The basic of the business

McBurger specializes in hamburgers and also sell alcohol beverages, sodas, and desserts. It opens for lunch from Tuesday to Saturday, between 12:00 and 14:30 and for dinner from Tuesday to Thursday, between 19:00 and 22:30, and eon Fridays and Saturdays. Between 19:00 and 23:00.

The restaurant offers 10 different burgers including options of beef, pulled pork, fish, chicken, as well as a veggie alternative. A burger-and-fries bundle costs between 10.95 and 12.95 and McBurger is now selling a monthly average of about 4500 burgers.

The restaurant features 35 indoor seats and 27 outdoor seats and has been typically running at full capacity on Thursday, Friday, and Saturday evenings. Attendance is a little lower for lunch and, unlike may of its competitors, McBurger does not offer a special lunch deal.

The Take Away market

One big opportunity in the restaurant market is the increased demand in take-away food from different services, such as Deliveroo, Foodora, and Take Eat Easy. Deliveroo and Foodora usually pay the restaurant on invoice every two weeks. This makes up to a net working capital increase and ties up money in the business. Nevertheless, since Foodora has not established themselves fully in Nantes and Take Eat Easy went bankrupt, Deliveroo hold an almost-monopoly on Nantes take-away market. CEO has therefore signed a six-month exclusive agreement with Deliveroo (expiring April 2017), determining that:

Deliveroo takes 30% of the orders up to 28;

Deliveroo takes 25% of the orders above 28; and

Deliveroo charges the customer an extra of 2.50 per order.

The demand for take-away services is especially high on Saturday and Sunday evenings but, at the moment, McBurger does not accept take away orders on Saturday evenings and does not open on Sundays. It is also common that during Thursday and Friday evenings McBurger stop to accept take away orders when the restaurant runs at full capacity utilization.

The customers in the take-away segment do not appear to be very price sensitive. CEO has made this inference by studying their purchases. He argues due to their expensive beer purchases etc. they are likely people less price sensitive than his in-dining customer group. One important future issue would be to increase the order size to have orders above the 28 cut, to pay the take away service 5% less per order.

At existing capacity McBurger n earns around 2,000 per two-weeks from the take-away service. However, CEO estimates that the Sunday take-away demand could be up to 200 burgers per night and that he misses out on 50 burgers per Thursday and Friday night by not accepting take-away orders. The Saturday take-away demand is estimated to be up to 100 burgers.

To be able to meet the increased demand from the take away services,CEO ponders about opening a second kitchen, in a space across the street designated for take away use. CEO already acquired this space in order to produce his own bread. The new space costs CEO 1,200 in rent and 1,000 in bank fees (until 2021). The cost to establish a new kitchen would be around 10,000. Opening a new kitchen would facilitate to meet the full demand for take-away burgers all week, including Sunday evenings. However, opening a new kitchen would increase the staff costs due by requirement another two chefs, who would need to be present in the kitchen from 18:00 to midnight, six days a week. Hiring a chef costs McBurger approximately 1,800 for 150h.

Suppliers and Supplies

Burgers

The main ingredients in a burger are the so-called beef (which is not always beef), bread, greens, sauce, and cheese. McBurger uses five types of beefs: minced meat, pulled pork, chicken, fish and vegetarian.

The meat use for McBurger is of about 30 kg/day, supplied at 5,40/kg. For chicken, pork and fish the weekly bill amounts to 220. The bill for fresh greens amounts to 700 to 900 per 10 days, which also includes the potatoes used for the fries. The weekly cheese purchase amounts to 7kg of Comt at 12/kg and 7kg of Cheddar at 7/kg. Other important purchases include 50/week of pickles and 102/week of oil. Further procurements include mayonnaise 26/week, ketchup 45/week and BBQ sauce 36/week. CEO does not consider replacing the ingredients by cheaper alternatives because he believes it would negatively affect the taste the burgers quality and taste.

Bread

McBurger has recently started to produce its own bread and, to do so, an additional space has been rented and bread machine has been acquired for 19,000. The estimated life length of the machine is 5-8 years (and can be sold at rest value at any time). The additional space costs 1,200 in rent and 1,000 in bank fees (50,000 loan with 1.6% interest rate) per month. This space could also be used for the take-away kitchen. McBurger also sells bread to Monsieur Machine for 250/month. The baker working McBurger costs 2,300 per month (including taxes) and works between 4 and 7h per day. Before baking its own bread, McBurger used to buy it from a bakery for 0.54 apiece. The daily usage of ingredients to produce bread is

Ingredient	usage/day	purchase price
Flour	18kg	86/32.5kg
eggs	8	8 cents/egg
butter	500g	15/4kg
salt	250g	2/kg
Seeds*	0.542kg	9.5/kg
jeast	690g	2/kg

*added only to a certain type of bread, which is included in about 40 burgers per day.

Drinks

McBurger sells mostly beer and wine, with selling prices, purchasing prices, and estimated weekly sales as follows:

Product	Unit	Purchase	Big	Price	small	Price	Unit	Estimated weekly sales
Brooklyn Lager	liters	3.50	0.5L	6.4	0.25l	3.5	liters	120
Corona	bottle	1.38	bottle	5			bottle	40
Bud	bottle	1.19	bottle	4			bottle	48
Red wine 1	bottle	9	bottle	31	glass	4.8	bottle	1
Red wine 2	bottle	3.5	bottle	17	glass	3.5	bottle	8
Ros wine	bottle	3.63	bottle	17	glass	3.5	bottle	1
White wine	bottle	4.17	bottle	17	glass	3.5	bottle	2
Sodas	can	0.79	can	3.2			can	96

To increase the margin on beer CEO has considered switching the tap beer to less expensive ones because he suspects that increasing the price of Brooklyn Lager would push prices too high and most likely result in a loss of sales which would offset the price increase effect. Nevertheless, although he knows that switching to Jupiler or Kronenbourg could allow a higher margin, he is concerned about jeopardizing the brand association by not offering a New York beer.

Production

A standard burger uses 130g of meat and one bread. In addition to the basics there are greens, sauce and cheese. One problem in the restaurant business is that some food needs to be thrown away. Minced meat has a particularly short life span. However, by carefully estimating demand, CEO has been able to keep a very low throw away rate on their products.

Other major costs

Rent: For the main restaurants 1,500 and bank fees 1,000 (50,000 loan with 1.6% interest rate on 7 years). For the additional space: 1200 and 1000 in bank fees (50,000 loan with 1.6% interest rate on 7 years).

Employees: 6 full time employees and 1 part time. The total monthly cost is 10,000 and 18,000/3 month in associated taxes. The bakers salary is included in the salaries above.

Taxes: 33% corporate tax rate, VAT on alcohol is 20% and for the food it amounts to 10%

Gas and Electricity: Electricity: 734/month and Gas: 220/month (plus 200/month for electricity to the extra space).

QUESTIONS

How many burgers per day is his break-even point? How to help CEO to understand his business? What sort of internal accounting could help him gaining a better control of his business? How are the costs spread?