Explain how the value chain paradigm helps stakeholders to improve the operational efficiency and effectiveness of the organisation. Draw a daigram input-output framework and describe how the case study illustrates its value chain paradigm based on the input output framework.
âI think the waiter wrote in an extra $25 tip on my Sunshine Café bill after I received and signed my credit card receipt,â Mr. Mark Otter said to the restaurant manager, Brad Gladiolus. âMr. Otter, mail me a copy of the restaurant receipt and Iâll investigate,â responded Mr. Gladiolus. âI donât have the receiptâI lost itâbut I have my monthly credit card statement,â replied Mr. Otter. Mr. Gladiolus hesitated, then said, âMr. Otter, I donât see any way to investigate your claim, so thereâs nothing I can do.â
Mr. Gladiolus sat down at his desk and sketched out possible causes of this service upset as follows:
The customer is responsible for adding the bill and tipping properly, writing legibly, retaining the second receipt, and drinking alcohol responsibly.
The employee is responsible for typing the bill in the register/computer correctly, going back to the customer if the tip is unreadable and verifying the correct amount, and being honest.
The restaurant manager is responsible for investigating the storeâs receipt history and finding this transaction; auditing the source of the error if possible, such as a mistyped decimal or extra zero; and contacting the credit card company and customer to resolve the issue.
The credit card company, a third-party provider in this value chain, is responsible for providing records of the electronic transaction, helping resolve the issue, and issuing a debit or credit to the customer and/or restaurant if needed.
Company Background
Abby Martinâs parents came to Florida from Chicago in the 1960s. Her parents bought land in the Cape Coral area. Later they opened a hotel on Fort Myers Beach, and Abby was part of the housekeeping staff, her first job. By 17, she was running the hotel on her own. Today, she owns and operates six restaurants and a by-the-sea hotel. The restaurants are located in shopping centers next to high-traffic facilities such as movie theaters, groups of retail stores, and other clusters of restaurants. Abby uses four different restaurant concepts (i.e., facility décor, size, and layout; prices, menus; music and bands; wine list, lounge areas, etc.) for these six restaurants, depending on the location and local market demographics.
Abby has other investments but loves the challenge of managing restaurants. âI have a great passion for finding a need and meeting it,â she said. âThe secret to our restaurant success is customizing the business to local needs and being very consistent. Offer good food and service at the most reasonable price you can afford. And know that even if you offer all those things you can still fail. The hospitality business is the hardest business, period. You can never sit back and coast.â
In her spare time, she is a prominent community figure involved in activities such as helping build the Ronald McDonald House, fund-raising for the hospital cancer foundation, and serving as chairperson of the local board for the Salvation Army. She likes the Salvation Army because it runs a lean operation, with only six cents spent on management for every one dollar in donations.
Day-to-Day Service Management
Sunshine restaurants are normally open seven days a week from 11 a.m. to 10 p.m. Lunch prices are in the $10 to $20 range and include such entrees as a wood-grilled hamburger, seafood salad croissant, and sesame-crusted yellow fin tuna. Dinner prices range from $20 to $30 per person and include dishes such as shrimp and scallop scampi, red snapper picatta, and wood-grilled filet mignon. Each restaurant keeps about 20 to 30 popular wines in stock, such as a Cakebread Chardonnay. Wine, liquor, and some food items are ordered in bulk to take advantage of volume-price discounts and shipped directly from the suppliers to individual restaurants. All other items are ordered by the restaurant chef and general manager for each unique restaurant.
Abby, like most entrepreneurs, has her own approach to quality control. She notes that âI visit my restaurants every few days, and as I walk in I immediately begin to watch customer faces and behaviors. I try to see if they are happy, talking, smiling, and enjoying the food and surroundings. I look at their posture and facial expressions. I often talk with customers and ask if everything was to their liking. I ask my employeesâwaiters, bartenders, kitchen help, managers, and chefâif they have encountered any problems or service breakdowns. I look for untidy floors, tables, and restrooms. I try to learn from negative customer comments or complaints. My employees know that I will try to help them solve any problemâthey trust me. I take the pulse of the restaurant in a short visit. I meet weekly with the restaurant chefs. I manage quality by observation and close contact with all of the people in the restaurant. At night I go over the financials and sales data.â
A typical Sunshine restaurant has a core staff of about 12 employees, consisting of a manager, an assistant manager, chef, assistant chef, four waiters, two bartenders, and two helpers in the kitchen. During peak season each restaurant hires about six to eight additional employees. Peak demand is when the âsnow-birdsâ arrive in southwest Florida from November to April. During peak demand, the populations of Lee and Collier counties double to almost 2 million people.
Abbyâs entrepreneurial approach to managing the business results in about one negative customer complaint per 100 customer comments. The complaints are nearly equal in focusing on food or service quality. Contribution to profit and overhead per restaurant is 35 percent. The typical customer averages one visit every two months, and the customer defection rate is in the 5 to 10 percent range, but is difficult to estimate given the seasonal nature of the business.
Long-Term Strategic Issues
Abby Martin has established a reputation in southwest Florida for superior service and food quality in her restaurants. She was considering expanding her restaurants to the Tampa and Orlando areas to leverage her expertise and grow the business for the family. She wondered whether she could maintain the proper financial and quality controls with more restaurants and whether to franchise or not. Due to the 2007â2009 credit crunch and high foreclosure rates, there were plenty of commercial properties in good locations for restaurants, and prices were at all-time lows. Abby thought it was now or never in terms of expanding up and down the west coast of Florida. She envisioned as many as 20 Sunshine restaurants in the next five years.
Decisions
Abby wondered when she would ever get the time to analyze these issues. It was not easy keeping up with her businesses. She knew that superior day-to-day food and service quality determines repeat business, so she had to successfully resolve this customer complaint about the waiter adding a $25 tip, while trying to plan for the future. She happened to be at her hotel, so she sat down in a beach chair and watched the brilliant colors of a sunset over the Gulf of Mexico. She began to write down a number of questions she had to answer soon.
