What Is Your Advice?

1. What would you suggest to Tyler to improve the restaurant’s operational efficiency? Examine the business’s inputs, processing, and outputs. Formulate recommendations to streamline the business transactions. What type of reports do Liz and Michael need? How would you alter the back- office work to better suit their needs? 


2. Based on Tyler’s request, his parents provided some questions. Michael knows that some meals are selling better than others, but he can only guess which ones. What sales and operational data do they need to maximize revenues and profits while minimizing costs? What will data help them to make decisions on how to operate and manage their business? What information technology system(s) would you recommend for gathering and reporting the necessary information?

KIMBALL’S RESTAURANT

Liz and Michael Kimball dreamed about opening their own restaurant. They believed that they could use their talents and experience to operate a successful restaurant. Liz was a great cook and had accumulated many family recipes for appetizers, entrees, and bakery desserts. Michael had a degree in business and several years of experience in business management. They believed that it was the right time to think about new careers and realize their dream.

Michael began his career in the human resources department of a local manufacturing business. Over the course of his 20 years in human resources, he was responsible for recruiting, compensation evaluation, and employee orientation. He also managed employees’ performance evaluations for the production departments. While he has some accounting and budgeting experience, it was specific only to human resources, not for an entire business organization.

Liz started work as a customer service rep for a financial services company right after high school. Her 15 years of customer service experience has given her some ability to manage people. She does not have a formal culinary education, but she has an excellent sense of food preparation, ingredient selection, and meal planning. These skills should provide a foundation for the menu development and food preparation that a restaurant will require. However, her lack of a formal culinary education and experience in commercial kitchen operations might require some additional training.

The Kimball’s live in Lakeside Heights, a suburb of a metropolitan city. Their community and the adjacent towns consist of primarily middle-income households. Many of the adults in the community are college-educated and have professional jobs in business and manufacturing. The population of the town and surrounding communities is approximately 40,000 people. The city, about 12 miles from Lakeside Heights, has a population of 110,000.

Michael and Liz believe that a restaurant serving Liz’s specialties of “homestyle” American, Italian, and seafood dishes would be a good choice for their location. They are excited about the possibility of providing quality food at a reasonable cost. The same family and friends that enjoy Liz’s cooking would match their expected customers. They want to offer a quiet, relaxed dining environment offering mid-priced meals.

n Researching the Business

As they talked about the details, their dream gathered momentum. However, they both knew that they couldn’t build their business on dreams alone. They would need additional business advice and perspective to ensure that their business concept was realistic. First, they checked out the numbers. Liz and Michael, along with their advisors and friends, assessed the capital required for starting a restaurant. They agreed that Liz and Michael had sufficient funds to use as start-up capital for the new venture.

Tom, a family friend employed as a marketing consultant, felt that their business model would be well suited for their location. They had their eye on a strip mall location that was vacant and could be suitable for a small family restaurant. They contacted the local real estate agent, Anne Marie Sim- mons, to ask about its rental cost, availability, and size. Liz and Michael visited the location with Anne Marie. The agent said that the store housed a diner for three years before it closed. She speculated that the diner might not have been able to compete against the fast-food franchises in the area. The agent also believed that the owners did not have the proper financial and marketing plan to be successful.

Liz studied the store’s floor plan and dimensions. The store had floor space to accommodate about 50 diners as well as a full kitchen operation and storage areas. The strip mall location had plenty of parking as well as access on a major road. The gas, plumbing, and electrical infrastructure were in good working order. The décor and kitchen appliances need to be purchased as well as all restaurant fixtures (pans, dishes, flatware, etc.) if they signed a lease to occupy the restaurant.

In order to be efficient and leverage their individual skills, Liz and Michael segregated the various research tasks necessary to compile business projections and forecasts. Michael focused his attention on the front-house operations, sales, and marketing plan while Liz analyzed the kitchen operations, inventory, and menu planning. Each of them compiled forecasts for the startup and operational costs in their areas of specialty. These costs included the labor, materials, food, utilities, rent, and other necessary costs. These forecasts would be the foundation of their business, financial, and operations plan.

n Creating the Business Plan

Michael continued to work with Tom on the marketing and promotion of the restaurant. Their first thought was to gather sales, customer, and meal data from the previous owner. To protect the anonymity of the new owners, Michael asked Anne Marie to contact the previous owner. She provided three years of weekly data on the number of meals and tables served. Unfortunately, the previous owner could not or did not want to provide any sales data. Michael entered 164 weeks of data into a simple Excel spreadsheet to review. The spreadsheet contained three data points: week ending date (Sunday), total checks, and total meals served. Michael and Tom reviewed the spreadsheet to attempt to find some relevant information for their marketing and forecasting projections.

