CHOCOHOLICS Two cousins, Krissy Karklins and Ingo Pavelson decided to take their passion for chocolate and turn it into a profession Both were recent graduates of the Ryerson hospitality program, where Ingo demonstrated a passion for cooking while Krissy, a competent chef in her own right, enjoyed the managerial side of restaurant operations After graduation they decided to open a unique chocolate themed restaurant, where all products (from appetizers to mains to desserts and even beverages) incorporated chocolate in some way Their first restaurant opened in their hometown of Haliburton in 1998 to rave reviews Two years later, they established a second restaurant in Gravenhurst By 2008 they were confident enough in their business model that they were ready to try their luck in a larger market The third store opened in Brampton in April 2008 But no business is without its struggles 2009 was a particularly difficult year Ingo took an extended sabbatical from the business to deal with personal matters after the passing of his father When an early spring thaw resulted in flooding damage to both the Gravenhurst and Haliburton stores in mid March, Krissy was left to manage the required repairs and renovations To make sure the stores would be ready for the busy summer season, it was decided to close for renovations The Gravenhurst store reopened in late May, but the Haliburton store saw its first customers back only on June 10 th With the difficult times behind them, Ingo and Krissy were ready to open another store, this time on Hess St in downtown Hamilton in 2010 and another in Cambridge in 2011 By 2012 it was clear to the pair that the Hamilton market was unique in many ways (including a lack of demand for chocolate based foods other than donuts) and the decision was made not to renew the lease when it came up for renewal at the end of the year The loss of the Hamilton store was a disappointment, but by 2014 they were ready to try again This time they were going all out a store right in the heart of Mississauga With access to a market this large, they suspected this store would either be a tremendous success or an absolute failure The quarterly sales figures for each store for 2007 2015, as well as the total combined sales for all stores are provided in Table 1 Data is also available for the first quarter of 2016, but only partial data (April and May) is included in the quarter 2 results as June's totals haven't yet been realized Krissy and Ingo have hired your team to provide them with a sales forecast for the rest of 2016 and all of 2017 In your initial conversations with them (over chocolate martinis and chicken mole), Ingo explains they would also like to learn as much as they can about the nature of their business and the relative performance of each of their stores Later (over a shared slice of chocolate ganache torte accompanied by a generous shot of Godiva liqueur) Krissy reveals that she and Ingo have been agonizing over the question of whether or not to open up another store in 2017, and if so, where You politely decline the offer of a chocolate flavoured cigar to seal the deal, but agree to have your team showcase a report for Krissy and Ingo based on the information they have provided Complete the Analysis fully analyze the situation using line graphs and simple linear regression (time index) and multiple regression (time index and binary variables for seasonality), and to present the results of your analysis along with your resulting recommendations in a brief memo to the owners The conclusions may be based on one or several regression time series analyses These should be included in the appendices of your report and should be BRIEFLY documented a brief statement of why the model was chosen for evaluation, the model result (equation), summary comments on the quality of the model results The goal in the analysis is to try to learn as much as you can about the business environment and Chocoholics' degree of success, in order to help you better advise the owners Ideally, the owners would like as much guidance as possible on How each restaurant is likely to perform An indication of the influence of seasonality on the business in general and on a store by store basis Potential trouble spots in terms of anticipated under performing establishments The advisability of their opening another store in 2017 and (if recommended) guidance regarding where such a store should be located Questions a) The owners would like to know the insights of their business based on forecasts, insights and recommendations arising from the analysis Please include the following an ANNUAL sales forecast for the business for the next two years (perhaps under more than one scenario), insights or comparisons regarding the individual stores, comments and suggestions regarding business strategies (including possible expansion plans) b) Please share the following graphs a line graph showing the sales of each individual restaurant over time a line graph showing the total sales for Chocoholics over time the linear regression models you built to understand the business Clearly label each model Summarize your conclusions regarding the quality of the model in a SINGLE STATEMENT directly in the regression output Data Sales Data For Chocoholics (thousands of dollars) Year Quarter Store 1 Store 2 Store 3 Store 4 Store 5 Store 6 Total Sales 2007 1 403 75 216 3 620 05 2 353 274 575 627 575 3 494 25 369 6 863 85 4 407 311 325 718 325 2008 1 462 15 257 25 719 4 2 406 266 175 218 5 890 675 3 510 8 393 75 249 5 1154 05 4 427 7 336 405 5 1169 2 2009 1 522 9 290 85 374 5 1188 25 2 221 85 111 325 240 573 175 3 463 75 325 25 299 5 1088 5 4 510 8 346 5 495 1352 3 2010 1 560 7 337 05 486 5 1384 25 2 492 65 373 275 280 1145 925 3 638 9 488 775 329 5 296 5 1753 675 4 553 15 460 425 584 317 1914 575 2011 1 595 35 404 775 617 5 358 5 1976 125 2 583 433 125 283 305 5 1604 625 3 662 8 576 975 313 269 5 193 5 2015 775 4 571 0588 451 5 525 5 246 236 2030 059 2012 1 589 8517 416 85 696 201 5 155 2059 202 2 560 7 437 325 370 157 129 5 1654 525 3 672 25 645 75 375 5 130 5 209 2033 4 587 9 510 3 841 68 261 2268 2 2013 1 650 5 437 85 765 5 176 2029 85 2 626 5 485 625 405 5 141 1658 625 3 693 95 742 875 461 5 234 2132 325 4 555 0094 576 45 757 284 5 2172 959 2014 1 643 65 459 375 861 5 220 5 2185 025 2 572 3 539 175 337 166 5 205 5 1820 475 3 704 2 854 175 387 5 278 5 223 2447 375 4 621 6 562 48 908 5 338 5 408 5 2839 58 2015 1 672 55 528 22 882 257 5 578 2918 27 2 612 8 569 887 370 5 203 365 5 2121 687 3 712 75 849 76 465 319 386 5 2733 01 4 630 25 523 84 1011 5 379 601 3145 59 2016 1 689 23 551 36 896 2 272 1 621 3 3030 19 2 356 2 398 77 212 5 170 298 1435 47 Note 2016 Quarter 2 sales consist of only April and May results (June has not yet been incorporated into the totals)

