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Soon after Angie Keller graduated college, she began talking with her family and best friends to help figure out her career options. She had just

Soon after Angie Keller graduated college, she began talking with her family and best friends to help figure out her career options.She had just delighted a large group of people with her delicious Peruvian cuisine at her graduation party, so her first thought was to open a Peruvian restaurant. As a nontraditional graduate of her university's hotel and restaurant administration program, she was aware of the challenges of running a restaurant, including the long hours and high failure rate. After abandoning the idea of a restaurant, she began considering other food-service operations such as catering or supplying specialty items, for example, appetizers or desserts.

One idea she considered was selling empanadas. An empanada is a pastry made with modified pie dough filled with various ingredients. The dough is rolled out and cut into three- to four-inch circles. A heaping tablespoon of pre-cooked ingredients is placed in the center, and the dough is folded over the ingredients and pinched closed. Then the empanadas are baked at 350 degrees for about one hour.

When there are 15 minutes of baking time left, the pastry is brushed with egg. Ingredients vary but often include meat mixed with vegetables and spices, or even fruit, as well as vegetarian varieties. Different regions of Latin America favor diverse types of empanadas. For instance, pumpkin empanadas are popular in Mexico.

Angie had long been told that her empanadas were the best in town, and they travel well. They can be frozen and retain their good quality and taste even after being defrosted and reheated. So she decided to create Angie's Empanadas, a wholesale food-service company, to sell her empanadas to local restaurants. The company sells three kinds of empanadas: Peruvian (chicken), Argentinean (beef), and vegetarian.

The empanadas are assembled in a rented kitchen, with fully cooked fillings. Then they are baked and placed on trays in batches of eight small empanadas. Currently Angie sells trays of the three types for the same price. Restaurant clients unwrap the tray, brush the empanada tops with egg wash, and heat them for 10 minutes before serving them as appetizers.

STARTING THE BUSINESS

When looking to start a business around her empanadas, Angie first considered a large-scale rollout of pre-packaged empanadas for grocery stores and big-box retailers but quickly realized that option was premature. She then decided to explore the possibility of a smaller-scale rollout, selling empanadas to local restaurants.

Over the next few days, Angie did some basic research and found that there were about 800 restaurants in the local metropolitan area. Because empanadas are common throughout Latin America, she narrowed the prime target market to some form of Latin American food. She found approximately 100 restaurants that could be classified as Latin American, with the majority identifiable as Mexican restaurants. Of these, she identified 21 as national or regional chains such as Taco Bell and Chipotle Mexican Grill. Angie identified a local chain of seven restaurants as unsuited for the product. This left 72 restaurants that she labeled prime target customers.

Digging further, Angie made a second list of non-Latino restaurants and bars that might be interested in her empanadas. Excluding national chains and types of cuisine that were obviously a poor fit, she pared down the list to 130 in total.

At the same time, she was perfecting her recipes and estimating costs. She identified a few fully equipped kitchens she could rent for between $700 and $2,000 a month, depending on size, equipment, and location. She also estimated the cost of other items, including ingredients, labor, trays, utilities, and delivery. Then she classified each cost as fixed, variable, or mixed based on the advice of her accountant. After some additional market testing and interactions with potential clients, Angie prepared a six-month budget (see Table 1).

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Table 1 : SIX MONTH BUDGET APRIL SEPTEMBER APRI JUNE JULY AUGUS SEPTEMBER TOTAL Trays sold 300 500 650 1,100 3. 350 ales revenue $3 450 $4 025 85 , 17 $5, 750 $7 , 475 $12, 650 $38 , 525 Cost of sales Ingredients 8725 $845 $1 087 81 207 $1. 570 $2657 $8 091 Labor 1 035 208 1552 379 17. 558 Tray 135 195 330 1005 Rent 000 OOO 1000 1000 1000 1000 6000 Utilities 125 835 Delivery 650 700 800 850 1000 450 5 450 Total cost of sales $3 621 $3 983 $4.70 $5 067 $6 154 $9 409 832 939 Operating profit $ (170 ) $42 $470 $68 $1 321 83. 247 85 58 NOTE - MIXED COSTS VARIABLE COST PER TRAY FIXED COST PERMONTH Utilities 50.0 $100 Delivery $7.00 $350Table 2 ACTUAL RESULTS APRIL - SEPTEMBER APRIL JUNE JULY AUGUST SEPTEMBER TOTAL Trays sold 340 290 Sales revenue 53.450 $3 910 85 , 405 $7 728 89 747 $14, 835 $45 069 Cost of sales Ingredients $725 8901 87 . 214 $7 760 $2 212 83. 255 $10 067 Labor 1.139 784 2.550 3 , 214 4 896 14 873 Trays 202 387 1 .176 Rent 1000 OOO 1.000 1000 1000 1000 6000 Utilities 190 Delivery 865 056 6058 Total cost of sales $3740 $4, 124 85 , 17 $6 715 $8 078 871 27 $39 048 Operating prof ($290) ($214 ) $289 $1 013 $1 6 63 83 560 $6 021 NOTE - MIXED COSTS ACTUAL FIXED COST PER MONTH Utilities $100 Delivery 8350Table 3: ACTUAL INGREDIENT COST BY TYPE AND SALES MIX BY MONTH PERUVIAN ARGENTINIAN QUANTITY VEGETARIAN (CHICKEN) (BEEF) April 300 20% 40% 40% May 340 5% 45% 50% June 470 10% 42% 48% July 672 8% 42% 50% August 847 8% 43% 49% September 1,290 12% 44% 44% Total 3,919 10% 43% 47% Cost per tray $1.265 $2.300 $3.105

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