PART 3 The Pieman's Fancy management team was once again impressed with your team's recommendations on the investment opportunities. For various reasons, the company decided to invest in the new labelling machine and not pursue the national fast food chain RFP. However, since receiving your recommendations, the company has been conducting strategic planning discussions on the future of Pieman's Fancy and is considering two major acquisitions. Option 1 Purchase Pete's Steakhouse. Up to now, Pieman's Fancy has focused on selling pies as a wholesaler to restaurants and supermarket chains. Linda and Taylor were approached by the chain's management group about whether they would be interested in buying their five underperforming restaurants and operate them under the "L&T's Steakhouse" name. Pete's Steakhouse is known for its excellent steak dinners and service but has struggled to expand its menu to compete with the many dining options available to consumers. The key idea with this acquisition is that adding Pieman's Fancy outstanding dessert offerings would make the new restaurant an appealing destination for both dinner and dessert. To help prepare for the upcoming initial negotiations, Linda and Taylor have asked you to review the 2019 performance report for the chain (see Table 2). It is estimated that average price per meal would increase 12% with the new desserts and require an investment of R10 million. Table 2: Pete's Steakhouse 2018-2019 Performance Report 2019 Actual 2018 Actual Customer volume R1 066 000 R1 105 000 Net sales R10 523 440 R10 508 520 Cost of sales R7 335 366 R7 363 252 Food R 6340 206 R6 362 722 Labour R995 160 R1 000 480 Gross profit R3 188 074 R3 145 268 Other operating expenses R2 270 665 R 2 222 835 Operating profit R917 409 R922 433 Other data Average operating assets R7 500 000 R7 500 000 Food costs: % variable 100% 100% Labour costs: % variable 70% 70% Other operating expenses: % variable 60% 60%