Question:
Discuss about the Issue Presented in Bellini Italian restaurant.
The background provided in the case study is that Bellini Italian Restaurant is a restaurant located in Main Street, CBD, Capital City, Australia. It has the capacity to accommodate 78 seats and promotes the food theme of authentic Italian. The chef and the owner of the restaurant is Francesco Del Piero. The chef has designed the style of menu as A La Carte and has computed the average daily guest turnover as 39. The major issue that currently concerns the owner of the restaurant is that the restaurant seems very quite during the mid-week period. Francesco wants to utilize the management and leadership skills that he possesses to restructure the restaurant and increase business. He has proposed a new concept in terms of menu for the restaurant, that is, all you can eat buffet. The sole purpose behind such a strategy is increasing the overall profitability and the volume of sales of the business.
The owner feels that the reduction in some of the menu prices may lead to reduction in the contribution margin per unit of food. Therefore, he resorts to the solution of increasing the sales revenue from the beverages and expanding the associated client base. This study aims to provide an overview into the profitability and effectiveness of the decision taken by the owner/chef.
The strategy undertaken by Francesco to introduce the style of the menu offered by the restaurant, as all you can eat buffet is a wise and well thought plan by the owner of the restaurant. Francesco implements the newly introduced menu style into the schedule of business and decides to introduce the concept on Monday, Tuesday and Wednesday evenings at $28.90 per person and children at $12.50 each.
The introduction of a buffet concept is very likely to increase sales during the mid week. The concept of a buffet menu itself will attract customers thus expanding the customer base as desired by the owner of the restaurant. However, Francesco should determine the prices of the various food items included in the buffet menu, more or less accurately. This is because the price tagged for an adult and a child for selecting the buffet style of menu should be determined in such a way that even if a particular customer exceeds the estimated consumption margin, the price paid by the other customers compensate for this extra cost incurred (Dopson and Hayes 2015). Now, if Francesco determines the prices wrongly then this particular turnaround strategy may ultimately be the major reason for the downfall of business. The prices determined should not only cover for the cost of production of food but also for the cases of excess consumption in relation to the budgeted estimates. A well-known technique applied in case of a buffet menu is the ABC inventory approach. This particular approach states that A items, that are the most expensive in the menu should not comprise of more than 20% of the total available product. B items, which belong to the mid price range should not comprise of more than 30% of the total available product and C items, which are the least expensive should account for 50% of the total offerings (Tse and Poon 2017)
Therefore, provided all the proceedings are carried out accurately and with exact precision, the buffet style of menu is likely to be a success.
The key information to be monitored to measure the results of the implemented strategy is that the owner of the business should be vigilant towards developing a pattern or trend as to the nature of customers that visit the restaurant on the respective days of Monday, Tuesday and Wednesday.
For instance, it is being assumed that the scheduled day of practice for the local football team is on Monday and after practice, the team visits the restaurant for all you can eat buffet. Now, Tuesday observes a gang of high school goers who seem to stop at the restaurant in the evening for a quick bite at the all you can eat buffet. Again, on Wednesday the restaurant receives a random crowd comprising mostly of people between the age group of high thirties to low forties. This implies that the amount of food consumed by the members of the football team will definitely be more than the amount consumed by the gang of high school goers (Alonso and Mariani 2017).
Therefore, proper monitoring on the part of the owner or the management of the restaurant will help in determining the amount of food made available (in accordance to the ABC inventory approach) and the prices to be determined according to the rate of consumption by the different categories of the customers. Monitoring should be primarily related to customer visitation and perception; food production process and how to deal with carry over and wastes; the contribution margin of the different menu styles and the overall effect on the sales volume and profitability (Heo 2016).
Customer visitation and perception regarding the newly introduced menu is very important. An important part of the service sector is feedback. Feedback from the targeted band of customers is the foundation on which any industry in the service sector thrives. The feedback by the customer should encompass the areas, in regards to the entire buffet experience; the quality of the food offered; and the quality of the experience, on the whole. Monitoring all these trends and feedbacks related to business should be what about which Francesco should be vigilant. The nature of the customers that visit the restaurant after the implemented change and their perception in regards to the new style of menu should be monitored and analyzed (Heo et al.,2013)
As mentioned in the case study, the monthly reports show the actual food cost to be 32%. Food costs refer to the costs that are associated with producing the food items that is ordered by a particular customer. Thus, it is apparently evident that the food costs are high and continuous monitoring of these costs may highlight the exact location where the extra cost is incurred by business. These may be reasons like excess price of the raw materials, economic inflation, lack of optimum utilization of the available resources (Ivanov 2014).