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CHOCOHOLICS Two cousins, Krissy Karklins and Ingo Pavelson decided to take their passion for chocolate and turn it into a profession. Both were recent graduates

CHOCOHOLICS

Two cousins, Krissy Karklins and Ingo Pavelson decided to take their passion for chocolate and turn it into a profession. Both were recent graduates of the Ryerson hospitality program, where Ingo demonstrated a passion for cooking while Krissy, a competent chef in her own right, enjoyed the managerial side of restaurant operations. After graduation they decided to open a unique chocolate-themed restaurant, where all products (from appetizers to mains to desserts and even beverages) incorporated chocolate in some way. Their first restaurant opened in their hometown of Haliburton in 1998 to rave reviews. Two years later, they established a second restaurant in Gravenhurst.

By 2008 they were confident enough in their business model that they were ready to try their luck in a larger market. The third store opened in Brampton in April 2008. But no business is without its struggles - 2009 was a particularly difficult year. Ingo took an extended sabbatical from the business to deal with personal matters after the passing of his father. When an early spring thaw resulted in flooding damage to both the Gravenhurst and Haliburton stores in mid March, Krissy was left to manage the required repairs and renovations. To make sure the stores would be ready for the busy summer season, it was decided to close for renovations. The Gravenhurst store reopened in late May, but the Haliburton store saw its first customers back only on June 10^th.

With the difficult times behind them, Ingo and Krissy were ready to open another store, this time on Hess St. in downtown Hamilton in 2010 and another in Cambridge in 2011. By 2012 it was clear to the pair that the Hamilton market was unique in many ways (including a lack of demand for chocolate-based foods other than donuts) and the decision was made not to renew the lease when it came up for renewal at the end of the year.

The loss of the Hamilton store was a disappointment, but by 2014 they were ready to try again. This time they were going all out - a store right in the heart of Mississauga. With access to a market this large, they suspected this store would either be a tremendous success or an absolute failure.

The quarterly sales figures for each store for 2007-2015, as well as the total combined sales for all stores are provided in Table 1. Data is also available for the first quarter of 2016, but only partial data (April and May) is included in the quarter 2 results as June's totals haven't yet been realized. Krissy and Ingo have hired your team to provide them with a sales forecast for the rest of 2016 and all of 2017. In your initial conversations with them (over chocolate martinis and chicken mole), Ingo explains they would also like to learn as much as they can about the nature of their business and the relative performance of each of their stores.Later (over a shared slice of chocolate ganache torte accompanied by a generous shot of Godiva liqueur) Krissy reveals that she and Ingo have been agonizing over the question of whether or not to open up another store in 2017, and if so, where.

