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Colorado State University: Global Campus Profit Margins Reoort

 

Restaurants offer a variety of menu items which have different sizes,
ingredients, packaging, and demand. In addition, made-to-order
restaurants go one step further and may have different renditions of the
same menu items based on how a customer orders them. Take for example,
Chipotle Mexican Grill, for the same price, steak tacos could be
“crispy” or “soft”, may have white, brown, or no rice, may or may not
contain one of three types of salsa, could have cheese or sour cream or
neither, and may or may not have lettuce, black or pinto beans, or other
vegetables. Combinations for that one menu item are virtually endless!

Profit margins in the restaurant industry are small, and operating costs are high.
Variances
on budgeted amounts can be unwelcome interrupters in this business
model. Variance analysis and budget planning are essential for survival
in the business. This project option will allow you to apply your
knowledge of financial analysis to the restaurant industry to problem
solve and plan for the future.

  1. Select a nationally recognized fast casual restaurant chain that offers made-to-order menu items, except a restaurant primarily engaged in making pizza. Some examples would be Chipotle Mexican Grill, Five Guys, Noodles Co., Panera Bread, and Dunkin Donuts.
    1. For the restaurant chain you have selected, you will need to
      research and locate company information, menus, and financial
      information to assist you with the requirements of this project.
    2. Not every chain will have the same financial information available,
      so it may be necessary to generate your own “fictitious” data in order
      to complete the required tasks. If you do create data, be VERY CLEAR in
      your computations which data is taken from publicly available
      information (provide the sources) and which data has been generated by
      you.
  2. Choose 1 menu item from the menu of the restaurant. Familiarize
    yourself with the product including the ingredients, processing method,
    general selling price in your area, packaging requirements (if
    applicable), and accessories (straw, sweetener, fork/knife, condiments,
    etc.). In Module 3, you will be submitting this information as part of
    your Portfolio Project milestone.
  3. You have been notified by your purchasing department that the
    availability of one of the substantial ingredients of your menu item is
    impacted by an unusually cold and snowy winter for a period of at least 6
    months. The cost of the ingredient will now increase by 30%. This
    unexpected supply chain issue has created havoc for budgeted profits and
    costs. Create a “before and after” computation scenario to show how the
    impact of this change will impact operating income assuming all other
    variables remain constant. (See textbook Exhibit 14-1 for a sample
    computation format.)

    1. In a business with slim margins, 30% is tough to absorb even on a
      short run basis. How might your company be able to react to the change?
      Are there opportunities to: offset this extra cost with a price
      increase, maintain gross margin, or offer the product to consumers at
      the same price currently? Model alternatives and present your
      calculations and solution in a supporting table included in your paper.
  4. A good reliable labor force is tough to find for the fast-casual
    restaurant industry. During the summer, the company has an easier time
    finding help, but when school is in session, many students are
    unavailable for employment. Thus, the company occasionally has to
    increase wages in order to attract employees. Assume the company has to
    increase pay by $1.25 per hour over minimum wage for the foreseeable
    future. Use the same “before” scenario from 3.a. and run an “after”
    scenario for the increased wages to show the impact on operating income.
  5. In a Microsoft Word document, develop a project for this company
    that will require the purchase of additional equipment, in a short-term
    decision-making scenario. Research the cost of this equipment and
    develop an expectation regarding the cost savings for the company.
    Describe it fully and compute an incremental analysis for the company.
    Present your calculations in a supporting table included in your paper.

Your paper should meet the following requirements:

  • Minimally 7-10 pages in length (not including the title page and the reference page).
  • Assignment should follow APA guidelines with respect to use of subheadings, 1″ margins, and double spacing.
  • References should include your textbook plus 2 additional credible
    academic references. All sources used, including your textbook must be
    referenced; paraphrased and quoted material must have accompanying
    citations and cited per APA guidelines.
  • Use of CSU Global Library is necessary.

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