10/23/2013

Biz Cafe Decisions

0. 0

 Beginning Decisions
o Bought Modern new furniture, $4000
o Bought AutoFour High Capacity coffee maker, $6000
 Management Decisions
o 2 managers at $650 a week
o Hired 10 servers at $9 an hour
 Marketing Decisions
o Price—$4 a cup
o Newspaper ($200 a day) General Awareness ($1400 a week)
o Radio ($40 a spot) 5 per day ($1400 a week)
 Operations Decisions
o Shop Hours: Mon-Fri 7-10
o Weekly Purchases: Coffee—35 lbs organic ($245), 5000
medium cups ($450)
 Special
o Purchased insurance ($600)
 Decision Analysis
 o Service Capacity—1.2 servers per hour, 300 daily capacity,
1500 weekly capacity
o Projected sales—$4412, projected expenses—$7910
o Breakeven—1536 cups
o Projected coffee required—35.3 lbs
 Local Averages
o Manager wages—$600 a week
o Average staff wages—$8.75 an hour
o Average turnover rate—12.5%
o Minimum wage—$7.25 an hour
1. 1
 Results
o Coffee purchase was just right
o 3897 cups left in inventory
o Customer satisfaction—33.3%
o Revenue—$4412
o Net income—$(3000.5)
 Management Decisions
o No changes
 Marketing Decisions
o No changes
 Operations Decisions
 o Weekly purchases: Coffee—40 lbs organic ($280)
 Special
o Customer Survey: Data from the standard customer survey
is very limited, showing only the customer satisfaction rate. It
would be a good idea to obtain more information about your
customers and how they rate your café. Below are some
options for obtaining additional customer feedback.
 Add a suggestion box in the café. ($0)
 Print survey forms and place them on café tables.
Customers will rate their satisfaction with ambiance,
quality of service, and price in your café. ($50)
Hire a company to survey local public (customers and

non-customers) for ratings on the items listed in the
printed survey, plus ratings for satisfaction with café
hours, and general awareness of your café. ($500)
 No change. ($0)
o I decided on the print survey. ($50)
 Decision Analysis
o Service Capacity—1.2 servers an hour, 435 daily, 2175
weekly
o Projected sales—$5688 (1422 cups), projected expenses—
$4,945
o Breakeven—1535 cups
o Projected coffee required—45.5 lbs
 Materials report
o Cost per cup (for cups)—$0.09
o Cost per cup (for coffee)—$0.22
o No waste
 Local Averages
o Manager wages—$625 a week
o Average staff wages—$8.88 an hour
o Average turnover rate—11.7%
 o Minimum wage—$7.25
o Industry average customers satisfied—51.7%
2. 2
 Results
o Had to make emergency purchase of 6 lbs of coffee
o 2475 cups left in inventory
o Revenue—$5688 (+28.9%), gross margin—$5232 (+28.6%),
Net income (for period)—$113.8 (+103.8%), Net income
(total)—$(2886.75)
 Management Decisions
o Hired 1 manager
o Hired 3 servers
 Marketing Decisions
o Changed price of coffee to $3.90 a cup
 Operations Decisions
o Changed Shop Hours to Mon-Fri 7-10, Sat 7-11, Sun 7-10
o Weekly purchases: Coffee—62 lbs organic ($434), 5000 cups
($450)
 Special
o Staff Training: Mistakes made by staff are having an effect
on overall efficiency, so you have contacted the local
community college to enquire about customer service training
courses. They offer a one-time customer service course that
will train existing employees at a cost of $50 per employee.
They also offer an on-going training program that can train
existing and future employees at a cost of $1200 per year.
Will you sign up for either program or do nothing?