The diner had been open seven days a week. However, the data Michael received was not broken down by the day of the week. Therefore, the data could not be used to analyze daily traffic and sales, but only to analyze weekly trends without information on daily traffic and sales.

Tom coached Michael on how to analyze the data through a “rough” first glance. He separated the data into three spreadsheet tabs by year, where the first row of weekly data was the first week in the calendar year. He added a column that calculated the average meals per check. Then, to gain an understanding of the restaurant’s customer load, he ranked both the number of meals and checks within the year. These values provided a basic sense of the high and low weeks for the previous restaurant. He then sorted each of the three calendar years by the meal count (descending with the highest ranking first).

The lack of daily data limited the depth of analysis that could be completed. Tom looked at the hard- copy of three years of data side by side. After reviewing the three years of data, Tom pointed out that their weekly data showed only one clear trend: Some weeks showed lower sales than the other periods. Upon further analysis, it appeared that they were holiday periods (Thanksgiving and Christmas weeks) as well as some summer weeks. Without the daily data, it was impossible to determine the distribution or trending of customer sales.

Liz completed another tour of the restaurant location. The kitchen was equipped with an operational walk-in refrigerator, exhaust fan, several tables, and shelving units. She assembled a tentative new floor plan for the kitchen and food preparation area. From the floor plan, she compiled a cost estimate listing the appliances and fixtures still needed for the kitchen.

In addition to seating about 50 people comfortably with 15 tables, Michael believes that a bar can be built to seat an additional 10 patrons. He created estimates for dining room and bar equipment, furniture and fixtures, including all labor installation costs.

Tom helped them create a spreadsheet using various factors to estimate the weekly sales. They used some of the previous owner’s data to calculate the seasonal and weekly trends. With the menu that Liz compiled, they estimated the weekly sales for the restaurant for the first year. The entire spreadsheet calculated the variable costs (labor, food) based on the number of meals served. The list of fixed overhead costs (like utilities, taxes, and rent) then helped to generate the monthly cash flow and profit estimates. The spreadsheet calculated three scenarios: aggressive, reasonable, and conservative. The most conservative estimate resulted in a small loss for most months. They felt comfortable with the range of projections they had compiled. Tom believed that Liz and Michael could present these forecasts and a business plan to a bank for a loan for the startup costs.

n Launching the Dream

Kimball’s Restaurant opened in the strip mall location. As with any new business, the restaurant started out slowly with sales closer to the conservative estimates. However, as their reputation for quality, reasonably priced meals developed, Liz and Michael knew their dream had become a reality.

Three years later, Kimball’s was operating successfully and profitably. Their dining room was often at capacity with both new and returning customers. They often had a small waiting line on weekend nights. Liz and Michael were very satisfied with their dream. What would be next?

BUSINESS CHALLENGES

In the next three chapters, you will learn what Michael and Liz need to get started in harnessing the power of information systems to help build and grow their restaurant. They will need to understand how information systems can help with a restaurant’s short-term (operational) needs as well as plan for long-term initiatives (strategic) to expand the business.

● In Chapter 1, “Business Information Systems: An Overview,” you learn the various types of information systems businesses use and why familiarity with information technology is important for your career. You also are introduced to some of the major ethical and societal concerns about acquiring, storing, and reporting potentially sensitive information.

● In Chapter 2, “Strategic Uses of Information Systems,” you learn how to use information strategically, and how to harness information technology for competitive advantage.

● In Chapter 3, “Business Functions and Supply Chains,” you learn how you might best use information technology to help manage a business, whether you need to order inventory and track sales, generate financial statements, or automate payroll systems. You also learn how supply chain management systems serve whole enterprises.

The restaurant has been operating successfully for three years. Although they experienced challenges, Liz and Michael believe that they developed a great dining establishment. Sales forecasts have steadily increased over the last three years. Thankfully, the growth was not so fast as to cause any “growing pains” or problems with their business. Michael found that during most weeks, they had reservations for 50 to 100 percent of their dining capacity.

Processing Orders and Payments

Michael believed his analysis was fairly accurate, but it took a lot of effort to compile his information. The servers wrote the customer orders on multipart paper checks. One copy of these checks went to the kitchen for preparation. The server tabulated totals on the original copy and gave it to the customer when the meal was complete. At that point, the customer paid the cashier directly with cash or a credit card and the hardcopy of the check was saved. Several times a week, Michael used the paper checks to enter the sales and table information in an Excel spreadsheet for analysis. Because he was so busy with other operational priorities, the spreadsheet data entry and subsequent analysis was often delayed.