The amount of food that is included in each session of the buffet, the amount to be added, if required and food left to waste at the end of each buffet menu should also be monitored in order to determine the optimum production amount (Kim et al., 2015)
The monitoring of the contribution margin obtained by the buffet and the old menu style, that is, a la carte, should be compared within a regular interval of time in order to determine whether the adoption of the new strategy is turning out to be a success for business. This means that the contribution margin generated by each style of menu has to be computed. The contribution margin must be calculated by deducting the variable costs from the respective revenue generated (Kim, Li and Brymer 2016)
The overall effect on the sale volume and profitability should also be monitored. The preparation of the essential financial statements and the significant ratios related to profitability of business and the other related important factors like the revenue related to sales generated by business after the implementation of the new strategy should be monitored regularly. The business owner may assign the rigorous task of monitoring, to an employee, as this is the most crucial step in assessing the success of the new strategy (Kimes 2016).
The strategy to improve the overall profitability of the restaurant is that the owner of the restaurant may consider ways to reduce the food costs. This will increase the percentage of revenue earned by the restaurant without having to increase the prices of the food items.
The owner may also consider developing a feedback method which will create a proper channel for receiving the backward communication that has been transmitted by the customers. Analysis of business, especially in the restaurant industry, based on feedback by the customers is crucial (Kwok and Yu 2013).
Francesco should also consider effectively utilizing the food that has been rendered unused after serving all the customers in a particular buffet session.
The owner should look into the internal proceedings of business and should try to find out the root cause for the increased food costs.
Lastly, the owner should also consider advertisement and promotion of the new menu style (like publications on the social media) so that the existing client base gets expanded, ultimately leading to increased revenue from business. The business owner may also consider increasing the price of the beverages for gaining more revenues (Tse and Poon, 2017)
Conclusion
Therefore, as concluded from the above information and analyses, the new style of menu will successfully attract more and more customers, provided that all the required estimations have been executed properly. The accurate computation of the food costs and other profitability components; designing the menu according to the pattern of customer visitation and perception and appropriate pricing of the food items will surely result in increase in revenue generation by business.
The particular recommendation in a situation as described in the case study is that the owner of the restaurant should be patient with the results generated by the strategic plan of buffet. This is because the modification of the buffet menu may be essential in order to suit the changing tastes and preferences of the customers. Thus, the owner should be patient with the returns generated by the new style of menu, as it would take the stipulated time to be a success and generate estimated revenues.
References
Alonso, A.D. and Mariani, S., 2017. Complexity, change and the restaurant business: a case study from Montevideo, Uruguay. International Journal of Leisure and Tourism Marketing, 5(4), pp.351-369.
Dopson, L.R. and Hayes, D.K., 2015. Food and beverage cost control. John Wiley & Sons.
Heo, C.Y., 2016. Exploring group-buying platforms for restaurant revenue management. International Journal of Hospitality Management, 52, pp.154-159.
Heo, C.Y., Lee, S., Mattila, A. and Hu, C., 2013. Restaurant revenue management: do perceived capacity scarcity and price differences matter?. International Journal of Hospitality Management, 35, pp.316-326.
Ivanov, S.H., 2014. Hotel revenue management: From theory to practice. Browser Download This Paper.
Kim, S., Koh, Y., Cha, J. and Lee, S., 2015. Effects of social media on firm value for US restaurant companies. International Journal of Hospitality Management, 49, pp.40-46.
Kim, W.G., Li, J.J. and Brymer, R.A., 2016. The impact of social media reviews on restaurant performance: The moderating role of excellence certificate. International Journal of Hospitality Management, 55, pp.41-51.
Kimes, S.E., 2016. The evolution of hotel revenue management. Journal of Revenue and Pricing Management, 15(3-4), pp.247-251.
Kwok, L. and Yu, B., 2013. Spreading social media messages on Facebook: An analysis of restaurant business-to-consumer communications. Cornell Hospitality Quarterly, 54(1), pp.84-94.
Tse, T.S. and Poon, Y.T., 2017. Modeling no-shows, cancellations, overbooking, and walk-ins in restaurant revenue management. Journal of foodservice business research, 20(2), pp.127-145.
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