You politely decline the offer of a chocolate flavoured cigar to seal the deal, but agree to have your team showcase a report for Krissy and Ingo based on the information they have provided.

Complete the Analysis

fully analyze the situation using line graphs and simple linear regression (time index) and multiple regression (time index and binary variables for seasonality), and
to present the results of your analysis along with your resulting recommendations in a brief memo to the owners.

The conclusions may be based on one or several regression time series analyses. These should be included in the appendices of your report and should be BRIEFLY documented:

a brief statement of why the model was chosen for evaluation,
the model result (equation),
summary comments on the quality of the model results.

The goal in the analysis is to try to learn as much as you can about the business environment and Chocoholics' degree of success, in order to help you better advise the owners.

Ideally, the owners would like as much guidance as possible on:

How each restaurant is likely to perform;
An indication of the influence of seasonality on the business in general and on a store by store basis;
Potential trouble spots in terms of anticipated under-performing establishments.
The advisability of their opening another store in 2017 and (if recommended) guidance regarding where such a store should be located.

Questions

a) The owners would like to know the insights of their business based on forecasts, insights and recommendations arising from the analysis. Please include the following:

an ANNUAL sales forecast for the business for the next two years (perhaps under more than one scenario),
insights or comparisons regarding the individual stores,
comments and suggestions regarding business strategies (including possible expansion plans).

b) Please share the following graphs.

a line graph showing the sales of each individual restaurant over time
a line graph showing the total sales for Chocoholics over time
the linear regression models you built to understand the business. Clearly label each model. Summarize your conclusions regarding the quality of the model in a SINGLE STATEMENT directly in the regression output.

============== Data ===================

Sales Data For Chocoholics
	(thousands of dollars)
Year	Quarter	Store 1	Store 2	Store 3	Store 4	Store 5	Store 6	Total Sales
2007	1	403.75	216.3					620.05
	2	353	274.575					627.575
	3	494.25	369.6					863.85
	4	407	311.325					718.325
2008	1	462.15	257.25					719.4
	2	406	266.175	218.5				890.675
	3	510.8	393.75	249.5				1154.05
	4	427.7	336	405.5				1169.2
2009	1	522.9	290.85	374.5				1188.25
	2	221.85	111.325	240				573.175
	3	463.75	325.25	299.5				1088.5
	4	510.8	346.5	495				1352.3
2010	1	560.7	337.05	486.5				1384.25
	2	492.65	373.275	280				1145.925
	3	638.9	488.775	329.5	296.5			1753.675
	4	553.15	460.425	584	317			1914.575
2011	1	595.35	404.775	617.5	358.5			1976.125
	2	583	433.125	283	305.5			1604.625
	3	662.8	576.975	313	269.5	193.5		2015.775
	4	571.0588	451.5	525.5	246	236		2030.059
2012	1	589.8517	416.85	696	201.5	155		2059.202
	2	560.7	437.325	370	157	129.5		1654.525
	3	672.25	645.75	375.5	130.5	209		2033
	4	587.9	510.3	841	68	261		2268.2
2013	1	650.5	437.85	765.5		176		2029.85
	2	626.5	485.625	405.5		141		1658.625
	3	693.95	742.875	461.5		234		2132.325
	4	555.0094	576.45	757		284.5		2172.959
2014	1	643.65	459.375	861.5		220.5		2185.025
	2	572.3	539.175	337		166.5	205.5	1820.475
	3	704.2	854.175	387.5		278.5	223	2447.375
	4	621.6	562.48	908.5		338.5	408.5	2839.58
2015	1	672.55	528.22	882		257.5	578	2918.27
	2	612.8	569.887	370.5		203	365.5	2121.687
	3	712.75	849.76	465		319	386.5	2733.01
	4	630.25	523.84	1011.5		379	601	3145.59
2016	1	689.23	551.36	896.2		272.1	621.3	3030.19
	2 *	356.2	398.77	212.5		170	298	1435.47

* Note: 2016 Quarter 2 sales consist of only April and May results (June has not yet been incorporated into the totals).