The restaurant processed its payroll through a local service. Employees maintained their timecards manually. Each week, the timecard data was validated by Michael and sent to the payroll service for processing and check printing. Michael was not comfortable with the manual entry of employee time punches, but he did not have a simple, cost-effective alternative.

Michael used a small business accounting package to track the restaurant’s expenses, process payable checks to suppliers, and record deposits. The software was easy to use and provided the balance sheet and income statement needed for the business. It also generated the required tax information for his accountant to file the appropriate tax forms. However, it did not track a level of information needed for analyzing the business operations and forecasting sales. From his experience in human resources, Michael understood the need for quality data and business information. At his former employer, the information technology department provided that expertise and assistance. Unfortunately, those skills were not available at the restaurant.

Michael knew that his time was limited and that he needed to focus more on the operations rather than data entry, but he also wanted to collect and analyze data about his business to manage it and plan effectively.

Their son, Tyler, finished his education to complete a business degree, specializing in marketing and

management. He had worked in the restaurant during the summers and semester breaks as a busboy and server so he had some familiarity with the business. He was also anxious to gain more experience to try out some of the skills he had learned in business school. Liz and Michael decided it was a good time for Tyler to join the business.

Defining the Problems

Michael told Tyler that he would like to streamline the front- and back-house operations and gather more information for analysis without relying on manual data entry. Tyler understood the challenges because some of the problems in these areas were directly related to issues that Tyler encountered while he was a server at the restaurant. The issues could be categorized into two areas: completeness and accuracy of guest check information and check payment.

Because the guests’ orders were handwritten, sometimes parts of the orders were not legible. In addition, especially with new servers, some of the information needed to complete a meal was either inaccurate or incomplete for that meal choice (cooking preferences, toppings, special preparation). This issue added time for the server and cooking staff as well as reduced customer satisfaction. Check payment was another problem. Often, it was not clear to the customers whether they should pay the server or the cashier. Michael wanted to control the cash and credit-card processing at a central location but was willing to review this policy.

Tyler talked to the servers and kitchen personnel to gain perspective on the guest check and payment problems. The staff was pleased to be asked for input. They confirmed that guest check accuracy and payment were issues, but additional issues were uncovered. As in many restaurants, at Kimball’s the servers were responsible for any checks not paid by the customer. However, it was impossible for the server to know if the customer paid the cashier or left without paying. The servers would prefer that customers settle their payment directly with the server so that they could know if a customer has paid. Servers also conveyed that even when they wrote out the order legibly and completely, meals sometimes were not prepared properly. The kitchen staff said that changes to guest orders are often “rushed” and disrupted the completion of other meals in progress. On many occasions, servers submitted changes after the order was ready to deliver to the table. Kitchen staff said a new process was needed to communicate order changes before the table’s meals were cooked. Unfortunately, it was impossible to tell from the current checks which orders required changes. Therefore, no data was available to objectively assess the magnitude of the problem.

Collecting Data to Address

Problems and Make Decisions

Tyler then focused his attention on the data analysis. He asked his parents to define two lists of questions: (1) What do you know from the information you currently maintain? and (2) What answers would you like to know that would help you operate the business more efficiently and profitably? They responded that they knew how many tables were seated by day as well as the total check amounts. The checks separated the liquor and food totals for tax purposes, but the

daily totals for these categories did not provide any details about the individual customers’ orders. Michael would also like to know more details, such as ... What meals did they order? Did they order appetizers? How many patrons were at the table (adults and children)? Did the customer take advantage of any of the specials? Liz wanted to know, how much food do I need to order based on past sales?

Tyler said that these questions were a great start. He categorized their questions into two areas: marketing/promotion and operational. He knew that additional marketing information was needed to determine menu planning, promotions, and customer satisfaction. He wondered how many people were returning or new customers. How did they learn about the restaurant? For operational issues, was there any monitoring of the operations as issues occurred?

Now that Chapter 1 has helped you understand how businesses use data, information, and information systems, let’s reexamine the Kimball’s Restaurant case. Michael is spending significant time entering the restaurant’s sales data. He does not have the time to manage the business during its operating hours as well as maintain the financial records. He is responsible for rent payments, sales tax reports, and paying suppliers for operating expenses and materials. He needs a better system to maintain the guest check and meal information for forecasting.