Mongolian Grill Analysis
Our team has been instructed to help advise on a business case involving a restaurant, The Mongolian Grill. It’s owner, John Butkus, is contemplating renovations, in hopes of adding capacity and increasing revenue. There are several scenarios that are available to him. One option is to add an extra food bar. The second option is to move the location of the cooking area. He can also implement both options, if he so chooses. Our team has done the appropriate financial calculations, as well as qualitative considerations.
Our decision is that Mr. Butkus should choose to implement both options. The additional capacity is definitely needed, and the demand to fill the capacity is also present. We calculated the possible …show more content…
Mr Butkus also provided the forecasted costs associated with each potential alternative. These costs are also assumed to be accurate. The food bar would cost $3,200 and the sauce, oil and spice bar would cost $2,100. Additional counter space along the cooking station has a cost of $600. The required extra member of kitchen staff would be paid $8.00 per hour while the additional cook would be paid $12.00 per hour.
We were told that the average customer spends $15.00 and that the restaurant’s profit margin is 50%.
Analysis and Results
We began our analysis by calculating the total incremental cost associated with each alternative. To calculate yearly costs, we assumed that there are 52 weeks in a year. There are no incremental costs associated with alternative 1. We made the assumption that there is currently one cook scheduled to work, and therefore one additional cook will be needed to implement alternative 3.
Next, we calculated total time saved under each alternative. Since no changes are made under alternative 1, the average meal duration will not