Sunset-at-Blue has just finished its first year in business and although the restaurant broke even the co-owner, Bruce Melhuish, is not content as there is a lack of efficiency with the staff and a high demand of customers. Queue lines to be seated and at the cooking station are causing Sunset-at-Blue to lose profits. This case study analyses how Sunset-at-Blue can improve service efficiency, increase seating capacity and future profits. Sunset-at-Blue, a franchise of Sunset Grill is located in Ontario, Toronto and is co-owned by Bruce Melhuish whom was an executive for a technology and telecommunications firm. Sunset-at-Blue is an all-day “fresh made to order” breakfast restaurant, which business motto is “fresh is tastiest”. This allows them to be a healthy and fresh breakfast restaurant at Blue Mountain.
Sunset-at-Blue is not like other breakfast places in the area; it serves breakfast all day and runs a single 7am to 3pm shift while providing superior quality meals at low prices. Sunset Grill is located in the village of Blue Mountain. Its location is one of the first restaurants visitors see when they enter the Blue Mountain village. While having a primo location, Sunset-at-Blue is having growing pains associated with being a busy restaurant struggling from long wait times for guest, long queue at the cooking stations, and slow learning from the staff. Even though Bruce Melhuish’s Sunset Grill at Blue Mountain was able to break even in the first year, he knows that the Sunset Grill will struggle to generate extra revenues and make a profit due to the high traffic of customers, the seating capacity, and the amount of time it takes to serve a customer from beginning to end. Problem Statement
The franchise is struggling to capitalize on consumer demand, without some investments
to help improve service efficiency, Sunset Blue will never achieve its fullest potential to
streamline the ordering process.
Analysis (3 pgs) There are several underlying problems with the current personnel and procedural configuration. The most pressing issue is the excessively long turnover time per table, which results in a long wait for hungry customers, and reduced revenue for the business. There are approximately 10 steps between the customer arriving at the restaurant, finishing their meal, and a new group being sat. Careful consideration of each step reveals significant opportunity to reduce wasted time throughout the customer interaction. The bulk of waiting during peak hours is a result of the kitchen receiving orders far faster than they can fulfill them. One scenario given in the case study shows a full 26 minutes elapsing between an order being sent to the kitchen, and finally beginning to be cooked.
Once the food in this example was cooked, it sat for 5 minutes before being delivered to the customers. This represents 31 minutes of idle time for a table of two, which when applied across an entire restaurant of 2 and 4 seat tables presents a significant reduction in turnover time and a huge loss of revenue. One suggested method for improving turnaround time is to introduce a runner on the weekends, which would increase turnaround by 5-10%. With an average of 556 plates served per day, this would create approximately 28-56 additional plates served. Using the following chart we can calculate the feasibility of hiring a runner at $10/hr.
Food Revenue Avg Plate Price Profit Per Item Daily Runner Cost Net Revenue Increase Weighted
$5.64 $80 $155.84 – $235.84 Back Flap $7.13 $3.57
Regular Menu $8.59 $6.01
By averaging the menu item cost, and weighting it on an 85/15 scale (regular menu/back flap) we can determine an average profit of $5.64 per item. When considering the 5-10% increase in sales, and subtracting out the daily cost of a runner, the restaurant would net between $155-$235 per weekend day during the summer months. Even during the summer weekdays this would result in an roughly $15-$95 increase in profit every day. This pattern is consistent for every day except winter weekdays and shoulder weekdays, where it would not be profitable to employ a runner. In the winter the restaurant seating is reduced by about a third due to the outside seating being unavailable. Considering that the winter months are on average just as busy for the resort area as the summer months, the reduced seating presents a limiting factor on profitability.
