franchises. In a similar university not so far away, customers spend on average
$13.50 per meal at Exotic wok. Schira expected a similar average check at TC3. She also believed that
Exotic Wok’s popularity would reduce sales at Centre Food Hall by approximately 3%, but it would
attract 3,360 students per month.
Schira estimated an Exotic Wok Stand Food Cost would average 38.8 % of sales in its first full year of
operations. To operate the new stand, Schira needs to hire an extra DMO, a line cook and a sous-chef.
Exotic Wok commands a royalty of 5%, applied to sales. Additional costs are listed in the notes in
Appendix 3.
An interesting aspect of this partnership is that Exotic Wok is ready to pay for some of the construction
costs. Yet, after Schira’s calculation, depreciation cost should be an extra $10,000 per year for the next
three years. Since the proposed location was not as visible as Centre Food Hall, Schira planned to set
aside approximately $1,500 per year for each of the next three years to promote the new location. HMS
generally eased into promotions for new restaurants, allowing consumers to sample the new location.
Students’ characteristics
Students often rush to complete multiple errands between classes, forcing HSM to compete against
many other services, including Campus Recreation, where students could exercise; and the two oncampus convenience stores. Schira estimated that on-campus restaurants have an average of 20
minutes to serve students from the time they entered the restaurant to the time they paid for their
purchase, or they risked losing that customer to time constraints. The short time frame often resulted in
a lunchtime rush between 11 a.m. and 2 p.m. on weekdays with sporadic demand throughout the rest of
the day. Speed of service was not the students’ only criterion; friendly service and fresh ingredients
were also important. Price was an important factor; however, students were willing to pay more for a
meal if service and freshness met their expectations.
Case inspired from Hospitality Services – The University of Western Ontario – All copyrights reserved to Marie Ozanne
Page | 2
Heather Kolakowski ‘00
Lecturer
Food and Beverage Management
249 B Statler Hall
Ithaca, NY 14853
[email protected]
Final thoughts
Although Schira had options to consider capturing unsatisfied customers due to long lines, she still
wondered whether the current mix of restaurants was ideal or whether it should be expanded. What
direction should HMS take? Should Amy Schira pursue the acquisition of additional space and launching
a new food outlet, or should she simply focus on improving the current structure?
Analysis questions:
1. Assess the financial health of Centre Food Hall for the year 2018 (P & L and Ratio Analyses)
2. Which cost-to-sales ratios should be improved?
3. Analyze the consumers of Centre Food Hall, their expectations, and the value proposition
offered. Use external consumer marketing data to augment what’s provided in the case.
4. Analyze both quantitatively and qualitatively the decision to implement a new cash register.
5. Analyze both quantitatively and qualitatively the decision to implement a new food stand.
6. Come up with a recommendation based on the answer to the above questions.
7. In addition, perform whatever analysis and make whatever recommendations you deem
necessary.
Additional Tips:
–
Make sure your income statements present a full year of sales and expenses.
All information you need are either in the descriptions above or in the appendixes.
Except the extra sales and expenses mentioned in the case descriptions and appendixes, assume
that all other financial data the same for 2018 and 2019.
Expected deliverables:
–
Team Contract
A PowerPoint slide deck and recorded Zoom presentation
An Excel workbook file with the financial calculations
Individually submitted peer evaluations of your group members
Individually submitted audience feedback
NOTE: PLEASE CLEARLY INDICATE YOUR GROUP NUMBER ON ALL DELIVERABLES
Case inspired from Hospitality Services – The University of Western Ontario – All copyrights reserved to Marie Ozanne
Page | 3
Heather Kolakowski ‘00
Lecturer
Food and Beverage Management
249 B Statler Hall
Ithaca, NY 14853
[email protected]
Grading Rubric
Rubric description
Team Contract
Excel document
Correct 2018 Centre Food Hall P&L
Correct quantitative assessment of the new cash register implementation
Correct quantitative assessment of the new food stand implementation
Excel document is clearly presented, formulas are detailed, etc
PowerPoint Slides and Recorded Zoom Presentation
Summary of the case issue is well constructed, financial health assessment of Centre
Food Hall for 2018 is clear, and ratios are used correctly
Description of the new cash register implementation is financially coherent and
qualitative assessment is well-detailed and explained
Description of the new food stand is financially coherent and qualitative assessment is
well-detailed and explained
Final recommendation is well constructed and the rationale behind the arguments in
favor of the recommendation is transparent and well explained
Dynamic, varied delivery that greatly enhanced the message
Creative and engaging visuals, advanced listener’s understanding, and interest
Audience Feedback (audience evaluations of presentation)
YOUR performance as an audience reviewer (individual assessment)
Group Peer Evaluation (individual submission)
Total
Grades (Pts)
5
20
8
5
5
2
45
6
10
10
13
3
3
10
10
10
100
Note: the peer evaluations are something I take very seriously. Therefore, individual final grades will
be adjusted based on the evaluation that each group member received by their group peers. I want
you to be aware that differences in grade between a group member who has worked much more than
another group member can be significant (+/- 20 points).