o I decided to purchase the on-going training program. ($1200)
 Decision Analysis
o Service capacity—1.1 servers an hour, 395 daily capacity,
2810 weekly capacity
o Projected sales—$7659.60, projected expenses—$7666.33,
projected cups sold—1964
 o Breakeven—1839 cups
o Projected coffee required—62.8 lbs
 Materials Report
o Cost per cup (for cups)—$0.09
o Cost per cup (for coffee)—$0.23 (due to emergency purchase
of 6 lbs of coffee $48)
 Local Averages
o Manager wages—$625 a week
o Average staff wages—$8.88 an hour
o Average turnover rate—11.9%
o Minimum wage—$7.25
o Industry average customers satisfied—62.8%
 Customer Survey
o Customers satisfied—55.6% (+22.2%)
o Price—3/5
o Ambiance—4/5
o Service—4/5
o Suggestions—Okay service; too expensive; great price; good
coffee; nice paintings; great coffee; love the coffee; great
ambiance; thanks; short lines; the windows are dirty; price is
okay; ambiance is okay; nice ambiance; great service
3. 3
 Results
o Had to make emergency purchase of 1 lbs of coffee
o 5511 cups left in inventory
 o Revenue—$7659.60 (+34.7%); gross margin—$7040.80
(+34.6%); Net income (this period)—$833.30 (+632.5%);
Net income (total)—$(2053.44)
 Management Decisions
o Hired 2 servers
 Marketing Decisions
o Changed price of coffee to $3.85
 Operations Decisions
o Changed Sunday open hours to 8-8
o Weekly purchases: Coffee—70 lbs organic ($490)
 Special
o Results from last week: The employees appreciate the
training program.
o Baked Goods: You now have the opportunity to sell baked
goods at your café. About 30% of your customers are
expected to purchase baked goods with their coffee, at an
average price of $2 per item. You have a couple of options.
Your first option is to buy fresh baked goods from a bakery in
town at a unit cost of $1 each. Your second option is to
purchase an oven for $4000 and bake the goods in the café at
a unit cost of $0.50 each. If you decide to bake the goods in-
house, you will need an additional employee to run the oven.
You may choose to adjust staff accordingly. Although running
the baking operation in-house may be more expensive than
purchasing from the bakery, the smell of baked goods is
expected to attract more customers, and add to the ambiance
of the café. What will you do?
o I chose to purchase the oven. ($4000 + $0.50 per unit)
 Decision Analysis
o Service capacity—1.3 servers an hour, 405 daily, 2774 weekly
o Projected sales—$8697.15 (2259 cups), projected expenses—
$12636.49
o Breakeven—1913 cups
o Projected coffee required—72.3 lbs
 Materials Report
o Cost per cup (for cups)—$0.09 per cup
 o Cost per cup (for coffee)—$0.23 per cup (due to emergency
purchase of 1 lb coffee $8)
 Local Averages
o Manager wages—$625 a week
o Average staff wages—$8.88 an hour
o Average turnover rate—10.4%
o Minimum wage—$7.25
o Industry average customers satisfied—67.5%
 Customer survey
o Customers satisfied—65% (+9.4%)
o Price—3/5
o Ambiance—4/5
o Service—4/5
o Suggestions—Great price; awesome service; long lines; great
ambiance; nice paintings; good coffee; thanks; ambiance is
okay; lines are okay; short lines; great coffee; nice
ambiance; great service; okay service; too expensive; love
the coffee; price is okay
4. 4
 Results
o Had to make emergency purchase of 2 lbs of coffee
o 3232 cups left in inventory
o Revenue—$10077.20 (+31.6%); Gross margin—$9022.80
(+28.2%); Net income (this period)—$2801.10 (+236.1%);
Net income (total)—$(1246.81)
 Management Decisions
o Hired 5 servers
 Marketing Decisions
o Increases radio ads to 10 per day ($2800 a week)
 Operations Decisions
 o Weekly purchases: Coffee—80 lbs organic ($560)
 Special
o Advertising: There has been a steady long line of customers
at the Fair-Trade Coffee Shop across the street since they
opened, over a month ago. Fair-trade coffee must be a
popular trend. Would advertising your coffee as “fair trade”
(even though your source is not fair trade certified) increase
your sales? Fair trade coffee probably has no discernable
taste difference from your brand. Will you begin advertising
your coffee as fair trade, too?
o I chose not to advertise as fair trade coffee.
 Decision Analysis
o Service capacity—1.8 servers an hour, 552 daily M-F, 593
daily on Sat, 450 daily on Sun, 3803 weekly
o Projected sales—$10083.15 (2619 cups); projected expenses
—$9853.75
o Breakeven—2440 cups
o Projected coffee required—83.8 lbs
 Materials Report
o Cost per cup (for cups)—$0.09
o Cost per cup (for coffee)—$0.22 per cup (emergency
purchase of 2 lbs coffee $16)
 Local Averages
o Manager wages—$625 a week
o Average staff wages—$8.88 an hour
o Average turnover rate—13.3%
o Minimum wage—$7.25
o Industry average customers satisfied—70.5%
 Customer Survey
o Customers satisfied—71%
o Price—3/5
 o Ambiance—5/5
o Service—2/5
o Suggestions—Nice paintings; okay service; great price; great
ambiance; I stole a coffee stirrer; HURRY UP; good coffee;
long lines; price is okay; great coffee; too expensive; love the
coffee; mmmm, goodies, nice ambiance.
