Big Burgers is in the fast-food restaurant business. One component of its marketing strategy is to increase sales by expanding in foreign markets. It uses both financial and nonfinancial quantitative and qualitative information when deciding whether to open restaurants abroad. Big’s decided to open a restaurant in Prague (Czech Republic) five years ago. The following information helped the managers in making that decision:
Financial Quantitative Information
■ Operating information
■ Estimated food, labor, and other operating costs (e.g., taxes, insurance, utilities, and supplies)
■ Estimated selling price for each food item
■ Capital investment information
■ Cost of land, building, equipment, and furniture
■ Financing options and amounts
Nonfinancial Quantitative Information
■ Estimated daily number of customers, hamburgers to be sold, employees to work
■ High-traffic time periods
■ Income of people living in the area
■ Ratio of population to number of restaurants in the market area
■ Traffic counts in front of similar restaurants in the area
Qualitative Information
■ Government regulations, taxes, duties, tariffs, political involvement in business operations
■ Property ownership restrictions
■ Site visibility
■ Accessibility of store location
■ Training process for local managers
■ Hiring process for employees
■ Local customs and practices
Big Burgers has hired you as a consultant and given you an income statement comparing the operating incomes of its five restaurants in Eastern Europe. You have noticed that the Prague location is operating at a loss (including unallocated fixed costs) and must decide whether to recommend closing that restaurant.
Review the information used in making the decision to open the restaurant. Identify the types of information that would also be relevant in deciding whether to close the restaurant. What additional information would be relevant in making your decision?