Due Dates
Deliverables
1: Team Contract (group)
2: PowerPoint slides and Excel files (group) and
recorded presentation
3: Audience Feedback (individual)
4: Peer group evaluations (individual)
Due Dates
Feb 12, 2024 by 10:10 am
Upload on Canvas by Monday March 4, 2024 at
10:10 am
Submitted by Wednesday March 6 at 5 pm
Submit individual peer evaluation form by March
11 at 10:10 am
Case inspired from Hospitality Services – The University of Western Ontario – All copyrights reserved to Marie Ozanne
Page | 4
Heather Kolakowski ‘00
Lecturer
Food and Beverage Management
249 B Statler Hall
Ithaca, NY 14853
[email protected]
APPENDIX 1
Centre Food Hall Restaurants
Burger One
Pizza and Co
Salad and
Fruits
Dame Coffee
Stand
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Tompkins County quick-service restaurant chain specializing in hamburgers
Foods offered: hamburgers, veggie burgers, grilled chicken sandwiches, French
fries, onion rings, poutine, soups and salads
Prepared to order
Represented 33% of Centre Food Hall sales in 2018
Food cost 38%
Franchise Royalty Fee: 4%
NY quick-service restaurant specializing in pizzas
Foods offered: a variety of single serving pizzas
Prepared in advance and kept under heat lamps
Represented 28% of Centre Food Hall sales in 2018
Food cost is 34%.
Franchise Royalty Fee: 4%
Upstate quick-service restaurant specializing prepacked salad and fruits
Food offered: Prepackaged salads, portion of fruits and fresh juices
Represented 16% of Centre Food Hall sales in 2018
Food cost is 36%.
Franchise Royalty Fee: 4%
Local chains specialized in coffees and hot/cold beverages
Food offered: cookies, brownies, and hot/cold beverages
Prepared to order
Represented 22% of Centre Food Hall sales in 2018
Food cost is 33%.
Franchise Royalty Fee: 4%.
Case inspired from Hospitality Services – The University of Western Ontario – All copyrights reserved to Marie Ozanne
Page | 5
Heather Kolakowski ‘00
Lecturer
Food and Beverage Management
249 B Statler Hall
Ithaca, NY 14853
[email protected]
APPENDIX 2
P&L DATA FOR YEAR ENDING DECEMBER 2018 – CENTRE FOOD HALL
On premise Food Sales
Burger One
Pizza and Co
Juicy Fruits
Coffee Stand
$
$
$
$
Off premise Food Sales
Catering
Vending machine
$
$
633,325
543,948
314,340
423,000
Inventory
Beg. Food Inventory
End, Food Inventory
Food Purchases
Beg. Off premise. Inventory
End, Off premise. Inventory
Off premise purchases
Food given Away at Cost
(Food consumed but not sold)
Employee meal cost
Complimentary meals at cost
Number of employee meal per
employee
Info on Centre Food Hall (Year 2018) – Average Per month
270,000
90,180
Hours of Operation per Day:
Average Operating days per month:
Number of Seats:
Average number of guests per month:
Food Hall Size:
11AM – 9:30PM
28
150
14,000
3,800
days
seats
(on premise only)
square feet
Payroll Data
DMO
Line cooks
Chef
Sous-Chef
Cashiers
Managers
Employee Benefits
Employees
Hourly Wage
5
$ 12.00
5
$ 14.50
1
$ 28.00
4
$ 22.00
7
$ 15.00
2
$ 24.50
10% of payroll plus any employee meals
Other Operating expense
Franchise Royalty fee
4% of On-Premises sales
Marketing
Newspaper advertising
Sponsorship
Direct Mail Campaign
$
$
$
$
$
$
$
$
$
68,250
62,300
672,408
49,476
62,868
151,716
$
$
3.15
580
322
Total
Monthly
Hours for
employees
700
700
140
560
980
280
20,076
10,980
725
Case inspired from Hospitality Services – The University of Western Ontario – All copyrights reserved to Marie Ozanne
Page | 6
Heather Kolakowski ‘00
Lecturer
Food and Beverage Management
249 B Statler Hall
Ithaca, NY 14853
[email protected]
Direct Operating Expenses
China and Glassware
Cleaning supplies
Paper supplies
Equipment maintenance
Employee uniform rentals
Waste removal
Laundry
Kitchen fuel
Utilities
Electricity
Heating (oil)
$
$
$
$
$
$
$
$
10,140
21,180
22,980
17,760
20,040
1,260
13,476
10,680
$
$
49,404
3,624
Administration and General
Office supplies
Cash Shortages
Insurance (Liability)
Data Processing
Equipment Rental fees
Licenses
Professional Fees
$
$
$
$
$
$
$
4,548
1,404
31,044
2,844
2,640
1,848
7,920
Repairs and Maintenance
Refrigerator Repairs
Other repairs
Janitorial Services
Carpenter
$
$
$
$
7,716
7,044
10,560
3,420
Occupation Costs
University Rent (per month)
Insurance (fire)
$5 per sq ft
$ 5,580
Depreciation
FF&E Depreciation
$ 14,268
Interest Expense
$ 47,640
Case inspired from Hospitality Services – The University of Western Ontario – All copyrights reserved to Marie Ozanne
Page | 7
Heather Kolakowski ‘00
Lecturer
Food and Beverage Management
249 B Statler Hall
Ithaca, NY 14853
[email protected]
APPENDIX 3
Notes from Amy Shira regarding the discussion with the Exotic Wok Representative
Additional customers per month (average)
Average check
Food costs
Food offered
Type of service
Franchise and Royalty
Food Stand new space required
Direct operating expenses
Paper supplies
Utilities
Admin and General
Repairs & Maintenance
Depreciation
+24%
$13.50
38.8%
Fresh vegetables, pork, chicken, tofu, fried rice,
chow mein, noodles.
Precooked ingredients but wok prepared to order
5%
200 sqf
3.6% of food sales
1.5% of food sales
Estimated $1,000/year
Estimated $2,000/year
Estimated $1,200/year
Estimated $10,000/year over the next three years
Case inspired from Hospitality Services – The University of Western Ontario – All copyrights reserved to Marie Ozanne
Page | 8
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