5. 5
 Results
o Had to make emergency purchase of 4 lbs of coffee.
o 633 medium logo cups left in inventory
o Revenue—$11669.20 (+15.8%); Gross margin—$10444.90
(+15.8%); Net income (this period)—$(34.2) (-101.2%); Net
income (total)—$713.48
 Management Decisions
o Hired 5 servers
 Marketing Decisions
o Changed price to $3.75 (from $3.85)
o Changed to 2 radio spots a day ($560 a week)
 Operations Decisions
o Weekly purchases: Coffee—95 lbs organic ($665); Cups—
10000 ($800)
 Special
o Last week’s results: Your decision not to use the “fair trade”
advertising appears to be wise. The local newspaper has done
an expose on some businesses advertising fair trade
products.
 o Green Upgrade: You now have an opportunity to make
decisions on upgrades that have come available for your
business. For the first option, your electric company is
promoting the use of new compact fluorescent light bulbs in
place of your current standard bulbs, in order to conserve
energy. You can purchase 25 bulbs at a cost of $4 per bulb.
CFL bulbs use about ¼ the watts as standard ones. This may
cause changes in your electric bill. Now for your second
option, the local water company is offering a financial
incentive to business owners who choose to replace their
toilets with water conserving ones. The new toilets use about
half the amount of water your current ones do. The water
company will give you $75 for each toilet you install. The
toilets cost $300 and you would have to purchase two of them
to replace all of yours. What will you do? You can choose any
combination of the following options or you can do nothing.
 Replace bulbs. (Cost: $100)
 Replace both toilets. (Cost: $600, Rebate: $150)
 Do nothing.
o I chose to replace both bulbs and toilets. (Cost: $700,
Rebate: $150)
 Decision Analysis
o Service Capacity—2.1 servers per hour M-Sat, 2.2 servers per
hour Sun, 674 daily M-F, 716 daily Sat, 548 daily Sun, 4634
weekly
o Projected sales—$9821.25 (2619 cups); projected expenses—
$8090
o Breakeven—1991 cups
o Projected coffee required—83.8 lbs
 Materials Report
o Cost per cup (for cups)—$0.09
o Cost per cup (for coffee)—$0.23 (emergency purchase of 4
lbs coffee $32)
 Local Averages
o Manager wages—$625 a week
o Average staff wages—$8.88 an hour
 o Average turnover rate—12.1%
o Minimum wage—$7.25
o Industry average customers satisfied—70.2%
 Customer Survey
o Customers satisfied—70.4%
o Price—3/5
o Ambiance—5/5
o Service—3/5
o Suggestions—Too expensive; nice ambiance; okay service;
great ambiance; lines are okay; the coffee is okay; great
coffee; long lines; cool wallpaper; love the coffee; great
price; great service; price is okay; nice paintings; I stole a
coffee stirrer; good coffee.
6. 6
 Results
o 9 lbs of coffee went to waste
o 7954 cups left in inventory
o Revenue—$11706.30 (+0.3%); Gross margin—$10410.30 (-
0.3%); net income (this period)—$2495.60 (+7399.2%); net
income (total)—$3209.07
 Management Decisions
o Hired 3 servers
 Marketing Decisions
o Now have small, medium, and large cups. Prices: Small—
$3.10, Medium—$3.65, Large—$4.65
 Operations Decisions
o Weekly purchases: Coffee—90 lbs organic ($630), Small cups
—5000 ($400), Large cups—5000 ($500)
 Special
o Last week’s results: Customers noticed the changes in the
bulbs and toilets! An electrical fire damaged your espresso
maker. The damage is covered by your insurance, but you
needed to pay the $500 deductible.
 o Renovation: You now have the opportunity to renovate your
café using the same furniture choices you were given at
startup. This is a chance for you to change the theme of your
café. If you do decide to change, your old furniture will be
disposed of with half the original cost written off. The cost of
the new furniture will come out of your checking account
immediately and be depreciated over five years.
