Coffee Shop Chain Case A chain coffee shop company is considering adding a new line of business of offering small foods and snacks. The CEO of the company hired you as a financial analyst to help the company decide if it is economical to add foods and snacks to its business or not. You have spent some time gathering information and talking to people in the company and you collected the following information. 1) The coffee shop chain already offers 3 types of drinks, each comes in 2 sizes. The coffee shop wants to add a breakfast sandwich and classic oatmeal. The current sales information of the existing drinks and estimated sales information for new foods according to the marketing consultant are:

Question 1: Coffee shops have two types of costumers. Customers who sit in the coffee shop (40%) and to-go customers (60%). The companys marketing consultant thinks that offering food will increase the sales of the existing drinks to to-go costumers by 15% (they stop by for food and also buy a drink). However, since eating food takes a long time and the spaces in the coffee shops are limited, offering food will lower the sales of the existing drinks to the first type of customers by 10% (some drink customers cant find a seat and just leave without buying anything).

Question 2: Should the company add food business?

Small Coffee Large Coffee Small Tea Large Tea Small Hot Chocolate Large Hot Chocolate Breakfast Sandwich Classic Oatmeal Unit Price $2.50 $3.50 $2.00 $2.70 $3.00 $3.70 $4.50 $5.00 sales 500,000 350,000 120,000 100,000 100,000 80,000 50,000 (estimate) 60,000 (estimate)