Question
b) Fishy and Chippy Ltd operates a chain of restaurants in Perth, South Australia. The head office reviewed information about two of its restaurants i.e.
b) Fishy and Chippy Ltd operates a chain of restaurants in Perth, South Australia. The head office reviewed information about two of its restaurants i.e. Restaurant Alpha and Restaurant Gamma (see below). Each restaurant operates as a separate stand-alone business and is designated as an investment centre. (8 marks) Restaurant Alpha Restaurant Gamma Sales $900 000 $805 000 Cost of goods sold $495 000 422 500 Operating expenses $350 000 300 000 Profit $55 000 $82 500 Average invested capital $350 000 $500 000 ROI ? ? RI ? ? Required: i. Calculate the financial performance of each restaurant using both ROI and RI. Assume the firm's minimum required rate of return is 13%. (4 marks) ii. Which restaurant performed better? Explain (2 marks) iii. Suggest two ways the poor-performing restaurant can improve its performance in the future (2 marks)
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