So Sweet Ltd

CLIENT INTRODUCTION: So Sweet Ltd operates as a chain of dessert cafs. It started as a family business called Cosi Dolce in Naples, and has rapidly grown across Italy and parts of Western Europe. The So Sweet international head office remains in Naples. The first UK branch opened in Brighton in 2014. Ten small- to medium-sized cafs now operate across the country. The Exeter caf opened in May 2016. It is located slightly away from the main city centre, in a unit within a small retail area, where it is hoped that the cheaper rents and rates will provide opportunity for competitive pricing and/or strong margins. This particular location also offers free parking for non-local customers. A standard range of desserts are sold in all So Sweet cafs. Most of these are ice-cream based. Cafs are managed autonomously on many operational matters, reporting to a UK region senior management team in Brighton, England. The vote in 2016 for the UK to leave the European Union (also known as Brexit) has been economically challenging for UK businesses. More recently, all cafs closed during the Covid-19 lockdowns of 2020. During the first summer lock-down (March July 2020), the Exeter branch furloughed its retail staff, but put a post on Facebook offering deliveries from a limited dessert menu. This was considered essential to the survival of the business as 60% of its annual income is made from ice-cream sales during April to September. Demand was beyond expectations. However in August, deliveries stopped when the caf was able to re-open. During the second lockdown in November 2020, delivery was not-re-offered as it was assumed that the UK winter demand would not be sufficiently profitable to warrant this provision. UK REVIEW UK senior management have been asked to review current operations in light of the current and anticipated economic situation. The Exeter caf is included due to a trend of dessert eateries opening in the city during 2015-18, some of which have since closed. You are a management consultant providing evaluations and recommendations on elements of this review to the UK senior management or caf managers as specified.

Question: CVP DECISION-MAKING

UK senior management has decided to undertake a customer profitability analysis for its Exeter caf, based upon the following data: Average revenue per customer 10.00 Average ingredients and other traceable variable costs per customer 3.00 Fixed overheads per month can be identified as being: Management salaries and benefits 3,000 Rent, Rates, Utilities 3,000 Customers are as follows Month - No. Customers May - 1,300 June - 1,000 July - 900 August - 850 September - 600 October - 500 Requirement: Evaluate the profitability of the Exeter caf and advise of considerations for performance improvement.