o I decided to keep the modern theme I already have. (Cost—
$0)
 Decision Analysis
o Service capacity—2.5 servers M-F and Sun, 2.4 servers Sat,
799 M-F, 842 Sat, 648 Sun, 5485 weekly
o Projected sales—$9778.35; projected expenses—$7386.08
o Breakeven—816 smalls, 714 mediums, 563 larges
o Projected coffee required—85.7 lbs
 Materials Report
o Cost per cup (for cups)—$0.08
o Cost per cup (for coffee)—$0.25 (9 lbs wasted coffee at a cost
of $0.02 per cup)
 Local Averages
o Manager wages—$625 a week
o Average staff wages—$8.88 an hour
o Average turnover rate—10.9%
o Minimum wage—$7.25
o Industry average customers satisfied—71.2%
 Customer Survey
o Customers satisfied—72.4% (+2%)
o Price—3/5
o Ambiance—5/5
o Service—4/5
o Suggestions—Good coffee; everything was very nice; great
price; WOW, FAST; price is okay; great ambiance; too
expensive; nice ambiance; nice paintings; I’ve had waaaay
too much caffeine; great service; great coffee; the coffee is
okay; love the coffee; okay service; short lines.
7. 7
 Results
o A server quit this week.
o Coffee purchase was just right.
o 3625 small cups left in inventory, 6671 medium cups left in
inventory, 4459 large cups left in inventory.
o Revenue—$13459 (+15%); gross margin—$12062
(+15.9%); Net income (this period)—$5340 (+114%); Net
income (total)—$8549.14
 Management Decisions
o Hired 4 servers.
 Marketing Decisions
o Changed price of large coffee to $4.35 (from $4.65).
 Operations Decisions
o Changed operating hours to M-Sun 7-11
o Weekly purchases: Coffee—100 lbs organic ($700)
 Special
o Last week’s results: Customers heard you were thinking
about changing the furniture, and are happy to hear you
decided not to.
 o Live Entertainment: David Douglas, an announcer from local
WTJM radio, has approached you with an exciting offer. He is
planning to interview a popular touring group on his radio
show next week, and would like to conduct the interview in
your café instead. He would bring all the equipment and
promote the event. He explains, “It would bring a lot of
business to the café and you would not have to do anything. I
am very experienced in promoting and organizing events and
would only charge you $250 to take care of it all! I promise
you that your sales will increase at the event. Are you
interested?” An employee who couldn’t help but overhear
your conversation with David, says, “For a while I have been
thinking of events that the café could host to promote
business. For example, we could have a karaoke night, a
poetry slam, or even have the local high school jazz band
come play. After hearing his offer to you, it seemed like a
good time to mention this. David’s idea would be a lot less
work for you, but would be a lot more expensive than my
ideas. Everything I just mentioned are things we could do for
virtually nothing. And, they could be just as successful!” I
have the following options:
 Accept radio show offer. ($250)
 Have a karaoke nighe. ($50)
 Organize a poetry slam. ($35)
 Host the local HS jazz band. ($0)
 Don’t offer live entertainment.
o I decided to accept the radio show offer. ($250)
 Decision Analysis
o Service Capacity—2.5 servers per hour, 880 daily, 6160
weekly
o Projected sales—$11298.80 (1375 smalls, 1283 mediums,
541 larges); projected expenses—$10952.99
o Breakeven—845 smalls, 737 mediums, 628 larges
o Projected coffee required—89 lbs
 Materials Report
o Cost per cup (for small cups)—$0.08
 o Cost per cup (for medium cups)—$0.08
o Cost per cup (for large cups)—$0.10
o Cost per cup (for small coffee)—$0.11
o Cost per cup (for medium coffee)—$0.23
o Cost per cup (for large coffee)—$0.34
 Local Averages
o Manager wages—$625 a week
o Average staff wages—$8.88 an hour
o Average turnover rate—11.2%
o Minimum wage—$7.25
o Industry average customers satisfied—72.2%
 Customer Survey
o Customers satisfied—74.5%
o Price—3/5
o Ambiance—5/5
o Service—5/5
o Suggestions—Price is okay; great price; love the coffee;
thanks; nice ambiance; too expensive; worth every penny;
great coffee; coffee’s terrible; good coffee; nice paintings;
great service; lines are okay; great ambiance; short lines;
WOW, FAST; everything was very nice.
