Question

Required information Taylor's is a popular restaurant that offers customers a large dining room and comfortable bar area. Taylor Henry, the owner and manager of the restaurant, has seen the number of patrons increase steadily over the last two years and is considering whether and when she will have to expand its available capacity. The restaurant occupies a large home, and all the space in the building is now used for dining, the bar, and kitchen, but space is available on the property to expand the restaurant. The restaurant is open from 6 p.m. to 10 p.m. each night (except Monday) and, on average, has 36 customers enter the bar and 56 enter the dining room during each of those hours. Taylor has noticed the trends over the last 2 years and expects that within about 4 years, the number of bar customers will increase by 50% and the dining customers will increase by 20%. Taylor is worried that the restaurant will be not be able to handle the increase and has asked you to study its capacity. In your study, you consider four areas of capacity: the parking lot (which has 96 spaces). the bar (74 seats), the dining room (106 seats), and the kitchen. The kitchen is well-staffed and can prepare any meal on the menu 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 hour (60 min/12 min 20 meals). To assess the capacity of the restaurant, you obtain the additional information: • 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 persons 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 typically 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 restaurant's cost per drink is $1, and the direct costs for meal preparation are $5

taylor has obtained construction eatimates. to increase the capacity of the barbto 116 seats, the doning room to 126 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 years. there would be no change to the parking lot. given the analysis above, prepare a brief recommendation to Taylor regarding expanding the restaurant. this is essay question for the forth picture

Answer 1

1-a.
Existing capacity
Bar	74
Dining	106
Parking	96
Working to calculate the excess capacity
Number of bar patrons per hour		36
Average time spent(in hours)		2
Occupancy		72
Number of dining patrons per hour		56
Average time spent(in hours)		1
Occupancy		56
		Bar	Dining Area
Number of patrons per hour		36	56
Average bar patrons per car		1.5	3
No.of hours spent		2	1
Parking space occupancy		48	37.33
Parking space occupancy		85	Rounded off
Statement showing excess capacity
Particulars	Existing Capacity	Occupied Capacity	Excess Capacity
Bar	74	72	2
Dining Area	106	56	50
Parking Area	96	85	11
1-b.
Throughput Margin = Revenue - Food Costs
Computation of daily Revenue
Particulars	Bar	Dining
Total hours (a)	4	4
No.of patrons (b)	36	56
Orders per hour ('c)	2	1
Price per order (d)	$7	$ 22
Revenue(a*b*c*d)	$ 2,016	$ 4,928
Computation of daily Cost
Particulars	Bar	Dining
Total hours (a)	4	4
No.of patrons (b)	36	56
Orders per hour ('c)	2	1
Cost per order (d)	$1	$5
Total Cost(a*b*c*d)	$ 288	$1,120
Computation of Throughput Margin
Particulars	Revenue (daily)	Costs (daily)	Throughput (daily)	Throughput (monthly)
Bar	$ 2,016	$ 288	$ 1,728	$ 44,928
Dining Area	$4,928	$ 1,120	$ 3,808	$ 99,008
Total	$ 6,944	$ 1,408	$ 5,536	$143,936
2-a.
Bar
Current number of bar patrons		36
Expected increase (36*50%)		18
Expected number of bar patrons		54
Average time spent(in hours)		2
Required Capacity		108
Dining Area
Current number of dining patrons		56
Expected increase (56*20%)		11
Expected number of bar patrons		67
Average time spent(in hours)		1
Required Capacity		67
Parking Area
Expected number of bar patrons/hour		108
Average bar patrons per car		2
Parking space occupancy		72
Expected no. of dining patrons/hour		67
Average dining patrons per car		3
Parking space occupancy		22
Total Parking Area		94
Particulars	Expected Capacity	Current Capacity	Needed Capacity
Parking	94	96	-
Bar	108	74	34
Dining	67	106	-
Meals	67	100	-
2-b.
Looking at the details in 2-a,the only capacity constraint would be at the Bar area
Current capacity of Bar area		74
Average time spent(in hours)		2
Number of bar patrons accommodated		37
Throughput Margin = Revenue - Food Costs
Computation of daily Revenue
Particulars	Bar	Dining
Total hours (a)	4	4
No.of patrons (b)	37	67
Orders per hour ('c)	2	1
Price per order (d)	$ 7	$ 22
Revenue(a*b*c*d)	$ 2,072	$ 5,896
Computation of daily Cost
Particulars	Bar	Dining
Total hours (a)	4	4
No.of patrons (b)	37	67
Orders per hour ('c)	2	1
Cost per order (d)	$ 1	$ 5
Total Cost(a*b*c*d)	$ 296	$ 1,340
Computation of Throughput Margin
Particulars	Revenue (daily)	Costs (daily)	Throughput (daily)	Throughput (monthly)
Bar	$ 2,072	$ 296	$ 1,776	$ 46,176
Dining Area	$ 5,896	$ 1,340	$ 4,556	$ 118,456
Total	$ 7,968	$ 1,636	$ 6,332	$ 164,632

3. If we refer to the details of constraints in question 2-a., only the bar area needs expansion to accommodate the expected increase in the number of customers. All the other areas,i.e., dining area,parking space and kitchen have more than the required capacity to accommodate the expected increase in the number of dining patrons.

If Mr. Taylor Henry decided to expand the restaurant as stated,he will have an additional cash outflow of $ 5,000 per month.

Let have a look at the additional cash inflow that would be generated as a result of this expansion in for the bar patrons only because the existing capacity was sufficient for the other areas of parking,dining and kitchen.

Throughput Margin per drink($7 - $1)			$6
Expected no. of bar patrons per hour			54
Bar patrons allowed per hour due to constrainsts			37
Additional no. of bar patrons accomodated per hour			17
Expected additional no. of bar patrons per day			68
Incremental daily throughput margin($ 6 * 68) = $ 408
Incremental monthly throughput margin($ 26 * 408) = $ 10,608
Mr. Taylor Henry should expand the restaurant as it will give him an incremental
cash inflow of $ 5,608 per month