Taylors is a popular restaurant that offers customers a large dining room and comfortable bar area. The restaurant is located in a vibrant urban business district which seems to be attracting a variety of entertainment and food establishments. There is easy access to the restaurant and many patrons enjoy it for after work drinks and dinner.

Taylor Henry, the owner and manager of the restaurant, has seen the business increase steadily over the last two years and is considering where and when she will have to expand the available capacity for the business. The restaurant occupies its own building and currently all the space is being used for dining, the bar, and kitchen; however, additional space is available on the property to expand the restaurant.

The bar is a full-service bar with experiences bar-tenders who have worked with Taylor for many years. These friendly, efficient bar-tenders know many of the regulars by name. The kitchen is efficient and well-staffed and prepares meals only for the dining patrons. Sammy Sousa, Taylors chef, has been working for the restaurant for a number of years and has develop a list of dinner options that can be prepared in an average of 12 minutes per meal. The kitchen, when fully staffed, is able to have up to 20 meals in preparation at a time, or 100 meals per hours (60 min/12 min x 20 meals).

Currently, the restaurant opens at 6 pm and closes at 10 pm each night (except Monday). On the average, 24 customers enter the bar and 50 enter the dining room at the beginning of each hour. Over the last 2 years, Taylor has been examining the trends in both the restaurant business and her business. She expects that within about 4 years, the number of bar customers will increase by 50 percent and the dining customers will increase by 20 percent.

Taylor is worried that the restaurant will not be able to handle the increase in customers and has commissioned a capacity analysis, focusing on four areas of capacity: the parking lot (which has 80 spaces), the bar (54 seats), the dining room (100 seats), and the kitchen. She has provided the following estimates for use in the analysis:

• Diners typically come to the restaurant by car, with an average of 3 persons per car, while bar patrons arrive with an average of 1.5 person per car.
• Diners, on average, occupy a table for an hour, while bar customers usually stay for an average of 2 hours.
• Due to fire regulations, all bar customers must be seated.
• The bar customer orders one drink per hour at an average of $7 per drink; the dining room customer orders a meal with an average price of $22; The restaurants cost per drink is $1, and the direct costs for meal preparation are $5.

Taylor has obtained construction estimates. To increase the capacity of the bar to 80 seats, the dining room to 120 seats, and the kitchen to 25 meals at the same time would cost $250,000, which Taylor could finance for $5,000 per month for the next 4 years. There would be no change to the parking lot.

Assignment:

Prepare an analysis answer the following questions, using the Capacity Analysis (student).xlsx spreadsheet provided. You may type your numbers into the Student Sheet tab or reference them from another sheet. Please prepare your analysis on other tabs. Label the tabs.

Save your sheet with your last name and send it to me by Sunday evening sergeana@gvsu.edu

Reminders:

• Use an input section
• Label your work
• Make the spreadsheets readable: Colors, borders, and other formatting may help
• Save it using your names and email it to be by Sunday evening.

Analysis Questions

1. Assuming peak activity (after first hour), compute the percent occupancy and the available slack in seats, spaces and meals.
2. Compute the total throughput margin (sales less direct material costs) per day and per month (26 days) for the bar and the restaurant.
3. Assuming the activity in the bar increases 50% and the activity in the restaurant increases 20%, compute the percent occupancy and the available slack in seats, spaces, and meals. Will there be insufficient capacity? Where?
4. Given, the current constraints and additional sales, compute the total throughput margin per day and per month for the bar and the restaurant.
5. Assuming the increase sales and the capacity expansion, compute the percent occupancy and the available slack in seats, spaces, and meals. Is there sufficient capacity?
6. Given the additional capacity and additional sales, compute the total throughput margin per day and per month for the bar and the restaurant.
7. Compare the monthly profitability (remember to include the additional costs from renovations) for the three situations.
8. What action would you recommend? Why? What additional considerations would be important?