8. 8
 Results
o A server quit this week
o Had to make emergency purchase of 2 lbs of coffee.
o 2070 small cups left in inventory, 5228 medium cups left in
inventory, 3820 large cups in inventory.
o Revenue—$15121.10 (+12.3%); gross margin—$13537
(+12.2%); Net income (this period)—$6521.70 (+22.1%);
Net income (total)—$15070.89
 Management Decisions
o Hired 1 server
 Marketing Decisions
o Changed price of small coffee to $2.90, changed price of
medium coffee to $3.50, changed price of large coffee to
$4.10.
 Operations Decisions
o Weekly purchases: Coffee—110 lbs organic ($770), 5000
small cups ($400), 10000 medium cups ($800)
 Special
o Last week’s results: The radio show was a success! People
were talking about it all week.
o Problem Employee: A shift manager comes to you with a
problem, explaining that one employee is disrupting the
staffing schedule by repeatedly not showing up on time.
Several employees have had to cover her shift times and one
employee worked a double shift today because she didn’t
show up at all. Your manager is concerned that employee
morale will decline if something isn’t done about it. How will
you solve this problem?
 Fire the employee that is causing the problem.
 Meet with the employee to find out what the problem is.
 Schedule employee to work during another manager’s
shift times.
 Meet with the servers who work with the employee,
encouraging them to help out more.
 Hold a meeting for all employees to clarify company
policy on tardiness and absenteeism.
 Do nothing.
o I decided to meet with the employee to find out what the
problem is.
 Decision Analysis
o Service capacity—2.5 servers per hour, 888 daily, 6216
weekly
o Projected sales—$12179.90 (1555 smalls, 1443 mediums,
639 larges)
o Breakeven—907 smalls, 771 mediums, 670 larges
o Projected coffee required—101.7 lbs
 Local Averages
o Manager wages—$625 a week
o Average staff wages—$8.88 an hour
o Average turnover rate—11.5%
 o Minimum wage—$7.25
o Industry average customers satisfied—73.2%
 Customer Survey
o Customers satisfied—76.3%
o Price—3/5
o Ambiance—5/5
o Service—5/5
o Suggestions—Lines are okay; great price; always open; great
coffee; great service; too expensive; good coffee; nice
ambiance; love the coffee; short lines; cool wallpaper; long
lines; coffee’s terrible; thanks; nice paintings; great
ambiance; price is okay.
9. 9
 Results
o 7 lbs of coffee went to waste.
o 5456 small cups, 13768 medium cups, 3190 large cups left in
inventory.
o Revenue—$14669.60 (-3%); gross margin—$13016.40 (-
3.8%); Net income (this period)—$3867.80; Net income
(total)—$18938.69
 Management Decisions
o No changes
 Marketing Decisions
o No changes
 Operations Decisions
o Weekly purchases: Coffee—110 lbs organic ($770)
 Special
o Last week’s results: The disruptive employee opened up to
you about problems she is having at home, and promised to
do better. But you haven’t seen any significant improvement.
 o Coffee Roaster: You have been researching coffee roasters
and found one selling for $2400. If you purchase the coffee
roaster to roast coffee beans in your café, your coffee
purchase price will remain the same, but the aroma of
roasting coffee will improve the ambience of your café and is
apt to attract more customers. Should you invest in the coffee
roaster?
o I chose to invest in the coffee roaster. ($2400)
 Decision Analysis
o Service capacity—2.5 servers per hour, 896 daily, 6272
weekly
o Projected sales—$12373 (1614 smalls, 1460 mediums, 630
larges), projected expenses—$9540.50
o Projected coffee required—102.8 lbs
 Local Averages
o Manager wages—$625 a week
o Average staff wages—$8.88 an hour
o Average turnover rate—11.5%
o Minimum wage—$7.25
o Industry average customers satisfied—75.1%
 Customer Survey
o Customers satisfied—80.1% (+3.8%)
o Price—3/5
o Ambiance—5/5
o Service—5/5
o Suggestions—great service; good coffee; thanks; great
ambiance; too expensive; great coffee; nice ambiance; price
is okay; nice paintings; love the coffee; long lines; lines are
okay; great price; always open; short lines.
10/23/2013
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10/23/2013