Italiano is a popular restaurant in the Vile Parle area of Mumbai. The lockdown and subsequent Covid restrictions force the restaurant to shut shop. The owner Mr Ranjeet Sharma is also the main chef of the restaurant decided to start operations from home and use the apps of Zomato and Swiggy to run the place as a cloud kitchen. The business not only survived but became a profitable venture. The recent lifting of restrictions as put Mr Sharma in a quandary, should he now re- rent restaurant space at a very expensive rental value or should he continue to run it as a cloud kitchen. He has approached you, a marketing consultant for advice on devising a plan of action. What would you advise? Create a plan of action for the business. Create a communication plan. Create a consumer outreach plan.

Assume that fast-food restaurants generally provide an ROI of15%, but that such a restaurant near a college campus has an ROI of18% because its relatively large volume of business generates anabove-average turnover (sales / assets). The replacement value ofthe restaurant's plant and equipment is $200,000. If you were toinvest that amount in a restaurant elsewhere in town, you couldexpect a 15% ROI.

Case 1 Penne Pesto

Penne Pesto is a small restaurant in the financial district ofSan Francisco. Customers order from a variety of pasta dishes. Therestaurant has 50 seats and is always full during the four hours inthe evening. It is not possible to make reservations at Penne, mostguests show up spontaneously on their way home from work. If thereis no available seat, guests simply move on to another place.

On average, a guest spends 50 minutes in the restaurant, whichincludes 5 minutes until the waiter has taken the order, anadditional 10 minutes until the food is served, 30 minutes to eat,and 5 minutes to handle the check-out (including waiting for thecheck, paying, and leaving). It takes the restaurant another 10minutes to clean the table and have it be ready for the next guests(of which there are always plenty).The average guest leaves $20 atPenne, including food, drink, and tip (all tips are collected bythe restaurant, employees get a fixed salary).

The restaurant has 10 waiters and 10 kitchen employees, eachearning $90 per evening (including any preparation, the 4 hours therestaurant is open, and clean-up). The average order costs $5.50 inmaterials, including $4.50 for the food and $1 for the averagedrink. In addition to labor costs, fixed costs for the restaurantinclude $500 per day of rent and $500 per day for other overheadcosts.

The restaurant is open 365 days in the year and is full to thelast seat even on week-ends and holidays. There are about $200,000of capital tied up in the restaurant, largely consisting offurniture, decoration, and equipment.

a) How many guests will therestaurant serve on an evening?

b) What is the Return onInvested Capital for the owner of the restaurant?

c) Assume that you couldimprove the productivity of the kitchen employees and free up oneperson who would be helping cleaning up the table. This wouldreduce the clean-up to 5 minutes instead of 10 minutes. What wouldbe the new ROIC?

d) What would be the newROIC if over-head charges could be reduced by $100 per day? Answerthis question independent of the previous question.

Think about your favorite restaurant or fast-food restaurant.The general manager of that restaurant has hired you to helpclassify all the costs that are involved in running the restaurantand keeping the customers satisfied. Think about its businessoperations as you answer the following questions.

Describe all business activities from the time a customerarrives to the time that customer departs.

List all costs you can identify with the separate activitiesdescribed in question 1.

Classify each cost from question 2 as fixed, variable, or mixedand explain your classification.