Month Village Occupancy Restaurant Sales August 90.50% $110,210.00 February 89.70% $71,090.00 Difference -0.80% -35.50%
The two busiest months of the year are August and February. With an almost identical village occupancy, the 35.5 percent reduction in sales is unacceptable. This is consistent with 32.25% reduction is seating when the outside 40 seats are closed off for the winter. Two options are proposed: Build benches indoors that will net 9 additional seats, or install outdoor heaters that will net 40 additional seats. The heaters are more expensive and require significant recurring costs for propane
Winter Options Gained Profit Weekend Gained Profit Weekday 5 Year Winter Net Avg Benches $260.00 $78.60 $11,589.24 Heaters $1,155.55 $349.35 $46,432.17 By taking the average number of plates served per seat per day in the winter, we are able to determine the additional plates that could be served with the additional seats. Multiplying this figure by the average weighted profit of any item on the menu yield the increase for both options, which can then be reduced by the one time and recurring costs associated with each. The results show that installing heaters will return a much higher 5 year yield than the benches alone. It is safe to assume these seats would be filled as well, since the winter months are on average just as busy, or more than the summer months in the village.
Another viable option is to build out a roof, walls, and retracting door openings at the front of the outdoor seating area. Electric heaters could keep the space warm in the winter, and the doors could be opened in the mild months to preserve the outdoor feel. This uploads a bulk of the expense up front, but would net the same income as the heater option and have a break even timeframe of 5 years, after which it would become the most profitable option of all three. The total cost for the construction would be an estimated $42,346 with a total duration of 3 weeks and the restaurant will remain open. See below for contractor listed prices for design and construction of the structure.
Item Cost Design $1,500.00 Permit $1,600.00 Roof $8,640.00 Glass Doors $19,485.00 Heaters $1,250.00 Markup $4,871.00 Contingency $5,000.00 Grand Total $42,346.00
Another method for reducing the wait time and increase the turnover of customers coming to eat at the restaurant is to integrate a” Point of Sale System.” With the integration of this system it will eliminate the current “chit” they have now, which is not efficient. With similar products on the market the best POS System for restaurants according to Businessnewsdaily.com is Touch Bistro (Angeles). Touch Bistro consist of iPads integrated with an ordering system, payment option and preloaded menus that are included with the monthly service charge of $399 for unlimited licenses since there are up to 6 servers & 1 cashier during peak hours and the use of the system does not require an extensive training to be able to use. Melhuish will need to invest in a reliable wireless connectivity and minimum 7 iPads at the price of $399/ea.
The system will take orders directly on the iPads that will report back to a screen in the kitchen where the cooks can see it instantly and will eliminate the trip back to the kitchen or computer to place an order. This will reduce order errors by the waiter by eliminating the need to write and each order is associated with a seat at the table so the server does not have to guess which meal is for each guest. With the POS system employee efficiency will improve by having the capability of presenting the bill at the table, paying at the table reducing trips to the register to process payments and will allow for easier bill splitting when needed. In addition to improving employee efficiency there are several cost-effective factors, which come with the integration.
As employee efficiency improves the table turnover increases and increases the number of customers served and reduces long wait times. Touch Bistro allows you to easily modify orders, which is currently not an option at Sunset Grill. Adding the capability to modify order will allow Sunset Grill to charge extra for those who want to do substitutions and increase revenues. Also, since customers will review/pay their bill on the iPad it will reduce the need for printer paper as you will have the option to email the receipt to yourself or a printed copy can be provided upon request. Reducing the use of printer paper allows Sunset Grill to be more environmentally conscious by saving paper and energy.
Recommendations and Conclusion (3/4pg) Sunset-at-Blue has conquered the normal first years horrible expectations of opening a new restaurant. The Sunset Grill franchise definitely has not expected to have the outstanding public reception that they have had in the first year. The present operations have to be optimized for continued growth and a successful financial future. Group 6 believes that Sunset-at-Blue would benefit from adding runners to the payroll, adding electronic POS system, installing large menu board and electronic and enclosing the patio area with electric heaters. The selected options have been analyzed and been deemed a positive financial outcome for Sunset-at-Blue and will save the customer time. These items are essential for Sunset-at-Blue to continue to become more successful and be able to handle larger crowds in the future.
******((((this is where I will put in numbers from the data from the analysis))))))))))))************ Runners would be placed on the schedule during weekends year round and the weekdays during the summer months. The cost of adding a runner is $80 per day. The benefit is a 5-10% efficiency increase and an increase in profit during summer weekend days of $155-$235 and $15-$85 on summer weekdays.