Question 1

Mudeford Ferry Bistro is part of a chain of restaurants on the South Coast. The owners appointed a new manager, Roberto, for the financial year ended 31/12/2020 who made the following changes:

• Reduced the menu options so that meals could be made with fresh local produce. The previous menu had extensive options with a lot of frozen food being used, which reduced training staff required in preparation.
• Invested in a BBQ area outside the restaurant for alfresco dining, increasing the number of tables available.
• Introduced a new pricing policy which was loosely based on material cost plus 450% to cover labour, fixed costs and profit.
• Reduced opening times per day from 10 hours to 8 hours, 362 days a year.

Robertos popularity amongst the Mudeford customers is clear, with sales revenue up on the prior year. Despite this, you are slightly concerned with the bottom line result and have decided to compare 2020 to the prior year:

	Y/E 31/12/2019	Y/E 31/12/2020
	'000	'000
Sales Revenue	618	855
Variable Costs	85	155
Staff Costs	155	257
Leasehold Costs	125	127
Depreciation	44	80
Cost of Sales	409	619
Gross Profit	209	236
Allocated Head Office Costs	190	220
Operating Profit	19	16
Fixed Assets	122	190
Current Assets	7	9
Current Liabilities	35	55
Operating Data:
Beverage Sales	352	371
Food Sales	266	484
Staff (Full time equivalent)	7	10
Leavers	2	1
Joiners	2	4
Absence Hours	230	267
Average Customers Per Day	44	40
SQ Metres	115	135

Required:

1. Write a report to the CEO which:

1. Includes a schedule/table which compares the restaurants performance in 2020 with the performance in 2019 (this may include a comparison of Key Performance Indicators, key financials and any other data as required)

[18 marks]

2. Suggests reasons why the restaurant barely broke even in 2020 despite the apparent success of Robertos strategy.

[18 marks]

3. Suggest and fully justify actions Roberto could take to improve profit while adhering to the fresh local produce offering.